NOTICE AND PROXY STATEMENT
_____________________________
AFLAC INCORPORATED
Worldwide
Headquarters
1932 Wynnton Road
Columbus, Georgia 31999
_____________________________
NOTICE OF 2008 ANNUAL MEETING OF
SHAREHOLDERS
Important Notice Regarding the
Availability of Proxy Materials for the Shareholder
Meeting to Be Held on May
5, 2008
_____________________________
The Annual
Meeting of Shareholders of Aflac Incorporated (the Company) will be held on
Monday, May 5, 2008, at 10:00 a.m. at the Columbus Museum (in the Patrick
Theatre), 1251 Wynnton Road, Columbus, Georgia, for the following purposes, all
of which are described in the accompanying Proxy Statement:
1. To elect 17 Directors of the Company to serve until the next Annual
Meeting and until their successors are duly elected and qualified;
2. To consider and act upon a proposal to amend Article IV of the
Company's Articles of Incorporation, to increase the Company's authorized shares
of $.10 par value Common Stock from 1,000,000,000 shares to 1,900,000,000
shares;
3. To consider and adopt an amended and restated management incentive
plan (the 2009 Management Incentive Plan);
4. To consider and approve the following advisory (non-binding)
proposal:
Resolved, that
the shareholders approve the overall executive pay-for-performance compensation
policies and procedures employed by the Company, as described in the
Compensation Discussion and Analysis and the tabular disclosure regarding named
executive officer compensation (together with the accompanying narrative
disclosure) in this Proxy Statement.
5. To consider and act upon the ratification of the appointment of KPMG
LLP as independent registered public accounting firm of the Company for the year
ending December 31, 2008.
The
accompanying proxy is solicited by the Board of Directors of the Company. The
Proxy Statement and the Companys Annual Report for the year ended December 31,
2007, are enclosed.
The record
date for the determination of shareholders entitled to vote at the meeting is
February 27, 2008, and only shareholders of record at the close of business on
that date will be entitled to vote at this meeting and any adjournment thereof.
YOUR VOTE
IS IMPORTANT! WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
MARK, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED PREPAID
ENVELOPE SO THAT WE MAY BE ASSURED OF A QUORUM TO TRANSACT BUSINESS. YOU MAY
ALSO VOTE VIA THE INTERNET OR TELEPHONE. IF YOU ATTEND THE MEETING, YOU MAY
REVOKE YOUR PROXY AND VOTE IN PERSON.
|
By
|
order of the
Board of Directors,
|
|
|
|
/s/Joey M. Loudermilk
|
|
Columbus,
Georgia
|
|
Joey M.
Loudermilk
|
|
March 24,
2008
|
|
Secretary
|
|
1
TABLE OF CONTENTS
Solicitation and Revocation of
Proxy
|
1
|
Proposal 1 Election of
Directors
|
3
|
Security Ownership of
Management
|
6
|
Section 16(a) Beneficial Ownership Reporting
Compliance
|
7
|
Corporate
Governance
|
7
|
Board and Committees
|
9
|
Compensation Discussion and
Analysis
|
11
|
Compensation Committee
Report
|
22
|
2007 Summary Compensation
Table
|
23
|
2007 Grants of Plan-Based
Awards
|
27
|
2007 Outstanding Equity Awards at Fiscal Year-End
|
29
|
2007 Option Exercises and Stock
Vested
|
31
|
Pension
Benefits
|
31
|
2007 Nonqualified Deferred
Compensation
|
34
|
Potential Payments Upon Termination or Change in Control
|
35
|
Director Compensation
|
40
|
Related Person Transactions
|
42
|
Equity Compensation Plan
Information
|
43
|
Audit Committee Report
|
43
|
Proposal 2 Amendment to Article IV of the Companys Articles of
Incorporation to Increase the Number of Authorized
|
|
Shares of Common
Stock
|
44
|
Proposal 3
Adopt the Amended and Restated 2009 Management Incentive
Plan
|
45
|
Proposal 4
Advisory Vote on Executive Pay-for-Performance Compensation
|
47
|
Proposal 5
Ratification of Appointment of Independent Registered Public
Accounting
Firm
|
48
|
Appendix A
Amendment to Article IV of Articles of
Incorporation
|
50
|
Appendix B
The Amended and Restated 2009 Management Incentive Plan
|
51
|
2
AFLAC
INCORPORATED
_________________________
PROXY STATEMENT
_________________________
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE
HELD MONDAY, MAY 5, 2008
_________________________
SOLICITATION AND REVOCATION OF PROXY
This Proxy
Statement is furnished to shareholders in connection with the solicitation of
proxies by the Board of Directors of Aflac Incorporated (the Company) for use
at the Annual Meeting of Shareholders to be held on Monday, May 5, 2008, and any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders and described in detail herein. The meeting will
be held at 10 a.m. at the Columbus Museum (in the Patrick Theatre), 1251 Wynnton
Road, Columbus, Georgia.
All properly
executed proxies will be voted in accordance with the instructions contained
thereon. If no choice is specified, the proxies will be voted FOR the election
of all nominees named elsewhere in this Proxy Statement, and FOR approval of
each other proposal set forth in the Notice of Meeting, and according to the
discretion of the proxy holders on any other matters that may properly come
before the meeting or any postponement or adjournment thereof. Shareholders of
record may also submit their proxies via the Internet or by telephone in
accordance with the procedures set forth in the enclosed proxy. Any proxy may be
revoked by the shareholder at any time before it is exercised by giving written
notice to that effect to the Secretary of the Company or by submission of a
later-dated proxy or subsequent Internet or telephonic proxy. Shareholders who
attend the meeting may revoke any proxy previously granted and vote in person.
This Proxy Statement and the
accompanying proxy are being delivered to shareholders on or about March 24,
2008.
Solicitation of Proxies
The Company
will pay the cost of soliciting proxies. The Company will make arrangements with
brokerage firms, custodians, and other fiduciaries to send proxy materials to
their principals by mail and by electronic transmission, and the Company will
reimburse these entities for mailing and related expenses incurred. In addition
to solicitation by mail and electronic transmission, certain officers and other
employees of the Company may solicit proxies by telephone and by personal
contacts. However, they will not receive additional compensation (outside of
their regular compensation) for doing so. In addition, the Company has retained
Georgeson Inc. to assist in the solicitation of proxies for a fee of $9,000,
plus reimbursement of reasonable out-of-pocket expenses.
Proxy Materials and Annual Report
Shareholders
may access the Companys Notice and Proxy Statement and Annual Report via
Aflacs Web site, at www.aflac.com/shareholdermeeting. For future shareholder
meetings, the Companys registered shareholders can elect to save the Company
printing and mailing expenses by electing online access to their Proxy
Statement, Annual Report, and other account mailings through
af
linc®
, Aflacs secure online account management system.
Shareholders that select this option will continue to receive their proxies in
the mail prior to each shareholder meeting, along with a notice of the meeting
and instructions for voting by mail, telephone, or the Internet.
Multiple Shareholders Sharing the Same
Address
In
accordance with a notice sent to eligible shareholders who share a single
address, the Company is sending only one Annual Report and one Proxy Statement
to shareholders who consented. This is known as householding. However, if a
registered shareholder residing at such an address wishes to receive a separate
Annual Report or Proxy Statement, he or she may contact Aflac Incorporated
Shareholder Services by phone at
800.235.2667
Option
2
, by e-mail at
shareholder@aflac.com
, or by mail at
the following address: Shareholder Services, 1932 Wynnton Road, Columbus,
Georgia 31999. Registered shareholders who receive multiple copies of the
Companys Annual Report or Proxy Statement may request householding by
contacting Shareholder Services using the preceding options. Shareholders who
own the Companys shares through a bank, broker, or other holder of record may
request householding by contacting the holder of record.
1
Description of Voting Rights
In
accordance with the Companys Articles of Incorporation, shares of the Companys
Common Stock, par value $.10 per share (the Common Stock) are entitled to one
vote per share until they have been held by the same beneficial owner for a
continuous period of greater than 48 months prior to the record date of the
meeting, at which time they become entitled to 10 votes per share. Where a share
is transferred to a transferee by gift, devise, or bequest, or otherwise through
the laws of inheritance, descent, or distribution from the estate of the
transferor, or by distribution to a beneficiary of shares held in trust for such
beneficiary, the transferee is deemed to be the same beneficial owner as the
transferor for purposes of determining the number of votes per share. Shares
acquired as a direct result of a stock split, stock dividend, or other
distribution with respect to existing shares (dividend shares) are deemed to
have been acquired and held continuously from the date on which the shares with
regard to which the issued dividend shares were acquired. Shares of Common Stock
acquired pursuant to the exercise of a stock option are deemed to have been
acquired on the date the option was granted.
Shares of
Common Stock held in street or nominee name are presumed to have been held
for less than 48 months and are entitled to one vote per share unless this
presumption is rebutted by providing evidence to the contrary to the Board of
Directors of the Company. Shareholders desiring to rebut this presumption should
complete and execute the affidavit appearing on the reverse side of their proxy.
The Board of Directors reserves the right to require evidence to support the
affidavit.
Voting Securities
Holders of
record of Common Stock at the close of business on February 27, 2008, will be
entitled to vote at the meeting. At that date, the number of outstanding shares
of Common Stock entitled to vote was 474,813,182. According to the Companys
records, this represents the following voting rights:
425,287,267
|
Shares
|
@
|
1
|
Vote Per Share
|
=
|
425,287,267
|
Votes
|
49,525,915
|
Shares
|
@
|
10
|
Votes Per
Share
|
=
|
495,259,150
|
Votes
|
474,813,182
|
Shares
|
|
|
Total
|
|
920,546,417
|
Votes
|
Shareholders
shown above with one vote per share can rebut the presumption that they are
entitled to only one vote as outlined in Description of Voting Rights above.
If all of the outstanding shares were entitled to 10 votes per share, the total
votes available would be 4,748,131,820. However, for the purposes of this Proxy
Statement, it is assumed that the total votes available to be cast at the
meeting will be 920,546,417.
The holders
of a majority of the voting rights entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
such business that comes before the meeting. Directors are elected by an
affirmative vote of a plurality of voting rights cast. In the case of the
election of Directors, in tabulating the vote, under applicable Georgia law,
votes withheld will be disregarded and will have no effect on the outcome of the
vote. Pursuant to the Companys Bylaws, approval of all other matters to be
considered at the meeting requires the affirmative vote of holders of a majority
of the voting rights present in person or represented by proxy at the meeting. A
broker non-vote occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received voting
instructions from the beneficial owner. Broker non-votes and abstentions are
counted as shares present at the meeting in determining whether a quorum
exists. Broker non-votes, if any, have the effect of votes to withhold authority
in connection with the election of Directors while broker non-votes, if any, and
abstentions have the effect of votes against other proposals at the meeting.
In October
2006, the Board adopted a Director Resignation Policy to provide that a nominee
for director in an uncontested election who receives a greater number of votes
withheld
from his or her election than
for
his or her election will promptly
tender his or her resignation to the Chairman of the Board. The Corporate
Governance Committee will consider such resignation and within 45 days recommend
to the Board whether to accept or reject it. In considering whether to accept or
reject the tendered resignation, the Corporate Governance Committee will
consider all factors deemed relevant by its members, including the stated
reasons why shareholders
withheld
votes for election from such director, the qualifications of
the director and whether the resignation would be in the best interests of the
Company and its shareholders. The Board will formally act on the Corporate
Governance Committees recommendation no later than 75 days following the date
of the shareholders meeting at which the election occurred. The Company will,
within four business days after such decision is made, publicly disclose in a
Form 8-K filed with the Securities and Exchange Commission (SEC), the Boards
decision, together with a full explanation of the process by which the decision
was made and, if applicable, the reasons for rejecting the tendered
resignation.
Any director
who tenders his or her resignation pursuant to this provision will not
participate in the Corporate Governance Committee recommendation or Board
consideration regarding whether or not to accept the tendered resignation. If a
majority of the members of the Corporate Governance Committee received a greater
number of votes
withheld
than votes
for
their election at the same meeting, then the other directors
will appoint an ad hoc Board committee consisting of such number of directors,
as they may determine to be appropriate, solely for the purpose of considering
the tendered resignations and will recommend to the Board whether to accept or
reject them. Notwithstanding the foregoing, if an ad hoc Board committee would
have been created but fewer than three directors would be eligible to serve on
it, the entire Board (other than the director whose resignation is being
considered) will make the determination without any recommendation from the
Corporate Governance Committee and without the creation of an ad hoc Board
committee.
2
On February
28, 2008, the Georgia State Senate approved amendments to the Georgia Business
Corporation Code that would permit a board of directors to adopt a majority
voting standard for the election of directors through a bylaw amendment. A vote
on the proposed amendments is currently pending in the Georgia House of
Representatives. Currently, the Georgia Business Corporation Code, by default,
provides for a plurality standard in the election of directors, and requires any
increase to the plurality standard to be adopted by an amendment to the articles
of incorporation. To the extent the Georgia Business Corporation Code is amended
to permit adoption of a majority voting standard through a board-approved bylaw
amendment, it is the intent of the Corporate Governance Committee to recommend
that the Board of Directors adopt a bylaw amendment permitting majority voting
in the election of directors in appropriate circumstances.
Principal
Shareholders
No person,
as of February 27, 2008, was the owner of record or, to the knowledge of the
Company, beneficially owned 5% or more of the outstanding shares of Common Stock
or of the available votes of the Company other than as shown below:
Name and
Address
|
|
|
|
Amount of
|
|
|
|
Percent
of
|
of
Beneficial
|
|
Title of Class
|
|
Beneficial Ownership
|
|
Percent
of
|
|
Available
|
Owner
|
|
Common Stock
|
|
Shares
|
|
Votes
|
|
Class
|
|
Votes
|
Daniel P. Amos*
|
|
10 Votes Per Share
|
|
8,444,421
|
|
84,444,210
|
|
2.1
|
|
9.0
|
1932 Wynnton
Road
|
|
1 Vote Per
Share
|
|
1,445,030
|
|
1,445,030
|
|
|
|
|
Columbus, GA 31999
|
|
|
|
9,889,451
|
|
85,889,240
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
(*) See
footnote 2 on page 6
|
|
|
|
|
|
|
|
|
|
|
1. ELECTION OF
DIRECTORS
The Company
proposes that the following 17 individuals be elected to the Board of Directors
of the Company. The persons named in the following table have been nominated by
the Corporate Governance Committee of the Board of Directors for election as
Directors and, if elected, are willing to serve as such until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified. It is intended that the persons named in the accompanying proxy, or
their substitutes, will vote for the election of these nominees (unless
specifically instructed to the contrary). However, if any nominee at the time of
the election is unable or unwilling to serve or is otherwise unavailable for
election, and as a result another nominee is designated, the persons named in
the proxy, or their substitutes, will have discretionary authority to vote or
refrain from voting in accordance with their judgment on such other nominees.
The Board of Directors has no reason to believe that any of the persons
nominated will be unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ELECTION
OF EACH OF THE FOLLOWING NOMINEES AS DIRECTORS.
3
The following information is provided with
respect to the nominee:
|
|
|
|
|
|
|
|
Shares of
Common
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Stock
Beneficially
|
|
Percent
of
|
|
|
|
of
|
|
|
|
|
|
|
Year
First
|
|
Owned on
February
|
|
Outstanding
|
|
Voting
Rights
|
|
Available
|
Name
|
|
Principal Occupation
(1)
|
|
Age
|
|
Elected
|
|
27, 2008 (2)
|
|
Shares
|
|
on February 27, 2008
|
|
Votes
|
Daniel P. Amos
|
|
Chairman, the Company and Aflac,**
|
|
56
|
|
1983
|
|
9,889,451
|
|
2.1
|
|
85,889,240
|
|
9.0
|
|
|
Chief Executive Officer (CEO), the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company and Aflac; President, Aflac,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until January 2007; Director, Synovus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Financial Corp., Columbus, GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Shelby Amos II
|
|
Alabama/West Florida State Sales
|
|
55
|
|
1983
|
|
1,082,101
|
|
.2
|
|
10,759,975
|
|
1.2
|
|
|
Coordinator, Aflac
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos II
|
|
President, Aflac, since January 2007;
|
|
32
|
|
2007
|
|
3,418,603
|
|
.7
|
|
33,550,729
|
|
3.6
|
|
|
Chief Operating Officer (COO), U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations, Aflac, since February 2006;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, U.S. Operations,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aflac, from January 2005 until January 2007;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State Sales Coordinator-Georgia North,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aflac, from November 2002 through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yoshiro Aoki
|
|
President, Seiwa Sogo Tatemono Co., Ltd.,
|
|
62
|
|
2007
|
|
3,313,292
|
|
.7
|
|
33,132,920
|
|
3.6
|
|
|
Tokyo, Japan, since June 2005; Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditor, Chuo Real Estate Co., Ltd., and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yushu Corp., Tokyo, Japan, since June
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006; Deputy President, Mizuho Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institute Ltd., Tokyo Japan, from April
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 until June 2005; Senior Managing
|
|
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|
|
|
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|
|
|
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|
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Director, Mizuho Bank, Ltd., Tokyo,
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Japan, from April 2002 until April 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael H. Armacost
|
|
Shorenstein Distinguished Fellow,
|
|
70
|
|
1994
|
|
44,947
|
|
*
|
|
395,470
|
|
*
|
|
|
Stanford University Asia-Pacific Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center, Stanford, CA, since September
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002; Director, Applied Materials, Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa Clara, CA; Director, USEC Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bethesda, MD; Former U.S. Ambassador
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger III
|
|
President, the Company; Chief Financial
|
|
60
|
|
2001
|
|
1,402,231
|
|
.3
|
|
8,775,030
|
|
.9
|
|
|
Officer (CFO), the Company and Aflac;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasurer, the Company; Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Aflac; Director, Tupperware
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brands Corporation, Orlando, FL;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director, Total System Services, Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbus, GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Frank Harris
|
|
Distinguished Executive Fellow, Georgia
|
|
72
|
|
1991
|
|
83,498
|
|
*
|
|
780,980
|
|
*
|
|
|
State University, Atlanta, GA; Chairman of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the Board, Harris Georgia Corp.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cartersville, GA; Former Governor of the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State of Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elizabeth J. Hudson
|
|
Executive Vice President,
|
|
58
|
|
1990
|
|
109,743
|
|
*
|
|
1,043,430
|
|
.1
|
|
|
Communications, National Geographic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Society, Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth S. Janke Sr.
|
|
Chairman Emeritus, National Association
|
|
73
|
|
1989
|
|
128,976
|
|
*
|
|
1,219,089
|
|
.1
|
|
|
of Investors Corp. (NAIC), Madison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heights, MI, since October 2006;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman, NAIC, from February 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until October 2006; Retired, Chairman,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Director, NAIC Growth Fund,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Madison Heights, MI, until April 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
Shares of
Common
|
|
|
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Stock
Beneficially
|
|
Percent
of
|
|
|
|
of
|
|
|
|
|
|
|
Year
First
|
|
Owned on
February
|
|
Outstanding
|
|
Voting
Rights
|
|
Available
|
Name
|
|
Principal Occupation (1)
|
|
Age
|
|
Elected
|
|
27, 2008 (2)
|
|
Shares
|
|
on February 27, 2008
|
|
Votes
|
Douglas W.
Johnson
|
|
Retired,
Audit Partner, Ernst & Young,
|
|
64
|
|
2004
|
|
22,220
|
|
*
|
|
141,734
|
|
*
|
|
|
Atlanta,
GA, until June 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B.
Johnson
|
|
Senior
Counselor, Porter Novelli PR, since
|
|
63
|
|
2002
|
|
27,630
|
|
*
|
|
215,026
|
|
*
|
|
|
November
2003; Senior Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Porter
Novelli PR, Washington, D.C., from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 2003
until November 2003; Chairman,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One America
Foundation, Washington, D.C.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
February 2003 until December 2007;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President, BICO Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington,
D.C., from February 2001 until
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
2003; Assistant to the President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the
United States, Washington, D.C.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until
February 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B.
Knapp
|
|
Director of
Educational Development, CF
|
|
61
|
|
1990
|
|
61,805
|
|
*
|
|
564,050
|
|
.1
|
|
|
Foundation,
Inc., Atlanta, GA, since May
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004;
Partner, Heidrick & Struggles,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlanta,
GA, until May 2004; Former
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
University of Georgia, Athens,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Stephen
Purdom
|
|
Retired,
Executive Vice President, Aflac;
|
|
60
|
|
1987
|
|
235,367
|
|
*
|
|
2,299,670
|
|
.2
|
|
|
Retired
Medical Director, Columbus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinic,
Columbus, GA; Retired Director,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
Company Bank, Columbus, GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barbara K.
Rimer, Dr. PH
|
|
Dean,
School of Public Health, University
|
|
59
|
|
1995
|
|
26,235
|
|
*
|
|
208,350
|
|
*
|
|
|
of North
Carolina, Chapel Hill, NC, since
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 2005;
Alumni Distinguished
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor,
University of North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
School of
Public Health, Chapel Hill, NC,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
since
January 2003; Deputy Director,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lineberger
Comprehensive Cancer Center,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chapel
Hill, NC, from January 2002 until
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marvin R.
Schuster
|
|
Chairman of
the Board, Schuster
|
|
70
|
|
2000
|
|
76,000
|
|
*
|
|
616,000
|
|
.1
|
|
|
Enterprises, Inc., Columbus, GA, (owner of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 Burger
King restaurants in the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southeast)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Gary
Thompson
|
|
Retired,
Chief Executive Officer, Georgia
|
|
61
|
|
2005
|
|
7,000
|
|
*
|
|
7,000
|
|
*
|
|
|
Banking,
Wachovia Bank, N.A. and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President, Wachovia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation, Atlanta, GA, until December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004;
Director, Georgia Power Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a Southern
Company subsidiary)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L.
Wright
|
|
Chairman
Emeritus, Dimensions
|
|
70
|
|
1999
|
|
52,065
|
|
*
|
|
322,065
|
|
*
|
|
|
International, Alexandria, VA, since
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February
2003; Chairman, Flight Explorer,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alexandria,
VA; Former Associate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrator, U.S. Small Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administration
|
|
|
|
|
|
|
|
|
|
|
|
|
5
____________________
(*)
|
|
Percentage not listed if less
than .1%.
|
|
(**)
|
|
American Family Life Assurance
Company of Columbus (Aflac) is a wholly owned subsidiary of the
Company.
|
|
(1)
|
|
Unless specifically
noted, the respective Director has held the position for at least five
years.
|
|
(2)
|
|
Includes options to
purchase shares, which are exercisable within 60 days for: Daniel P. Amos,
4,232,571; John Shelby Amos II, 16,000; Paul S. Amos II, 40,000; Michael
H. Armacost, 16,000; Kriss Cloninger III, 997,000; Joe Frank Harris,
16,000; Elizabeth J. Hudson, 16,000; Kenneth S. Janke Sr., 10,000; Douglas
W. Johnson, 16,000; Robert B. Johnson, 23,000; Charles B. Knapp, 16,000;
E. Stephen Purdom, 16,000; Barbara K. Rimer, Dr. PH, 16,000; Marvin R.
Schuster, 36,000; David Gary Thompson, 6,000; and Robert L. Wright,
36,000. Also includes shares of restricted stock awarded under the 2004
Long-Term Incentive Plan for: Daniel P. Amos, 168,507; Paul S. Amos II,
26,318; and Kriss Cloninger III, 95,254, for which they have the right to
vote, but may not transfer until the shares have vested three years from
the date of grant if certain Company performance goals have been met. Also
includes shares of restricted stock awarded under the 2004 Long-Term
Incentive Plan for: Kenneth S. Janke Sr., 4,871; Robert B. Johnson,
2,436, and Robert L. Wright, 1,058 which they have the right to vote, but
may not transfer until the shares have vested four years from the date of
grant. Includes 300,000; 50,000; 250,000; and 121,756 shares pledged for
Daniel P. Amos, John Shelby Amos II, Paul S. Amos II, and Kriss Cloninger
III, respectively.
|
|
|
|
Also includes the following
shares:
Daniel P. Amos: 125,840 shares owned
by his spouse, which includes options to purchase 80,000 shares that are
exercisable within 60 days; 3,242,076 shares owned by partnerships of
which Mr. Amos is a partner; 654,488 shares owned by trusts with Mr. Amos
as trustee; 744,127 shares owned by the Daniel P. Amos Family Foundation,
Inc.; 80,000 shares owned by a trust with his spouse as trustee; 60,008
shares owned by his spouses children; 43,274 shares owned by a
partnership of which his spouse is a partner; and 20,082 shares owned by
the Paul S. Amos Family Foundation, Inc.
John Shelby Amos II: 330,181 shares
owned by his children with Mr. Amos as trustee; and 23,022 shares owned by
a corporation of which Mr. Amos is a controlling shareholder.
Paul S. Amos II: 6,877 shares owned
by his spouse; 15,668 shares owned by his children; 95,893 shares owned by
a trust with his spouse as trustee; 660,270 shares owned by a Trust;
15,000 shares owned by a partnership of which Mr. Amos is a partner; 5,700
shares owned by the Paul & Courtney Amos Foundation; 23,000 shares
owned by the Dan Amos Dynasty Trust; 1,719,560 shares owned by The Amos
Family Limited Partnership; 744,127 shares owned by the Daniel P. Amos
Family Foundation, Inc.; and 20,082 shares owned by the Paul S. Amos
Family Foundation, Inc.
Yoshiro Aoki: 3,313,292 shares owned
by The Mizuho Trust & Banking Co., Ltd. Mr. Aoki shares the power to
vote these shares.
Kriss Cloninger III: 1,754 shares
owned by his spouse; 46 shares owned by his spouses children; 72,420
shares owned by partnerships of which Mr. Cloninger is a partner; and
55,042 shares owned by a trust with Mr. Cloninger as trustee.
Kenneth S. Janke Sr.: 73,489 shares
owned by a trust with Mr. Janke as trustee; 33,964 shares owned by a trust
with his spouse as trustee; 5,000 shares owned by a partnership of which
Mr. Janke is a partner; and 1,523 shares owned by an investment club of
which Mr. Janke is a member.
Charles B. Knapp: 21,000 shares
owned by his spouse.
|
Daniel P. Amos and John Shelby Amos
II are cousins. Daniel P. Amos is the father of Paul S. Amos II. Kenneth S.
Janke Sr. is the father of Kenneth S. Janke Jr., an executive officer of the
Company. No other family relationships exist among any other executive officers
or Directors.
SECURITY OWNERSHIP OF MANAGEMENT
The
following table sets forth, as of February 27, 2008, the number of shares and
percentage of outstanding shares of Common Stock beneficially owned by: (i) our
Named Executive Officers, comprising our CEO, CFO, COO of Aflac U.S., and two
other most highly compensated executive officers as listed in the 2007 Summary
Compensation Table (collectively, the NEOs) whose information was not provided
under the heading Election of Directors, and (ii) all Directors and executive
officers as a group.
6
Common Stock Beneficially Owned and
Approximate Percentage of Class
as of February 27, 2008
|
|
|
Percent
|
|
|
|
Percent
of
|
Name and Principal Occupation for
five
years
|
|
Shares (1)
|
|
of
Shares
|
|
Votes
|
|
Votes
|
Akitoshi Kan
|
625,368
|
|
.1
|
|
3,267,812
|
|
.4
|
Chairman, Aflac Japan, since July 2007;
Chairman,
|
|
|
|
|
|
|
|
Aflac International, Inc., since January
2005;
|
|
|
|
|
|
|
|
President, Aflac Japan, from April 2005 until
July
|
|
|
|
|
|
|
|
2007; Chief Operating Officer, Aflac Japan,
from
|
|
|
|
|
|
|
|
January 2005 until July 2007; Executive Vice
President,
|
|
|
|
|
|
|
|
U.S. Internal Operations, Aflac, until January
2005
|
|
|
|
|
|
|
|
|
Ronald E. Kirkland
|
51,284
|
|
*
|
|
51,289
|
|
*
|
Sr. Vice President, Aflac, Director of Sales,
since
|
|
|
|
|
|
|
|
January 2005; Vice President, Aflac,
Territory
|
|
|
|
|
|
|
|
Director-West, from October 2004 until
January
|
|
|
|
|
|
|
|
2005; State Sales Coordinator-Missouri, Aflac,
until
|
|
|
|
|
|
|
|
October 2004
|
|
|
|
|
|
|
|
|
All Director nominees and executive
|
22,309,099
|
|
4.6
|
|
196,025,616
|
|
20.3
|
officers as a group
|
|
|
|
|
|
|
|
(34 persons)
|
|
|
|
|
|
|
|
____________________
(1)
|
|
Includes options to purchase
shares that are exercisable within 60 days for: Akitoshi Kan, 285,000;
Ronald E. Kirkland, 30,000; and all Directors and executive officers as a
group, 6,783,613. Also includes shares of restricted stock awarded under
the 2004 Long-Term Incentive Plan for: Akitoshi Kan, 30,635; Ronald E.
Kirkland, 14,212; and all Directors and executive officers as a group,
507,265, which they have the right to vote, but they may not transfer
until the shares have vested three years from the date of grant if certain
Company performance goals have been met. Includes 868,473 shares pledged
for all Directors and executive officers as a
group.
|
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange
Act), executive officers, Directors, and holders of more than 10% of the Common
Stock are required to file reports of their trading in Company equity securities
with the SEC.
Based solely
on its review of the copies of such reports received by the Company, or written
representations from certain reporting persons, the Company believes that during
the last fiscal year, all Section 16 filing requirements applicable to its
reporting persons were complied with, except for: Daniel P. Amos, who failed to
timely file a Form 4 when his spouse sold shares in her 401(k) Plan; executive
officer Martin A. Durant, who failed to timely file a Form 4 when his spouse
sold shares; and executive officers Susan R. Blanck and Audrey B. Tillman, who
both failed to include their non-vested Restricted Shares on their Forms 3 due
to an administrative oversight.
CORPORATE GOVERNANCE
Director Independence
The Board of
Directors annually assesses the independence of each Director nominee. The Board
has determined that with respect to Yoshiro Aoki, Michael H. Armacost, Elizabeth
J. Hudson, Douglas W. Johnson, Robert B. Johnson, Charles B. Knapp, Barbara K.
Rimer, Dr. PH, Marvin R. Schuster, David Gary Thompson, and Robert L. Wright,
(i) none of such individuals is precluded from being an independent director
under the New York Stock Exchange (NYSE) listing standards and (ii) none of
such individuals has a material relationship with the Company (either directly
or as a partner, shareholder, or officer of an organization that has a
relationship with the Company), and that accordingly, each such individual is
considered an independent director for purposes of the NYSE listing standards.
The Board made its determination based on information furnished by all Directors
regarding their relationships with the Company and research conducted by
management.
Executive Sessions of Non-employee
Directors; Presiding Director
The
Non-employee Directors meet at least annually in executive session without
management present. The Board annually designates the presiding Director for
such meetings. In August 2007, Kenneth S. Janke Sr. presided at the meeting of
the Non-employee Directors in executive session. Mr. Marvin R. Schuster has been
designated as the presiding Director since October 2007.
7
Communications with Directors
Shareholders
and interested parties may contact members of the Board by mail. To communicate
with the Board of Directors, any individual Director or any group or committee
of Directors (including Non-employee Directors as a group), correspondence
should be addressed to the Board of Directors or any such individual Director or
group or committee of Directors by either name or title. All such correspondence
should be sent to the Corporate Secretary of Aflac Incorporated at the following
address: 1932 Wynnton Road, Columbus, Georgia 31999.
All
communications received as set forth in the preceding paragraph will be opened
by the Corporate Secretary for the sole purpose of determining whether the
contents represent a message to the Directors. Any contents that are not in the
nature of advertising, promotions of a product or service, or patently offensive
material will be forwarded promptly to the addressee. In the case of
communications to the Board or any group or committee of Directors, the
Secretarys office will make sufficient copies of the contents to send to each
Director who is a member of the group or committee to which the envelope is
addressed.
In addition,
it is Company policy that each of the Directors attend the Annual Meeting. All
of the Directors were in attendance at the 2007 Annual Meeting.
Director Nominating Process
The
Corporate Governance Committee will consider Director candidates recommended by
shareholders. In considering candidates submitted by shareholders, the Corporate
Governance Committee will take into consideration the needs of the Board and the
qualifications of the candidate. The Corporate Governance Committee may also
take into consideration the number of shares held by the recommending
shareholder and the length of time that such shares have been held. To have a
candidate considered by the Corporate Governance Committee, a shareholder must
submit the recommendation in writing and must include: (i) the name of the
shareholder and evidence of the persons ownership of Common Stock, including
the number of shares owned and the length of time of ownership; and (ii) the
name of the candidate, the candidates resume or a listing of his or her
qualifications to be a Director of the Company and the persons consent to be
named as a Director if selected by the Corporate Governance Committee and
nominated by the Board. No person 20 years of age or younger or 75 years of age
or older shall be eligible for election or appointment as a member of the Board
of Directors.
The shareholder recommendation and
information described above must be sent to the Corporate Secretary at Aflac
Incorporated, 1932 Wynnton Road, Columbus, Georgia 31999, and must be received
by the Corporate Secretary not less than 90 nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of shareholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 25 days before or after such anniversary date, notice by
the shareholder, to be timely, must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made, whichever
occurs first.
The
Corporate Governance Committee believes that the minimum qualifications for
serving as a Director of the Company are that a nominee demonstrate, by
significant accomplishment in his or her field, an ability to make a meaningful
contribution to the Boards oversight of the business and affairs of the Company
and have an impeccable record and reputation for honest and ethical conduct in
both his or her professional and personal activities. In addition, the Corporate
Governance Committee examines a candidates specific experiences and skills,
time availability in light of other commitments, potential conflicts of interest
and independence from management and the Company. The Corporate Governance
Committee also seeks to have the Board represent a diversity of backgrounds and
experience.
The
Corporate Governance Committee identifies potential nominees by asking current
Directors and executive officers to notify the Corporate Governance Committee if
they become aware of persons that meet the criteria described above and who have
had a change in circumstances that might make them available to serve on the
Board (i.e., for example if an individual retired as chief executive officer or
chief financial officer of a public company or exited government or military
service). The Corporate Governance Committee may also, from time to time, engage
firms that specialize in identifying Director candidates. As described above,
the Corporate Governance Committee will also consider candidates recommended by
shareholders.
Once the
Corporate Governance Committee identifies a person as a potential candidate, the
Corporate Governance Committee may collect and review publicly available
information regarding the potential candidate to assess whether that person
should receive further consideration. If the Corporate Governance Committee
determines that the candidate warrants further consideration, the Chairman or
another member of the Corporate Governance Committee will contact the person.
Generally, if the person expresses a willingness to be considered and to serve
on the Board, the Corporate Governance Committee requests information from the
candidate, reviews the persons accomplishments and qualifications, including in
light of any other candidates that the Corporate Governance Committee might be
considering, and conducts one or more interviews with the candidate. In certain
instances, Corporate Governance Committee members may contact one or more
references provided by the candidate or may contact other members of the
business community or other persons that may have greater firsthand knowledge of
the candidates accomplishments. The Corporate Governance Committees evaluation
process does not vary based on whether or not a candidate is recommended by a
shareholder, although, as stated above, the Board may take into consideration
the number of shares held by the recommending shareholder and the length of time
that such shares have been held.
8
Code of Business Conduct and Ethics
The Company has a Code
of Business Conduct and Ethics, which is applicable to all Directors and
employees, including executive officers, of the Company and its subsidiaries.
The Code of Business Conduct and Ethics includes a Code of Ethics for Chief
Executive and Senior Financial Officers that sets forth standards applicable to
all officers, directors, and employees but has provisions specifically
applicable to the Chief Executive Officer, Chief Financial Officer, and the
Chief Accounting Officer. The Company intends to satisfy any disclosure
requirements regarding amendments to, or waivers from, any provision of the Code
of Business Conduct and Ethics by posting such information on the Aflac Web site
at
www.aflac.com
, under
Investors then Corporate Governance.
BOARD AND COMMITTEES
During 2007, the Board
of Directors met six times, and all Directors attended at least 75% of the
meetings of the Board and of the Board Committees on which they served.
The Audit Committee
Charter, the Compensation Committee Charter, and the Corporate Governance
Committee Charter, as well as the Companys Corporate Governance Guidelines and
the Code of Business Conduct and Ethics, can all be found at the Companys Web
site
www.aflac.com
under
Investors then Corporate Governance. These documents are also available in
print to shareholders upon request. Shareholders may submit their request to
Aflac Incorporated, Corporate Secretary, 1932 Wynnton Road, Columbus, Georgia
31999.
The Audit Committee
The Audit Committee,
which met 12 times during 2007, has the following primary duties and
responsibilities: (i) to oversee that management has maintained the reliability
and integrity of the financial reporting process and systems of internal
controls of the Company and its subsidiaries regarding finance, accounting, and
legal matters; (ii) to issue annually the Audit Committee Report set forth
below; (iii) to monitor the independence and performance of the Companys
independent registered public accounting firm and the performance of the
Companys internal auditing department; (iv) to assist Board oversight of the
Companys compliance with legal and regulatory requirements; (v) to provide an
open avenue of communication among the independent registered public accounting
firm, management, the internal auditing department, and the Board, and (vi) to
review and monitor the adequacy of enterprise risk management activities of the
Company. The Audit Committee also pre-approves audit and non-audit services
provided by the Companys independent registered public accounting firm and
pre-approves all related person transactions that are required to be disclosed
in the Companys annual Proxy Statement. In addition, it is the responsibility
of the Audit Committee to select, oversee, evaluate, determine funding for, and,
where appropriate, replace or terminate the independent registered public
accounting firm. At least annually, the Audit Committee reviews the services
performed and the fees charged by the independent registered public accounting
firm.
The independent
registered public accounting firm has direct access to the Audit Committee and
may discuss any matters that arise in connection with their audits, the
maintenance of internal controls, and any other matters relating to the
Companys financial affairs. The Audit Committee may authorize the independent
registered public accounting firm to investigate any matters that the Audit
Committee deems appropriate and may present its recommendations and conclusions
to the Board.
The Audit Committee of
the Board of Directors is composed of Robert L. Wright (Chairman), Douglas W.
Johnson (financial expert), Charles B. Knapp, and Marvin R. Schuster, each of
whom qualifies as an independent Director under the NYSE listing standards.
The Corporate Governance Committee
The Company has a
Corporate Governance Committee, the functions of which include: (i) selecting
individuals qualified to serve as Directors of the Company to be nominated to
stand for election to the Board of Directors; (ii) recommending to the Board,
Directors to serve on committees of the Board; (iii) advising the Board with
respect to matters of Board composition and procedures; (iv) developing and
recommending to the Board a set of corporate governance principles applicable to
the Company; and (v) overseeing the evaluation of the Board and the Companys
management. The Corporate Governance Committee operates under a written charter
adopted by the Board of Directors.
The Corporate
Governance Committee of the Board of Directors is composed of Marvin R. Schuster
(Chairman), Barbara K. Rimer, Dr. PH, and David Gary Thompson, each of whom
qualifies as an independent Director under the NYSE listing standards. The
Corporate Governance Committee met six times during 2007.
9
The Compensation Committee
The
responsibilities of the Compensation Committee include the following: (i) to
review, at least annually, the goals and objectives of the Companys executive
compensation plans; (ii) to annually evaluate the performance of the CEO with
respect to such goals and objectives; (iii) to determine the CEOs compensation
level based on this evaluation; and (iv) to annually evaluate the performance of
the employee Directors of the Company in light of such goals and objectives, and
set their compensation levels based on this evaluation. The Compensation
Committee approves all aspects of compensation for executive officers who are
members of the Board. For all other officers who are subject to Section 16
reporting requirements, including all executive officers, the Compensation
Committee reviews and approves compensation levels, equity-linked incentive
compensation, and also annual incentive awards, sometimes referred to as
non-equity incentives, under the Companys Management Incentive Plan (MIP).
With respect
to Non-employee Director compensation, the Compensation Committee recommended to
the Board a policy regarding Non-employee Director compensation and has
recommended Non-employee Director compensation consistent with the policy to the
Board. The Board makes final determinations regarding Non-employee Director
compensation.
The
Compensation Committee may form subcommittees and delegate such power and
authority as the Compensation Committee deems appropriate. However, no
subcommittee may have fewer than two members and the Compensation Committee may
not delegate to a subcommittee any power or authority required by any law,
regulation or listing standard to be exercised by the Compensation Committee as
a whole.
The
Compensation Committee retains a nationally recognized compensation consultant,
Mercer Human Resource Consulting (the Consultant), to assist and advise the
Compensation Committee in its deliberations regarding executive compensation.
The Consultant works with the Compensation Committee in the review of executive
compensation practices, including the competitiveness of pay levels, design
issues, market trends, and other technical considerations.
The Consultant typically provides
assistance for the following areas:
-
Provides
comparative company performance to determine CEO pay;
-
Provides an evaluation of the competitiveness of
the Companys executive compensation and benefit programs;
-
Reviews plan
design issues and recommends potential improvement opportunities;
-
Apprises the
Compensation Committee of trends and developments in the marketplace;
-
Provides
assistance in assessing the relationship between executive pay and
performance;
-
Provides assistance with assessing proposed
performance goals and ranges for incentive plans; and
-
Provides comparative company
data to determine NEO compensation.
In addition to these
recurring service activities for the Compensation Committee, the Consultant
created and conducted a training program for the Companys Compensation
Committee members in 2005 and 2006. The training program was designed to assist
the Compensation Committee in the execution of its duties and responsibilities.
In keeping with what the Company believes is a best practice aspect of
corporate governance, the Company does not use the Consultants services for
compensation issues outside the purview of the Compensation Committee
.
Additional information
regarding the Companys processes and procedures for the consideration and
determination of executive compensation can be found in Compensation Discussion
and Analysis (CD&A) below.
The current members of
the Compensation Committee are Robert B. Johnson (Chairman), David Gary
Thompson, and Robert L. Wright. All members of the Compensation Committee are
outside Directors as defined by Section 162(m) (Section 162(m)) of the
Internal Revenue Code of 1986, as amended (the IRC), Non-employee Directors
within the meaning of Rule 16b-3 under the Exchange Act, and independent
Directors under the NYSE listing standards. The Compensation Committee operates
under a written charter adopted by the Board of Directors. The Compensation
Committee met four times in 2007.
Compensation Committee Interlocks and Insider
Participation
During 2007, the
members of the Companys Compensation Committee were Robert B. Johnson
(Chairman), David Gary Thompson, and Robert L. Wright. None of such persons is a
current or former employee or officer of the Company or any of its subsidiaries.
During 2007, no member of the Compensation Committee was an executive officer of
another entity on whose compensation committee or board of directors any
executive officer of the Company served.
10
COMPENSATION DISCUSSION AND ANALYSIS
I.
Introduction
The Companys
compensation philosophy is to provide pay-for-performance that is directly
linked to the Companys results. We believe this is the most effective method
for creating shareholder value, and that it has played a significant role in
making the Company an industry leader. The performance-based elements of our
compensation programs apply to all levels of Company management, including our
executive officers. In fact, pay-for-performance components permeate every
employee level at the Company. The result is that we are able to attract,
retain, motivate and reward talented individuals who have the necessary skills
to manage our growing global business on a day-to-day basis, as well as for the
future.
The Company has a
history and a well-earned reputation with its shareholders as a very transparent
organization. That commitment to transparency on all levels was certainly a
driving force in our decision to allow shareholders a say-on-pay advisory
vote. As a Company, we pride ourselves on incorporating ethics and transparency
into everything we do, including compensation disclosure. With that in mind, we
are pleased to provide the following compensation discussion and analysis.
II.
Executive
Summary
This CD&A pertains to our
executive officers and in particular the following NEOs:
|
Daniel P. Amos
|
Chairman and
CEO
|
|
Kriss Cloninger
III
|
President, CFO, and
Treasurer
|
|
Akitoshi Kan
|
Chairman, Aflac Japan;
Chairman, Aflac International
|
|
Ronald E.
Kirkland
|
Senior Vice President,
Aflac, Director of Sales
|
|
Paul S. Amos
II
|
President, Aflac and COO,
Aflac U.S.
|
As a leader in our
industry segment, we recognize that a sound management compensation program is a
part of what makes a company an employer of choice. Our compensation philosophy
is to provide pay that is directly linked to the Companys performance results.
By doing so, we are able to provide the following: reasonable salaries that
reflect each executives responsibility level, qualifications and contribution
over time; benefits that adequately meet the needs of our employees and their
families at a reasonable shared cost; meaningful, performance-based annual
non-equity incentives; and long-term equity incentives that reflect the creation
of shareholder value.
Of these four pay
elements, we consider the annual and longer-term incentive forms of compensation
to be the most important because they enable us to attract, retain, motivate and
reward talented individuals who have the necessary skills to manage our growing
global enterprise on a day-to-day basis as well as for the future.
The value of annual
non-equity incentives is directly linked to specific financial goals such as
operating earnings per diluted share, increases in pretax operating earnings,
total new annualized premium sales, premium income, and expenses established and
approved by the Compensation Committee (for purposes of this CD&A, the
Committee) at the beginning of each fiscal year.
Longer term equity
incentives are provided to executive officers in two forms: stock options whose
future value depend upon share price appreciation and performance-based
restricted stock (PBRS) whose vesting is determined by the Companys cumulative
compound growth rate in operating earnings per diluted share, excluding foreign
currency changes, over a three-year performance period. This vesting target is
annually reviewed and established by the Committee for the ensuing three-year
performance period.
Lower level officers
receive stock options in combination with time-based restricted stock (TBRS)
that vest after three years of continuous service. This combination is felt to
link their interests to those of our shareholders as well as help the Company
retain their services. These plans are fully described in Section V and VI of
this CD&A.
To help the Committee
execute its responsibilities, the Consultant annually provides the Committee
comparative performance and pay data based upon a sample of 16 major insurance
companies (see section V of this CD&A). The peer group pay data is derived
from their proxy statements and helps the Committee establish the salaries and
target incentive award opportunities for the NEOs.
In general it is the
Companys intent to set individual salaries within a plus or minus range of 25%
from survey medians for comparable positions and to target incentives at median
levels with intended payout variances based upon results above or below our
planned financial goals. In this way, the Committee intends to have compensation
pay levels mirror performance results. Quite simply, if we are a median
performer, our total pay should approximate median levels. If we are a 75th
percentile performer, our total pay should approximate the 75th percentile. If
we are a 25th percentile performer, our total pay should approximate the 25th
percentile.
This philosophy is
directly applied by the Committee in determining the CEOs total pay. Each year
the Consultant calculates the Companys percentile performance rank for the
prior year among the peer group of other major insurance companies based on 10
weighted-performance measures. These measures are all related to one year
results for the prior year except for Total Shareholder Return, which is
measured over the prior three-year period. The Consultant then determines the
total pay value that matches the Companys percentile performance rank. The
Committee uses the information from this analysis to adjust the CEOs total pay
to that indicated by the Companys percentile performance rank. This adjustment
is accomplished through a final true-up stock option grant in August. This
methodology is detailed in Section VII of this CD&A.
11
In order to
directly link the CEOs total pay to the Companys performance results, it is
necessary to wait for both the performance and pay information of all companies
to be made public. As a result, the Committee finalizes the CEOs total pay
based on the prior years results at their August meeting. Accordingly, there is
a lag between the payment and reporting of awards because the CD&A reports
on these results in the following years proxy. For instance, 2006 performance
results determined the stock award provided to our CEO in August of 2007. In
years prior to 2006 in which this approach to the CEOs compensation was used,
the Companys performance rank placed it in the upper half, and in most years,
the upper quartile among the peer companies.
That
was not the case for the 2006 performance year, when the Companys performance
rank slipped to the 25th percentile. This resulted in a smaller long-term equity
incentive grant for our CEO in 2007 compared to previous years.
III.
Oversight of the
Executive Compensation Program
The
Companys executive compensation program is administered by the Committee with
assistance from the CEO and other company officers as appropriate. The Committee
also is assisted in the execution of its duties and responsibilities by the
Consultant, which reports to the Committee. A description of the assistance
typically provided to the Committee by the Consultant is presented on Page 10 of
this Proxy Statement.
IV.
Executive Compensation Philosophy and
Core Principles
The
following table highlights the primary components and rationale of our
compensation philosophy and the pay elements that support the philosophy.
Philosophy
Component
|
Rational/Commentary
|
Pay Element
|
Compensation should
reinforce business objectives and values
|
One of the Companys
guiding principles is to provide an enriching and rewarding workplace for
our employees. Key goals are to retain, motivate and reward executives
while closely aligning their interests with those of the Company and its
shareholders. Our compensation practices help us achieve these
goals.
|
All elements (salary,
non-equity incentive awards, equity linked compensation, retirement, and
health and welfare benefits)
|
A majority of compensation
for top executives should be based on performance
|
Performance-based pay
aligns the interest of management with the Companys shareholders. Pay for
top executives is highly dependent on performance success.
Performance-based compensation motivates and rewards individual efforts,
unit performance, and Company success. Potential earnings under
performance-based plans are structured such that greater compensation can
be realized in years of excellent performance. Similarly, missing goals
will result in lower, or no, compensation from the performance-based
plans.
|
Merit salary increases,
annual non-equity incentive awards, and equity-linked incentive
compensation (stock options, time-based restricted stock, and
performance-based restricted stock)
|
Compensation should be
competitive
|
The Compensation Committee
has retained Mercer Human Resource Consulting as an adviser to assist the
Committee with assessing pay practices and peer group performance, at
least annually, in order to maintain competitive compensation relative to
the Companys industry. The Consultant uses a combination of proxy data
and market surveys to assess the competitiveness of the Companys
executive pay within the industry. Company philosophies and cultural
practices also affect the overall compensation policies for the executive
officers.
|
All elements
|
Key talent should be
retained
|
In order to attract and
retain the highest caliber of management, the Company seeks to provide
financial security for its executives over the long term and to offer
intangible non-cash benefits in addition to other compensation that is
comparable with that offered by the Companys competitors.
|
Equity-linked incentive
compensation, retirement benefits, employment agreements, change in
control provisions
|
Compensation should align
interests of executives with shareholders
|
Equity ownership helps
ensure that the efforts of executives are consistent with the objectives
of shareholders.
|
Equity-linked incentive
compensation
|
V.
Executive Compensation
Policies
1.
|
|
Total direct compensation
relative to market
|
|
|
|
The Companys total direct
compensation (base salary, annual non-equity incentive award, and
long-term equity incentive compensation) for our NEOs is generally
designed to provide competitive compensation relative to companies in the
Companys peer group for target performance results. For the CEO, the
Companys practice is to measure performance relative to peers, which
ensures that the CEOs compensation in a given year directly correlates
with the Companys relative performance rank for the prior year. This
process is explained in greater detail below in the section labeled CEO
Compensation. We note that the Companys performance has ranked first or
second in six of the ten years for which such data has been gathered.
However, that was not the case for 2006, when the Companys performance
rank was below the median for the first time during that ten-year
period.
|
|
|
|
|
|
The peer group consists of 16
major insurance companies identified below. The peer group did not change
from 2006 through 2007. These peer companies are engaged in similar
businesses, of similar size, and are competitors for talent, although the
Company is slightly above the median revenues, market capitalization, and
assets of the peer group. Peer group companies include: Aetna Inc., The
Allstate Corporation, Aon Corporation, Assurant, Inc., The Chubb
Corporation, CIGNA Corporation, Conseco, Inc., Genworth Financial, Inc.,
The Hartford Financial Services Group, Inc., Lincoln National Corporation,
Manulife Financial Corporation, The Progressive Corporation, Prudential
Financial, Inc., The Travelers Companies, Inc., Safeco Corporation, and
Unum Group.
|
12
2.
|
|
Current vs. long-term
compensation
|
|
|
|
The components of current
compensation include an annual salary and an annual non-equity incentive
award. Long-term compensation is provided to link executive compensation
to the delivery of shareholder value. The equity-linked long-term
incentive compensation components include stock options, PBRS, and in some
cases, TBRS. The Company has two long-term equity incentive plans. The
first is a stock option plan, the 1997 Stock Option Plan, which allows for
grants of both incentive stock options (ISOs) and non-qualifying (NQ)
stock options. This plan expired on February 11, 2007 (although options
granted before that date remain outstanding in accordance with their
terms). The second plan, the 2004 Long-Term Incentive Plan, allows for
ISOs, NQs, performance- or time-based restricted stock, restricted stock
units, and stock appreciation rights.
|
|
|
|
On an annualized present value
basis, the proportion of long-term incentives to target annual cash
incentives varies based on the responsibility level of the participants
job and the ability to impact results over time. In general, the higher
the responsibility level, the greater the proportion of long-term equity
incentives, compared with target annual cash incentives. In the case of
all NEOs other than the Sales NEO (Mr. Kirkland), the present value of
long-term equity incentive grants is greater than target annual cash
incentives.
|
|
|
|
In the case of Mr. Kirkland, the
annual non-equity incentive compensation is the dominant feature of his
compensation arrangement. Annual non-equity incentive compensation will
vary directly each year in proportion to sales results achieved and the
percentage increase in average weekly producing sales
associates.
|
|
3.
|
|
Fixed vs. variable
compensation
|
|
|
|
The portion of an executives
compensation that is variable increases as the scope and level of the
individuals responsibilities increase. For the NEOs, variable
compensation accounts for a substantial portion of total compensation.
Annual cash incentives increase or decrease with performance. The amount
of equity-linked compensation granted each year is based primarily on
level of responsibility and secondarily on individual performance. The
vesting of PBRS is based on whether a predefined Committee approved
performance objective (i.e., cumulative compound growth rate in operating
earnings per diluted share) is attained over a three-year period. Other
contingent components include vesting restrictions on stock options and
TBRS, which require recipients to fulfill a continuing employment
obligation before they can exercise any option or vest in the
TBRS.
|
|
|
|
During 2007, the Committee, with
the assistance of the Consultant, reviewed the target award levels for
both annual and long-term incentives for the NEOs and other executive
officers. As a result, the 2008 target award levels for three of our
Non-Sales NEOs were set as follows:
|
|
|
|
Target Incentive as Percent of Salary
|
|
|
|
Non-Sales NEOs
|
Annual Incentive
|
Annualized
Long-term Incentives
|
|
|
Daniel P. Amos
|
200%
|
Performance-Based
|
|
Kriss Cloninger
III
|
150%
|
350%
|
|
Paul S. Amos II
|
100%
|
250%
|
|
|
Mr. Kans target incentives were
not changed for 2008 because he will be retiring during the year. Mr.
Kirklands target incentives were determined to be appropriate at the
current level for his position.
|
|
4.
|
|
Mix of long-term
incentives
|
|
|
|
In 2007, the Committee approved a
combination of equity-linked incentive compensation awards for the
executive officers. Based on the value of equity grants as presented in
the Summary Compensation Table which measures their financial statement
expense for 2007 under Statement of Financial Accounting Standard No.
123(R), Share Based Payment, (SFAS No. 123(R)) under the columns Stock
Awards and Option Awards, stock options represented 67% and PBRS
represented 33% of total long-term incentives for the CEO. For all other
NEOs, stock options ranged from 56% to 75% and PBRS ranged from 25% to 44%
of total long-term equity incentive value.
|
13
5.
|
|
Total compensation
in light of best practices and costs
|
|
|
|
Every year the
Committee reviews the incentive compensation components of all executive
officers with the help of the Consultant. The Committee believes that many
best practices are reflected in the existing compensation strategy and
that the Companys compensation expenses are reasonable and appropriate
given the superior financial and stock market performance that the Company
has produced over a long period of time. From August 1990, when Daniel
Amos was appointed as the Chief Executive Officer through December 2007,
the Companys total return to shareholders (TSR), including reinvested
cash dividends, has exceeded 3,867% compared with 549% for the S&P
500. During the same time, the Companys market capitalization has grown
from $1.2 billion to over $30 billion.
|
|
|
|
Modifications to the
compensation program are periodically made in order to remain consistent
with the competitive market and emerging best practices. However, our
compensation strategy and core program remained the same in 2007 as it had
in 2006 and 2005, and no material changes are anticipated for
2008.
|
|
VI.
Components of the NEO Compensation
Program
Total compensation is
provided to the CEO and other NEOs through four primary components, each of
which has a different strategic role and risk profile. The table below provides
an overview of the compensation components, and is followed by a detailed
description of how the amount of each component is determined.
|
Element
|
Description
|
Strategic
Role
|
Examples
|
Risk
Profile
|
|
|
|
Base Salary
|
Fixed based on level
of
responsibility, experience,
tenure, and
qualifications
|
- Performance of
day-to-day
activities
|
- Cash
|
- Low to
moderate
|
Non-Equity
Incentive
|
Variable based on
achievement of annual financial objectives
|
- Policy implementations
-
Operating decisions
- Short-term
focus
|
- Cash
|
- Moderate to
high
|
|
Long-Term Equity
Incentives
|
Variable based on
responsibility and the achievement of longer-term financial goals and
shareholder value creation
|
- Effective strategy
and
policy making
- Long-term
focus
- Alignment with shareholders
|
Equity-Linked Incentive
Compensation
- Stock
Options
-
Performance-Based
Restricted
Stock
|
- High
|
|
|
Benefits &
Perquisites
|
Satisfy employee health,
welfare, and retirement needs
|
- Security
- Tax effective pay
- Financial counseling
-
Time efficiency/convenience
|
- Health care
- Life &
Disability
- Retirement plans
- Security
|
-
Low
|
Base Salary
The primary purpose of
the base salary component is to provide the recipient a steady stream of income
consistent with his or her level of responsibility, qualifications and
contribution over time. The Consultant annually gathers comparative market data
on salaries for the Committee to use in reviewing and determining the CEOs
salary and his recommendations for the salaries of the CFO and all other
executive officers.
In the aggregate, the
total base salaries of the Companys executive officers, including its Non-Sales
NEOs, are at the 50th percentile of the survey results for these same positions
at peer companies. Virtually all executive officers receive a salary that is
within a plus or minus range of 25% from the survey median for their position.
In general, executive officers who are new to their role are likely to be below
the median and executive officers who have been in their jobs for extended
periods are more likely to be above the median.
In 2007 most of the
executive officers, including the CEO and CFO, received a 3.8% base salary
increase. These increases were derived from the industry projected base salary
increase in the Mercer 2007 U.S. Compensation Planning Survey for the insurance
industry, which reflected expected base salary increases for calendar year 2007.
The Chairman of Aflac Japan received a 4.8% increase and the President of Aflac
U.S. received a 5.5% increase. These two increases were slightly above the 2007
projected industry increase mentioned previously because of increased
responsibilities or the previous base salary was below the median range for the
responsibilities of the position. The salary of the Sales NEO remained the same,
as the majority of his compensation is intended to come from his annual
non-equity incentive award based on actual sales results achieved and the
percentage increase in average weekly producing sales associates.
14
Annual Non-Equity Incentive
Plans
All of the
NEOs are eligible to participate in one of two non-equity incentive plans
sponsored by the Company. The Non-Sales NEOs participate in the MIP and the
Sales NEO participates in the Sales Incentive Plan (SIP).
Performance
targets are set annually for each plan, and cash payouts are made to executives
based on actual performance as more fully described in the separate sections
below for each plan.
Management Incentive
Plan
The
Companys MIP uses specific performance objectives to provide potential annual
non-equity incentive awards for the CEO, CFO, Chairman of Aflac Japan, President
of Aflac, and all other non-sales officers. One of the performance targets of
the MIP is based on the growth of operating earnings per diluted share, which is
the primary financial objective of the Company on a consolidated
basis.
Additional
performance targets are specific to the Companys two principal business
segments: Aflac U.S. and Aflac Japan. For each segment, the MIP performance
targets include a measure of total new annualized premium sales, premium income,
operating expenses and pretax operating earnings. These measures are considered
to be the most significant to the performance of each segment. They are
understood by those eligible for the non-equity incentive awards, and they are
under the collective influence of the segment officers.
The
Committee, at its February meeting, approves all MIP performance objectives. The
Companys primary financial objective, the growth in operating earnings per
diluted share has a target established that must be achieved before any payout
is provided. Our objective for 2007 was to increase operating earnings in a
range of 15% to 16% or $3.28 to $3.31 per diluted share. The target objective
was set at the lower end of the range or $3.28 per share and the maximum was set
at the upper end of the range or $3.31 per share, all on a constant currency
basis. The actual attained result of $3.29 per share fell between the target and
maximum and resulted in a 15.4% increase in operating earnings per diluted
share.
For each
business segment performance measure, a target performance level is established.
In addition, a minimum and maximum level is established. The payout for a
minimum result is one-half that of the target result, while the payout for a
maximum result is two times that of the target result. Typically the target
result is equidistant between the minimum result and the maximum result.
Interpolation is used to calculate incentive
payouts for results between minimum and target or target and maximum.
For the Aflac U.S. business segment
in 2007, the following performance incentive measures were used:
-
the percentage
increases in new annualized premiums and premium income
-
the percentage
increase over the previous year of premium income, minus the percentage
increase in controllable expenses
-
the percentage
increase in pretax operating earnings over the previous year
For the Aflac Japan business segment
in 2007, the following performance incentive measures were used:
-
the percentage
increases in new annualized premiums and premium income
-
actual
operating expenses compared to budget
-
the percentage increase in
pretax operating earnings over the previous year, before expenses allocated
from the U.S. operations, and any currency effect
15
The actual 2007
business segment performance measures and the targets and ranges for each
incentive performance measure were as follows:
|
Aflac U.S. business
segment:
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
Percentage increase in new annualized premiums
|
6.0%
|
|
8.0%
|
|
10.0%
|
|
|
|
Percentage increase in premium income
|
9.0%
|
|
10.0%
|
|
11.0%
|
|
|
|
Percentage increase in premium income minus the
percentage
|
|
|
|
|
|
|
increase in controllable expenses
|
-2.0%
|
|
0.0%
|
|
2.0%
|
|
|
|
Percentage increase in pretax operating earnings
|
13.0%
|
|
15.0%
|
|
17.0%
|
|
|
|
|
|
Aflac Japan business
segment:
|
|
|
|
|
|
|
|
Percentage increase in new annualized premiums - 1st six
months
|
-14.0%
|
|
-12.0%
|
|
-10.0%
|
|
2nd six
months
|
0.0%
|
|
2.0%
|
|
4.0%
|
|
|
|
Percentage increase in premium income
|
3.5%
|
|
4.25%
|
|
5.0%
|
|
|
|
Actual operating expenses compared to budget (Yen in
millions)
|
117,829
|
|
116,662
|
|
115,459
|
|
|
|
Percentage increase in pretax operating earnings before
expenses
|
|
|
|
|
|
|
allocated from the U.S. operations, and eliminating any currency
effect
|
10.0%
|
|
12.0%
|
|
14.0%
|
The incentive performance measure for the Japan
business segment related to the percentage increase in new annualized premiums
was weighted 25% for the first six months and 75% for the second six months. If
the actual performance for the second six months was below minimum, no bonus was
payable for this entire incentive performance measure.
Actual performance was determined after the close of
the year and presented to the Committee for discussion and approval at its
February 2008 meeting. The actual non-equity incentive plan payments to the NEOs
are reflected in the 2007 Summary Compensation Table in the column labeled
Non-Equity Incentive Plan Compensation.
The incentive measures
described above include non-GAAP financial measures as more fully described in
this and the next paragraph. Our corporate performance measure is based on
operating earnings per diluted share excluding the impact of foreign currency
translation. We define operating earnings per diluted share to be the net
earnings before realized investment gains and losses, the impact of Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS No. 133) and nonrecurring items divided by the
weighted-average number of shares outstanding for the period plus the
weighted-average shares for the dilutive effect of share-based awards. Because
foreign exchange rates are outside of managements control, operating earnings
per diluted share is computed using the average yen/dollar exchange rate for the
prior year, which eliminates fluctuations from currency rates that can magnify
or suppress reported results in dollar terms.
Aflac U.S. and Aflac
Japan incentive measures also include non-GAAP financial measures. For both the
U.S. and Japanese segment, we use an industry measure of the increase in total
new annualized premium sales, which is the annual premiums on policies sold and
incremental annual premiums on policies converted during the reporting period.
For Aflac U.S., we use the percentage increase in premium income minus the
percentage increase in controllable expenses. Controllable expenses are a
component of total acquisition and operating expenses for the U.S. business
segment. For Aflac Japan, we compare actual expenses against budgeted operating
expenses as a performance measure for the reporting period. And for both
segments we use the percentage increase in pretax operating earnings. We define
pretax operating earnings on a segment basis to be the operating profit before
realized investment gains and losses, the impact of SFAS No. 133, and
nonrecurring items. The percentage increase in pretax operating earnings for the
Japan segment is measured before expenses allocated from the U.S. and currency
effects.
16
We believe the segment
measures and operating earnings per diluted share objectives described above are
the most important incentive factors for our business in terms of creating
shareholder value and aligning managements interests and rewards with those of
our shareholders.
The CEO and CFO
recommend to the Committee the specific Company performance objectives and their
ranges. In recommending the incentive performance objectives to the Committee,
the CEO and CFO take into consideration past performance results and scenario
tests of the Companys financial outlook as projected by a complex financial
model. The model projects the impact on various financial measures using
different levels of total new annualized premium sales, budgeted expenses,
morbidity, and persistency. This enables the Company to set ranges around most
performance objectives.
The Committee may
consider the probability of attainment of each of the various measures.
Generally, it is expected that target performance will be attained 50% to 60% of
the time, minimum performance attained at least 75% of the time, and maximum
performance attained not more than 25% of the time. At its annual February
meeting, the Committee reviews and approves, or if appropriate modifies, the
annual incentive goals for the ensuing year.
As noted above, at this
same meeting, the Committee also certifies the incentive plan performance
results for the prior year before payments are made in order to qualify, if
appropriate, any payouts to the NEOs as performance-based and fully deductible
as compensation expense for tax purposes under the IRC. The Committee has the
discretion to adjust the MIP results related to segment performance measures if
it deems that a class of MIP participants would be unduly penalized due to the
incomparability of the result to the performance measure as determined by the
Committee. For the Japan segment, the Committee did adjust the 2007 MIP
objective related to actual operating expenses compared to budget. The only NEO
that benefited from this adjustment was Mr. Kan.
Sales Incentive Plan
The Company maintains a
sales incentive plan for officers and management personnel whose primary
responsibilities are focused on producing total new annualized premium sales and
increasing the number of producing associates. Sales management, including Mr.
Kirkland, have three primary incentive goals, which are established annually by
the CEO. The specific performance measurement items are the percentage increase
in total new annualized premium sales, the dollar growth of total new annualized
premium sales over the previous year, and the percentage increase in average
weekly producing sales associates. All three of the performance metrics are
directly influenced by and under the responsibility of the sales management
team.
For each of the three
performance measures, a range is established that relates the relative
performance measure to a specific dollar payout. We believe the sales incentive
goals are the most important incentive measures for their job responsibilities.
Sales growth and weekly producers are performance drivers of our Company due to
their influence on revenue growth. Additionally, they are measures watched
closely by the investment community.
The
actual 2007 sales performance measures and the targets and ranges were as
follows:
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
Percentage
increase in total new annualized premium sales
|
8%
|
|
|
10%
|
|
|
28%
|
|
|
|
|
|
Growth in
new annualized premium over the prior year (in millions)
|
1,438
|
|
|
1,495
|
|
|
1,722
|
|
|
|
|
|
Percentage
increase in average weekly producing sales associates
|
3%
|
|
|
6%
|
|
|
23%
|
|
The cash incentives,
which are based on performance ranges, can range from zero for missing the
performance objective to payments that are, in some potential cases, more than
eight times the individuals salary. The Company bases the majority of the
compensation potential for sales management on annual cash incentives. Base
salaries are intentionally smaller as a percentage of total compensation when
compared to non-sales executives. This pay philosophy also puts the sales
management team in a clear pay-for-performance situation.
17
Weighting of Performance Measures
The performance
measures are weighted for the NEOs and all other officer levels of the Company.
The intent is to weight them according to how each position can and should
influence their outcome. The following table details these relative weightings
for each of the NEOs in 2007:
|
Weightings of
Annual Incentive Measures as Percent of Target Award
|
Executive
|
Corporate
|
U.S.
Operations/Sales
|
Japan
Operations
|
Total
|
Daniel P. Amos
|
48.6%
|
17.1%
|
34.3%
|
100%
|
Kriss Cloninger III
|
50.0
|
17.9
|
32.1
|
100
|
Akitoshi Kan
|
10.0
|
|
90.0
|
100
|
Ronald E. Kirkland
|
|
100.0
|
|
100
|
Paul S. Amos II
|
29.4
|
70.6
|
|
100
|
The
following table reflects targets and the earned percentages of salary based on
2007 performance results for the NEOs:
Executive
|
Target as Percent of
Salary
|
Earned as Percent of
Salary
|
Daniel P. Amos
|
175%
|
218.2%
|
Kriss Cloninger III
|
140
|
175.0
|
Akitoshi Kan
|
120
|
145.0
|
Ronald E. Kirkland*
|
200
|
193.4
|
Paul S. Amos II
|
80
|
132.6
|
____________________
*Based on salary, excluding any
deferrals disclosed below in the Nonqualified Deferred Compensation table.
For additional
information about the non-equity incentive plans, please refer to the 2007
Grants of Plan-Based Awards table, which shows the threshold, target, and
maximum award amounts payable under each plan for 2007, and the 2007 Summary
Compensation Table, which shows the actual amount of non-equity incentive plan
compensation paid to our NEOs for 2007.
Long-term Equity Incentives
It is generally the
Companys intent that approximately 50% of the value of long-term incentive
compensation to all officers will be provided through stock options, and
approximately 50% will be provided through restricted stock awards (either PBRS
or TBRS). Section 16 executive officers, which include the NEOs, receive
restricted stock in the form of PBRS, while other officers receive TBRS that
vest over time without a performance component.
PBRS awards generally
vest only if the recipient of an award remains an employee of the Company for
the full three-year performance period and the performance requirement is
achieved.
For PBRS awards that
were granted in 2007, the performance period is January 1, 2007, through
December 31, 2009. The sole performance measure for determining vesting is
achieving a cumulative growth rate of at least 45.5% in operating earnings per
diluted share, excluding foreign currency changes. This performance measure was
selected because of the Companys belief that growth in operating earnings per
diluted share can have a significant impact on building shareholder value over
time.
This measure, and its
target performance requirement of 45.5% cumulative growth, was reviewed and
approved by the Committee at its February 2007 meeting, thereby potentially
qualifying the awards made to the NEOs as performance-based for tax purposes
under IRC Section 162(m).
This cumulative growth
rate is equivalent to growth rates of 15%, 13% and 12% over the 2007-2009 time
period, excluding the impact of foreign currency fluctuations as compared with
the prior year. The Committee also adopted a threshold performance level set at
90% of the target. As a result of this provision, there is a 5% decrease in the
number of shares that will vest for every 1% decrease of the cumulative growth
rate of the performance measure. Therefore, if the threshold performance is
attained, 50% of the granted shares would vest and 50% would be forfeited. If
the actual cumulative growth rate is below the 90% threshold, no shares will
vest. However, if the target is exceeded, no additional shares will be awarded.
Most of the Companys
stock option grants are approved by the Committee and made on the day of their
February meeting. Stock options are granted with an exercise price equal to 100%
of their closing market value of the underlying shares on the grant date. For
grants prior to November 14, 2006, the exercise price was set at the average of
the market high and low sales prices of the underlying shares on the grant date.
A detailed description of how the CEOs long-term incentives are determined is
provided in Section VII below.
18
Retirement, Deferral and Savings
Plans
The retirement,
deferral and savings plans described below were established in order to provide
competitive post-termination benefits for officers and employees of the Company,
including the NEOs, in recognition of their long-term service and contributions
to the Company.
Defined Benefit Pension Plans
As described further in
Pension Benefits below, the Company maintains tax-qualified, noncontributory
defined benefit pension plans covering substantially all U.S. and Japanese
employees, including the NEOs, who satisfy the eligibility requirements, and the
Company also maintains nonqualified supplemental retirement plans covering the
Non-Sales NEOs.
Executive Deferred Compensation
Plan
The NEOs, in addition
to other U.S. based eligible executives, are entitled to participate in the
Executive Deferred Compensation Plan (EDCP). The EDCP is discussed in more
detail below under Nonqualified Deferred Compensation.
401(k) Savings and Profit Sharing
Plan
The Company maintains a
tax qualified 401(k) Savings and Profit Sharing Plan (the 401(k) Plan) in
which all U.S. based employees, including the NEOs, are eligible to participate.
The Company will match 50% of the first 6% of eligible compensation that is
contributed to the 401(k) Plan. Employee contributions made to the 401(k) Plan
are 100% vested. Employees vest in employer contributions at the rate of 20% for
each year of service the employee completes. After five years of service,
employees are fully vested in all employer contributions.
Other Benefits
The Company maintains
medical and dental insurance, accidental death insurance, cancer insurance, and
disability insurance programs for all of its employees, as well as customary
vacation, leave of absence, and other similar policies. The NEOs and other
officers are eligible to participate in these programs along with, and on the
same basis as, the Companys other salaried employees.
In addition, the NEOs
are eligible to receive reimbursement for certain financial counseling and
medical examination expenses. Additionally, for security and time management
reasons, certain of the Companys officers occasionally travel on corporate
aircraft for business and personal purposes. Personal travel on corporate
aircraft and security services are provided where considered by the Board of
Directors to be in the best interest of the Company and its business objectives.
VI.
Additional
Executive Compensation Practices and Procedures
1.
|
|
Equity Granting
Policies
|
|
|
|
The February meeting of the
Committee is held approximately two weeks after the Companys fiscal year
results are released to the public. As a general practice, the Company
makes the majority of its equity grants on the date the Board of Directors
meets in February, and has done so since 2002. The Company has never
engaged in the backdating of options. Based on recommendations developed
by the CEO and CFO with input from the Consultant, options, PBRS and TBRS
awards are submitted to the Committee for approval at its February
meeting. Option grants are awarded on the date of the meeting, and have an
exercise price set at the closing price on the date of grant.
|
|
|
|
The Company may periodically make
additional equity grants during the course of the year. However, it is the
Companys policy not to make any equity grants in advance of material news
releases. As detailed below in the section labeled CEO Compensation, it
has also been the Companys practice to grant the CEO a stock option award
in August based on the Companys performance relative to peers in the
prior year. This grant is issued on the date of the relevant Committee
meeting, with an exercise price set at the closing price on the date of
grant.
|
|
2.
|
|
Stock Ownership
Guidelines
|
|
|
|
The Company established stock
ownership guidelines for officers in 1998. Officers (beginning at the
Second Vice President level and above) have four years from date of hire
or promotion to reach their respective stock
ownership guidelines. The ownership guidelines are defined as stock
ownership value as a multiple of salary and are set as follows: CEO, CFO,
and President not less than five times salary; Executive Vice President
not less than three times salary; Senior Vice President/Vice President
not less than two times salary; and Second Vice President not less than
one times salary. Ownership includes all shares held by the executive and
their spouse as well as vested options. It does not include unvested
options and restricted stock. All of the Companys NEOs have stock
ownership that exceeds their ownership
guidelines.
|
19
3.
|
|
Employment
Agreements
|
|
|
|
The Company has
employment agreements with the four Non-Sales NEOs and certain other
executives in key roles. Agreements generally address: role and
responsibility; rights to compensation and benefits during active
employment; termination in the event of death, disability or retirement
and termination for cause or without cause; and resignation by the
employee. Contracts also contain termination and related pay provisions in
the event of a change in control. In all cases, for the change in control
provisions in the employment agreements to apply, there must be both (1) a
change in control, as well as (2) a termination by the Company without
cause or a resignation by the executive for good reason. This is commonly
referenced as a double trigger requirement. Further, they stipulate that
the executive may not compete with the Company for prescribed periods
following termination of employment or disclose confidential
information.
|
|
4.
|
|
Change in Control
(CIC) Policy and Severance Agreements
|
|
|
|
The Company has no
formal change in control or severance policy. However, as noted above,
individual employment agreements generally have provisions related to both
CIC and severance.
|
|
5.
|
|
Compensation
Recovery Policy
|
|
|
|
Prior to February
2007, the Company did not have a policy addressing the adjustment or
recovery of a non-equity incentive if the relevant performance measure was
adjusted or restated at a later date. In February 2007, the Committee
adopted a policy that will allow it to review any adjustment or
restatement of performance measures and make a determination if
adjustments or recoveries of non-equity incentives are necessary. If it is
deemed that adjustments or recoveries of non-equity incentives are
appropriate, the Committee is charged with determining the amount of
recovery, and the proper officer group subject to any potential
adjustments or recovery.
|
|
6.
|
|
Certain Tax
Implications of Executive Compensation (IRC Section
162(m))
|
|
|
|
In connection with
making decisions on executive compensation, the Committee will take into
consideration the provisions of IRC Section 162(m), which limits the
deductibility by the Company for federal income tax purposes of certain
categories of compensation in excess of $1 million paid to certain
executive officers. The Committee may decide to authorize compensation
arrangements that exceed the $1 million deductibility cap imposed by
Section 162(m), as it did with respect to the CEO for 2006 and 2007.
However, the Committee deferred payment of the nondeductible amount in
excess of $1 million until the CEOs retirement.
|
|
|
|
The 1997 Stock Option
Plan, the 2004 Long-Term Incentive Plan, and the MIP presently conform to
the requirements of Section 162(m). This means that Long-Term Incentive
Plan awards (exclusive of TBRS) and MIP awards are generally considered to
be performance-based and are therefore not subject to the deduction
limitation contained in Section 162(m).
|
|
7.
|
|
Accounting and
Other Tax Implications of Executive Compensation
|
|
|
|
The Company has
considered the accounting and other tax implications of all aspects of the
compensation program for its employees, including the NEOs and other
officers. While accounting and other tax considerations do not dictate
compensation decisions, the compensation program is designed to achieve
the most favorable accounting and other tax treatment consistent with the
intent and spirit of the compensation plan design.
|
|
8.
|
|
Long-term Incentive
Fair Value Determinations
|
|
|
|
A challenging issue
for publicly traded companies is how to value long-term incentive awards
for grant purposes. Like many companies, we target and express such awards
as a percent of salary. We also seek to balance the value of stock options
with those of PBRS as awarded to executive officers and to balance the
value of stock options with those of TBRS as awarded to other award
recipients. Of particular note, is how to calculate the value of a stock
option.
|
|
|
|
One valuation method
is the amount that is expensed over the vesting period based on a
Black-Scholes-Merton fair value determination. With the adoption of the
revised accounting rules under SFAS No. 123(R), this is the amount we now
expense for each granted stock option. It also is the required basis for
determining the Option Awards value in the Summary Compensation Table that
appears below in this Proxy Statement.
|
|
|
|
However, this amount
changes each year in direct relation to fluctuations in the current market
value of the Companys common shares. Therefore, when the share price goes
up, so does the options fair value and its strike price, and the number
of awarded shares equal to a designated dollar value would decrease.
Conversely, if the share price goes down, both the options fair value and
its strike price go down, and the number of awarded shares would increase.
This result seems counterintuitive from a pay-for-performance perspective
in that a lower stock price would lead to more options being granted at a
lower price and a higher stock price would lead to fewer options being
granted at a higher price.
Our solution for grant purposes only
is to stabilize the deemed present value of a stock option for a
three-year period. We think the use of such a value is more in line with
creating long-term shareholder value and pay-for-performance, and allows
us to better manage our burn rate (number of shares granted each year
divided by the number of common shares outstanding) and budget the number
of awarded shares over the life of the share authorization approved by
shareholders.
For grants made in years 2007, 2008,
and 2009, our deemed fair value of a stock option is $13.91, but its
actual exercise price is the closing price of a common share on the day it
is granted.
|
20
VII.
CEO Compensation
The
Committee is responsible for the review and determination of the CEOs pay. The
Committee has developed and long utilized a methodology for determining CEO
compensation that is directly linked to the Companys comparative performance
results. To achieve this linkage, the Consultant annually calculates the
Companys percentile composite performance rank among the peer group of 16 major
insurance companies previously identified in this CD&A. The CEOs total
direct compensation for the following calendar year is then determined in
accordance with that percentile rank. As a result, the CEOs compensation varies
with the amount determined by reference to the Companys performance rank among
its peers. The following describes the process for determining CEO pay in
greater detail:
1.
|
|
At its February meeting, the
Committee grants the CEO stock options and PBRS with a total present value
equal to 60% of his prior years long-term equity incentive award. The
intent is to make a partial grant in February, and then a true-up grant
in August once the Companys percentile performance rank can be determined
(as more fully described below).
|
|
2.
|
|
The Consultant gathers both
compensation data for the NEO positions and company performance data from
public records for the Company and the group of peer companies.
Competitive pay data is gathered for salaries, annual non-equity
incentive, cash compensation, (salary plus annual non-equity incentive)
annualized value of long-term equity incentives and total direct
compensation (cash compensation plus annualized value of long-term equity
incentives).
|
|
3.
|
|
For performance measures, the
Consultant collects specific results for the Company and the 16 peer
companies on each of 10 performance measures for their most recently
completed fiscal year, except for total shareholder return, which is
computed using a three-year period ending with the last fiscal year. The
performance measures used and their weightings ( )
are:
|
|
-
Revenue Growth (1)
-
Net Income (1)
-
Net Income Growth (1)
-
Premium Income (1)
-
Premium Income Growth (1)
|
|
-
Earnings Per Share Growth
-
Return on Revenues (2)
-
Return on Average Equity (2)
-
Return on Average Assets (2)
-
Total Shareholder Return (4)
|
|
Results are
sorted for each measure, and the best performer is assigned a ranking of 1 and
the lowest performer is assigned a ranking of 17. The weighted performance
ranks for each measure for each company are then summed to determine each
companys overall composite performance score.
4.
|
|
The percentile rank that
corresponds to each companys composite performance score is then
determined. While the Company showed positive gains on many of the
performance measures, the peer companies generally had greater gains.
Consequently, the Company received an overall performance rank of 13th in
2007 for 2006 results, which equated to the 25th percentile on a
performance basis.
|
|
5.
|
|
Each company, including Aflac
Incorporated, is then ranked on the basis of Total Direct Compensation.
For this computation, the highest paid and lowest paid CEOs from the peer
group are excluded, which reduces the total sample by two. A pay line is
then plotted based on the remaining companies, and the exact pay amount
(Total Direct Compensation) that corresponds to the Companys percentile
performance rank is determined.
|
|
6.
|
|
That amount is then aged to
represent the expected value of the compensation at the end of the
applicable fiscal year. The aging adjustment factor was 2.7% for 2007,
which was the insurance industrys surveyed projected increase for
salaries.
|
|
7.
|
|
Once the Total Direct
Compensation amount corresponding to the Companys composite performance
percentile is determined, a two-step calculation is performed. First, the
CEOs salary and non-equity incentive (total cash compensation) for the
previous year is deducted from the determined total direct compensation.
This calculation results in the gap between market total direct
compensation and the CEOs total cash compensation. The second
calculation, which is also used to determine his February stock grants,
subtracts 60% of the present value of the annualized long-term equity
incentive received in the prior year to determine the remaining gap. This
remaining gap determines the equity value the CEO will receive in the
August stock option grant.
|
21
8.
|
|
A second stock option grant is
then made at the Committees August meeting, with a present value equal to
the Remaining Gap and thereby truing up the CEOs Total Direct
Compensation to that which corresponds to the Companys performance rank.
These calculations for determining CEO compensation for 2007 are shown
below.
|
|
2007 CEO Compensation Determination
|
|
$
9,410,911
|
|
25th percentile
Total Direct Compensation (TDC)
|
|
- 3,450,897
|
|
CEO FY 2006 Total
Cash Compensation (TCC)
|
|
|
|
|
|
5,960,014
|
|
Gap between
Market TDC and CEO TCC
|
|
|
|
|
|
-
2,230,830
|
|
Feb. 2007 grant of
63,738 PBRS with a value of $35.00 per share
|
|
- 2,230,983
|
|
Feb. 2007 grant of
160,387 stock options with a value of $13.91 per option share
|
|
|
|
|
|
$ 1,498,201
|
|
Remaining
Gap
|
|
|
|
|
|
107,707
|
|
Number of options
with a value of $13.91 per option share granted 8/07
|
|
|
|
(value equal to
the Remaining Gap)
|
9.
|
|
At its December meeting, the
Committee sets the CEOs salary for the next calendar year. At its annual
February meeting the Committee approves the MIP-based non-equity incentive
after reviewing the financial results, compared with the performance
objectives, and (as noted above) awards the CEO PBRS and a partial grant
of stock options.
|
|
|
|
Using this method, the Company is
able to pay the CEO in direct alignment with the Companys percentile
performance results versus the peer group. It also means that the CEOs
pay will not exceed the Total Direct Compensation amount indicated by the
Companys performance success versus the peer group. Because of the lower
Company performance rank for 2006, the CEOs Total Direct
Compensation in 2007, decreased by 16.1% from its 2006 level. It
is noteworthy that the 2006 median for the peer group increased by 24%
over its 2005 median.
|
|
|
|
The Company believes it is
important for shareholders and other interested parties to note that 2007
was the 10th consecutive year in which this extensive analysis was used to
determine the CEOs total compensation. Reflecting the Companys lengthy
track record of strong financial performance and shareholder returns, the
Company ranked either first or second among its peer group in six of the
10 years. Furthermore, the Companys average percentile performance rank
over this 10 year period has been the second highest among all peers
currently in the analysis.
|
COMPENSATION COMMITTEE REPORT
The
Compensation Committee, has reviewed and discussed the preceding CD&A with
management and based on the review and discussion, has recommended to the Board
of Directors to include the CD&A in this Proxy Statement.
Compensation
Committee
Robert B. Johnson, Chairman
David
Gary Thompson
Robert L. Wright
22
The
following
table
provides
information
concerning
total
compensation
earned or paid to our CEO, CFO and the three other most highly
compensated
executive
officers
who were serving as
executive
officers
at the
end of 2007. These five
officers
are
referred
to as our NEOs in this Proxy
Statement.
2007 SUMMARY COMPENSATION
TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
|
|
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name and Principal
Position
|
|
|
Year
|
|
Salary($)(2)
|
|
($)(3)
|
|
($)(3)
|
|
($)
|
|
($)(4)
|
|
($)(5)
|
|
($)
|
Daniel P. Amos
|
|
2007
|
|
1,289,200
|
|
2,751,918
|
|
5,627,872
|
|
2,813,035
|
|
|
2,062,763
|
|
|
289,925
|
|
|
14,834,713
|
Chairman and CEO
|
|
2006
|
|
1,242,000
|
|
1,734,126
|
|
8,646,283
|
|
2,208,897
|
|
|
0
|
|
|
291,950
|
|
|
14,123,256
|
|
|
Kriss Cloninger III
|
|
2007
|
|
826,300
|
|
1,248,746
|
|
2,097,196
|
|
1,446,025
|
|
|
1,732,808
|
|
|
167,079
|
|
|
7,518,154
|
President, CFO, and Treasurer
|
|
2006
|
|
796,000
|
|
667,807
|
|
2,544,802
|
|
1,109,027
|
|
|
208,637
|
|
|
167,467
|
|
|
5,493,740
|
|
|
Akitoshi Kan(1)
|
|
2007
|
|
550,000
|
|
639,958
|
|
1,939,000
|
|
797,280
|
|
|
1,732,660
|
|
|
23,708
|
|
|
5,682,606
|
Chairman, Aflac Japan;
|
|
2006
|
|
525,000
|
|
400,684
|
|
1,748,352
|
|
620,550
|
|
|
190,695
|
|
|
27,772
|
|
|
3,513,053
|
Chairman, Aflac
International
|
|
Ronald E. Kirkland
|
|
2007
|
|
600,000
|
|
213,319
|
|
269,799
|
|
580,207
|
|
|
23,392
|
|
|
306,962
|
|
|
1,993,679
|
Sr.
VP, Aflac, Director of Sales
|
|
2006
|
|
600,000
|
|
133,561
|
|
202,147
|
|
1,463,459
|
|
|
29,643
|
|
|
348,264
|
|
|
2,777,074
|
|
|
Paul S. Amos II
|
|
2007
|
|
402,550
|
|
287,687
|
|
442,855
|
|
533,581
|
|
|
9,019
|
|
|
109,570
|
|
|
1,785,262
|
President, Aflac and COO
|
|
2006
|
|
365,000
|
|
168,050
|
|
306,733
|
|
440,738
|
|
|
64,193
|
|
|
314,432
|
|
|
1,659,146
|
Aflac
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
____________________
(1)
|
|
Includes payments made to Mr. Kan
for some perquisites paid in yen and converted to dollars by dividing the
actual yen denominated payments by the average 2007 exchange rate of
117.93 yen per dollar.
|
|
(2)
|
|
Includes $218,830 deferred by Mr.
Daniel Amos and $293,696 deferred by Mr. Kirkland, in each case net of
applicable taxes. These amounts are included in the Nonqualified Deferred
Compensation table below.
|
|
(3)
|
|
Represents the charges for 2007
pursuant to SFAS No. 123(R). The Company's SFAS No. 123(R) valuation
assumptions are described in Note 10 "Share-Based Transactions" in the
Notes to the Consolidated Financial Statements in the Company's Annual
Report to Shareholders for the year ended December 31, 2007. Amounts
reported include amounts expensed for restricted stock awards and option
grants that were granted in the current and previous years.
|
|
(4)
|
|
Mr. Daniel Amos participates in
the Defined Benefit Pension Plan and The Retirement Plan for Senior
Officers and the change in his aggregate pension value was $2,062,763,
which consisted of a decrease of $19,915 for the Defined Benefit Pension
Plan and a positive $2,082,678 for The Retirement Plan for Senior
Officers. Mr. Daniel Amos' net change for 2006 was a decrease of
$1,141,207. For the two years 2006 and 2007, the aggregate pension expense
recorded for all retirement plans which Mr. Daniel Amos is a participant
was $921,556. Includes $29,209, a decrease of $27,564, $23,392 and $5,966
for Mr. Cloninger, Mr. Kan, Mr. Kirkland, and Mr. Paul Amos, respectively,
under the Company's Defined Benefit Pension Plan. Additionally, includes
$1,703,599, $1,760,224, and $3,053 for Mr. Cloninger, Mr. Kan, and Mr.
Paul Amos, respectively, under the Supplemental Executive Retirement Plan.
No amounts in this column are attributable to preferential earnings on
deferred compensation balances.
|
|
(5)
|
|
Additional information regarding
all other compensation is provided in the "All Other Compensation" or
"Perquisites" tables detailed below.
|
24
The
following table identifies the amount of each item included for 2007 in the All
Other Compensation column in the Summary Compensation Table.
2007 ALL OTHER
COMPENSATION
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
|
|
|
|
|
Company
|
|
Renewal
|
|
|
|
|
|
|
Benefits
|
|
Insurance
|
|
Contribution
to
|
|
Commissions from
|
|
|
Name
|
|
Year
|
|
($)(1)
|
|
Premiums ($)
|
|
401(k) Plan ($)
|
|
Previous Job ($)(2)
|
|
Total($)
|
Daniel P.
Amos
|
|
2007
|
|
280,853
|
|
|
2,322
|
|
|
6,750
|
|
0
|
|
|
289,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
2007
|
|
156,765
|
|
|
3,564
|
|
|
6,750
|
|
0
|
|
|
167,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Akitoshi
Kan
|
|
2007
|
|
13,506
|
|
|
3,452
|
|
|
6,750
|
|
0
|
|
|
23,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald E.
Kirkland
|
|
2007
|
|
29,590
|
|
|
3,564
|
|
|
6,750
|
|
267,058
|
|
|
306,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos
II
|
|
2007
|
|
44,146
|
|
|
432
|
|
|
6,750
|
|
58,242
|
|
|
109,570
|
____________________
(1)
|
|
Perquisites are more fully
described in the Perquisites table below.
|
|
(2)
|
|
Amounts are for earned renewal
sales commissions before expenses on Aflac products sold before the NEO
became an Aflac employee.
|
25
The
following table identifies the incremental cost to the Company of each
perquisite included for 2007 in the All Other Compensation table above.
2007 PERQUISITES
|
|
|
|
Personal Use
|
|
Financial
|
|
|
|
|
|
|
|
Total Perquisites
|
|
|
|
|
of
Company
|
|
Planning
|
|
Security Services
|
|
|
|
|
and Other Personal
|
Name
|
|
Year
|
|
Aircraft ($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
Other
($)(4)
|
|
Benefits ($)
|
Daniel P.
Amos
|
|
2007
|
|
24,901
|
|
|
0
|
|
255,952
|
|
|
0
|
|
|
280,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
2007
|
|
92,754
|
|
|
10,841
|
|
51,056
|
|
|
2,114
|
|
|
156,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Akitoshi Kan
(5)
|
|
2007
|
|
0
|
|
|
11,970
|
|
1,536
|
|
|
0
|
|
|
13,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald E.
Kirkland
|
|
2007
|
|
6,972
|
|
|
0
|
|
22,618
|
|
|
0
|
|
|
29,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos
II
|
|
2007
|
|
36,060
|
|
|
0
|
|
7,818
|
|
|
268
|
|
|
44,146
|
|
____________________
(1)
|
|
Incremental cost for the personal
use of corporate aircraft includes the following: direct fuel costs and an
allocation for maintenance charges, landing fees, handling and catering,
and when necessary, any additional crew expenses such as transportation,
lodging and meals. The personal use of corporate aircraft has been
authorized by the Company's Board of Directors for security reasons and to
maximize the effectiveness of the NEOs time. Included in the amount
reported for Mr. Cloninger is $18,199 for attending outside Board of
Directors meetings for a Board on which he serves.
|
|
(2)
|
|
Financial planning fees are
direct charges by the provider of the services. They are available on a
limited basis to the executive management of the Company.
|
|
(3)
|
|
Incremental costs for security
services include the salaries and benefits of security officers and the
actual costs of any security equipment, monitoring, and maintenance
fees.
|
|
(4)
|
|
Amounts included in the Other
column for Mr. Cloninger and Mr. Paul Amos are charges for the use of
Company automobile transportation.
|
|
(5)
|
|
The amount reported for financial
planning for Mr. Kan was paid in yen and converted to dollars by dividing
the yen payment by the average 2007 exchange rate of 117.93 yen per
dollar.
|
26
The
following
table
provides
information
with respect to the 2007
grants of plan-based awards for the NEOs.
2007
GRANTS
OF PLAN-
BASED
AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Exercise
or
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Estimated Future Payouts Under
|
|
Securities
|
|
Base
Price
|
|
Grant Date Fair
|
|
|
|
|
Non-Equity Incentive Plan Awards
(1)
|
|
Equity Incentive Plan Awards
(2)
|
|
Underlying
|
|
of
Option
|
|
Value of Stock
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
and Option
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)(3)
|
|
Awards ($)
|
Daniel P.
Amos
|
|
8/14/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,707
|
|
|
52.59
|
|
1,920,513
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,387
|
|
|
47.84
|
|
2,601,541
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
31,869
|
|
|
63,738
|
|
63,738
|
|
|
|
|
|
|
|
3,049,226
|
|
|
|
N/A
|
|
580,140
|
|
2,256,100
|
|
4,512,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
47.84
|
|
1,540,938
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
19,000
|
|
|
38,000
|
|
38,000
|
|
|
|
|
|
|
|
1,817,920
|
|
|
|
N/A
|
|
289,205
|
|
1,156,820
|
|
2,313,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Akitoshi
Kan
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
47.84
|
|
1,540,938
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
7,500
|
|
|
15,000
|
|
15,000
|
|
|
|
|
|
|
|
717,600
|
|
|
|
N/A
|
|
297,000
|
|
660,000
|
|
1,320,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald E.
Kirkland
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
47.84
|
|
243,306
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
2,500
|
|
|
5,000
|
|
5,000
|
|
|
|
|
|
|
|
239,200
|
|
|
|
N/A
|
|
377,537
|
|
600,000
|
|
4,738,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos
II
|
|
2/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
47.84
|
|
405,510
|
|
|
|
2/13/2007
|
|
|
|
|
|
|
|
3,750
|
|
|
7,500
|
|
7,500
|
|
|
|
|
|
|
|
358,800
|
|
|
|
N/A
|
|
120,765
|
|
342,168
|
|
684,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
____________________
1.
|
|
The amounts shown in Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards reflect the payout
levels, for the Non-Sales NEOs, under the Companys MIP based on the
achievement of certain performance goals approved by the Compensation
Committee. With respect to each Company performance goal, a minimum,
target and maximum performance level is specified, the attainment of which
determines the amount paid for each performance goal (generally 50%, 100%,
and 200%, respectively), except for the earnings-per-share goal, under
which benefits are paid at a target and maximum level, but only if target
performance is attained or exceeded. No award is paid for the
earnings-per-share goal if performance is below target. The amounts shown
for the Sales NEO are based on performance ranges as more fully described
in the section Sales Incentive Plan above. Base salary is typically the
smallest component of total compensation for the NEOs, as the majority of
their total compensation is based on performance awards on a cash and
equity basis. Base salaries and non-equity incentive awards (including
deferrals) as a percent of total compensation for Messrs. Daniel Amos,
Cloninger, Kan, Kirkland and Paul Amos for 2007 were approximately 28%,
30%, 24%, 59%, and 52%, respectively.
|
|
2.
|
|
The amounts shown under Estimated
Future Payouts Under Equity Incentive Plan Awards reflect the number of
PBRS, with restrictions that will lapse upon the attainment of performance
goals in each award agreement as set by the Compensation Committee. Upon
the attainment of 90% of the cumulative three-year target performance
goal, one-half of the PBRS shares will vest, with additional vesting of 5%
of the remaining PBRS shares upon the certification of each additional 1%
of the target goal attained. Shares of restricted stock are held in book
entry form in the custody of the Company until the restrictions thereon
have lapsed. All NEOs possess the same rights as all other employees
receiving PBRS, such as all incidents of ownership with respect to the
shares, including the right to receive or reinvest dividends with respect
to such shares and to vote such shares. The dividends accrued on the award
shares will be reinvested in the Companys Common Stock at the same
dividend rate as other holders of Company Common Stock and held as
additional restricted shares in the book entry account subject to the same
terms and conditions attributable to the original grant until such time as
all restrictions have lapsed on the shares of Company Common Stock with
respect to which the original dividend was
accrued.
|
28
The following table provides
information with respect to the 2007 outstanding equity awards at fiscal
year-end for the NEOs.
2007 OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR-END
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
Awards:
|
|
|
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
|
|
Plan
Awards:
|
|
Market
or
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Number
of
|
|
Payout
Value
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
Unearned
|
|
of
Unearned
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
|
|
Shares,
Units,
|
|
Shares,
Units,
|
|
|
|
|
Options
|
|
Options
|
|
|
|
|
|
|
|
or
Other
|
|
or
Other
|
|
|
|
|
(#)
|
|
(#)
|
|
Option
|
|
|
|
Stock
|
|
Rights
That
|
|
Rights
That
|
|
|
Option
|
|
|
|
|
|
Exercise
|
|
Option
|
|
Award
|
|
Have
Not
|
|
Have
Not
|
|
|
Grant
|
|
|
|
|
|
Price
|
|
Expiration
|
|
Grant
|
|
Vested
|
|
Vested
|
Name
|
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Date
|
|
(#)
|
|
($)
|
Daniel P.
Amos
|
|
|
06/20/00
|
|
33,998
|
|
|
|
23.2344
|
|
06/20/10
|
|
|
|
|
|
|
|
|
01/22/01
|
|
756,594
|
|
|
|
29.3438
|
|
01/22/11
|
|
|
|
|
|
|
|
|
11/13/01
|
|
82,100
|
|
|
|
24.9800
|
|
11/13/11
|
|
|
|
|
|
|
|
|
02/12/02
|
|
631,575
|
|
|
|
25.1250
|
|
02/12/12
|
|
|
|
|
|
|
|
|
08/13/02
|
|
287,170
|
|
|
|
30.5750
|
|
08/13/12
|
|
|
|
|
|
|
|
|
02/11/03
|
|
663,692
|
|
|
|
31.4650
|
|
02/11/13
|
|
|
|
|
|
|
|
|
08/12/03
|
|
325,000
|
|
|
|
31.7050
|
|
08/12/13
|
|
|
|
|
|
|
|
|
02/10/04
|
|
221,349
|
|
|
|
40.4250
|
|
02/10/14
|
|
|
|
|
|
|
|
|
08/10/04
|
|
255,882
|
|
|
|
38.3200
|
|
08/10/14
|
|
|
|
|
|
|
|
|
02/08/05
|
|
143,169
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
08/09/05
|
|
289,405
|
|
|
|
43.6650
|
|
08/09/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
172,723
|
|
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
64,291
|
|
4,026,545
|
|
|
08/08/06
|
|
209,527
|
|
|
|
43.0700
|
|
08/08/16
|
|
|
|
|
|
|
|
|
02/13/07
|
|
|
|
160,387
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
63,738
|
|
3,991,911
|
|
|
08/14/07
|
|
|
|
107,707
|
|
52.5900
|
|
08/14/17
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
|
02/08/00
|
|
100,000
|
|
|
|
21.1563
|
|
02/08/10
|
|
|
|
|
|
|
|
|
08/14/01
|
|
125,000
|
|
|
|
26.7850
|
|
08/14/11
|
|
|
|
|
|
|
|
|
11/13/01
|
|
57,000
|
|
|
|
24.9800
|
|
11/13/11
|
|
|
|
|
|
|
|
|
08/13/02
|
|
150,000
|
|
|
|
30.5750
|
|
08/13/12
|
|
|
|
|
|
|
|
|
02/11/03
|
|
100,000
|
|
|
|
31.4650
|
|
02/11/13
|
|
|
|
|
|
|
|
|
08/10/04
|
|
100,000
|
|
|
|
38.3200
|
|
08/10/14
|
|
|
|
|
|
|
|
|
02/08/05
|
|
80,000
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
08/09/05
|
|
60,000
|
|
|
|
43.6650
|
|
08/09/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
80,000
|
|
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
25,000
|
|
1,565,750
|
|
|
08/08/06
|
|
50,000
|
|
|
|
43.0700
|
|
08/08/16
|
|
|
|
|
|
|
|
|
02/13/07
|
|
|
|
95,000
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
38,000
|
|
2,379,940
|
29
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan
Awards:
|
|
|
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
|
|
Plan
Awards:
|
|
Market
or
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
Number
of
|
|
Payout
Value
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
Unearned
|
|
of
Unearned
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
|
|
Shares,
Units,
|
|
Shares,
Units,
|
|
|
|
|
Options
|
|
Options
|
|
|
|
|
|
|
|
or
Other
|
|
or
Other
|
|
|
|
|
(#)
|
|
(#)
|
|
Option
|
|
|
|
Stock
|
|
Rights
That
|
|
Rights
That
|
|
|
Option
|
|
|
|
|
|
Exercise
|
|
Option
|
|
Award
|
|
Have
Not
|
|
Have
Not
|
|
|
Grant
|
|
|
|
|
|
Price
|
|
Expiration
|
|
Grant
|
|
Vested
|
|
Vested
|
Name
|
|
|
Date
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
Date
|
|
(#)
|
|
($)
|
Akitoshi Kan
|
|
02/08/05
|
|
45,000
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
08/09/05
|
|
50,000
|
|
|
|
43.6650
|
|
08/09/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
50,000
|
|
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
15,000
|
|
939,450
|
|
|
08/08/06
|
|
45,000
|
|
|
|
43.0700
|
|
08/08/16
|
|
|
|
|
|
|
|
|
02/13/07
|
|
|
|
95,000
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
15,000
|
|
939,450
|
|
Ronald E.
Kirkland
|
|
|
10/11/04
|
|
15,000
|
|
|
|
39.8000
|
|
10/11/14
|
|
|
|
|
|
|
|
|
02/08/05
|
|
15,000
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
|
|
15,000
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
5,000
|
|
313,150
|
|
|
02/13/07
|
|
|
|
15,000
|
|
47.8400
|
|
02/14/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/07
|
|
5,000
|
|
313,150
|
|
Paul
S. Amos II
|
|
02/08/05
|
|
40,000
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
|
|
25,000
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
7,500
|
|
469,725
|
|
|
02/13/07
|
|
|
|
25,000
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
7,500
|
|
469,725
|
Option Grant Date
|
|
Option Vesting
Schedule
|
02/08/05
|
|
100% vesting on the third anniversary of the option for Messrs.
Kirkland and Paul Amos
|
02/14/06
|
|
100% vesting on
the third anniversary of the option for Messrs. Kirkland and Paul
Amos
|
02/13/07
|
|
100% vesting of the first anniversary of the option for Messrs.
Daniel Amos, Cloninger, and Kan
|
|
|
100% vesting on
the third anniversary of the option for Messrs. Kirkland and Paul
Amos
|
08/14/07
|
|
100% vesting of the first anniversary of the option for Mr. Daniel
Amos
|
Stock
Award
|
|
|
Grant Date
|
|
Stock Award Vesting
Schedule
|
02/14/06
& 02/13/07
|
|
Graded
vesting on the third anniversary of the award equal to one-half of the
PBRS shares vesting on the attainment of 90% of the three-year cumulative
target performance goal, with an additional vesting of 5% of the remaining
PBRS shares for each additional 1% of the target goal
attained.
|
30
The
following table provides information with respect to options exercised and stock
awards vested during 2007 for each of the NEOs.
2007 OPTION EXERCISES AND STOCK
VESTED
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
Number of Shares
|
|
Value
Realized
|
|
Number of
Shares
|
|
Value
Realized
|
|
|
Acquired on Exercise
|
|
on
Exercise
|
|
Acquired on
Vesting
|
|
on
Vesting
|
Name
|
|
|
(#)
|
|
($)
|
|
(#)
|
|
($)
|
Daniel
P. Amos
|
|
2,021,108
|
|
|
70,767,041
|
|
0
|
|
0
|
|
Kriss Cloninger
III
|
|
|
350,000
|
|
|
13,367,577
|
|
0
|
|
0
|
|
Akitoshi Kan
|
|
150,000
|
|
|
3,353,950
|
|
0
|
|
0
|
|
Ronald
E. Kirkland
|
|
0
|
|
|
0
|
|
0
|
|
0
|
|
Paul
S. Amos II
|
|
0
|
|
|
0
|
|
0
|
|
0
|
PENSION BENEFITS
The Company
maintains tax-qualified, noncontributory defined benefit pension plans that
cover the NEOs, and it also maintains nonqualified supplemental retirement plans
covering the Non-Sales NEOs, as described below. The Company does not credit
extra years of service under any of its retirement plans, unless required by
employment contracts under certain termination events such as a change in
control or termination without cause. Messrs. Daniel Amos, Cloninger, and Kan
are eligible to receive immediate retirement benefits. For Mr. Daniel Amos,
retirement benefits fall under the provisions of the Retirement Plan for Senior
Officers, and for Messrs. Cloninger and Kan, retirement benefits fall under the
Supplemental Executive Retirement Plan.
Qualified Defined Benefit Pension
Plan
The Aflac
Incorporated Defined Benefit Pension Plan (Plan) is a funded tax-qualified
retirement program that covers all eligible employees in the U.S. Benefits under
the U.S. plan are calculated in accordance with the following formula: l% of
average final monthly compensation multiplied by years of credited service (not
in excess of 25 years), plus .5% of average final monthly compensation
multiplied by the number of years of credited service in excess of 25 years. For
purposes of the plan, final average monthly compensation is deemed to be the
participants highest average compensation during any five consecutive years of
service within the 10 consecutive plan years of service immediately preceding
retirement. Compensation means salary and non-equity incentive plan
compensation. Participants are eligible to receive full retirement benefits upon
attaining a retirement age of 65. Participants with 15 years of credited service
are eligible to receive reduced retirement benefits upon reaching an early
retirement age of 55. A participant may be eligible for full retirement benefits
when the participants years of credited service plus attained age equals or
exceeds 80.
The benefits
payable under the U.S. plan are not subject to adjustment for Social Security
benefits or other offsets. The benefits may be paid monthly over the life of the
participant (with joint and survivor options available at reduced rates). The
maximum retirement benefit was limited, in accordance with IRC Section 415, to
$180,000 for 2007. The maximum compensation that may be taken into account in
the calculation of retirement benefits was limited, in accordance with IRC
Section 401(a)(17), to $225,000 for 2007. These limitation amounts for future
years will be indexed for cost-of-living adjustments.
Benefits
under the Japanese plan are based on a point system. Eligible employees
accumulate points over their respective service periods based on job grades. At
retirement, the total points accumulated are multiplied by a unit price per
point of 8,500 yen and then adjusted for years of service with the Company.
Supplemental Executive Retirement
Plan
The
Companys Supplemental Executive Retirement Plan (SERP) is an unfunded and
unsecured obligation of the Company and is not a tax-qualified plan. The SERP
provides retirement benefits to certain officers of the Company in addition to
those provided by the qualified Defined Benefit Pension Plan. Mr. Cloninger, Mr.
Kan, and Mr. Paul Amos participate in the Companys SERP. Participation in the
SERP is limited to certain key employees of the Company as periodically
designated by the Board of Directors. To be eligible for benefits under the
SERP, participants generally must be employed with the Company or a subsidiary
at age 55. To be eligible to receive benefits under the SERP, participants who
began participating in the SERP after August 11, 1992, also must complete at
least 15 years of employment with the Company or a subsidiary and participate in
the SERP for at least five years.
31
The SERP
includes a four-tiered benefit formula that provides for a benefit based on
average final compensation. The benefit is 40% upon retirement between the ages
of 55 and 59, a 50% benefit upon retirement between the ages of 60 and 64, and a
60% benefit upon retirement for ages 65 and over. A reduced 30% benefit is
available to participants with at least 15 years of service who terminate
employment prior to age 55.
Benefits are
generally payable in the form of an annuity for the life of the participant. The
participant may elect to receive reduced benefits during his or her lifetime,
and after his or her death, the surviving spouse will receive a benefit equal to
50% of the amount paid to the participant. The benefit formula computes benefits
using the average annual compensation for the three consecutive calendar years
out of the final 10 consecutive calendar years of employment that yield the
highest average. Average final compensation is calculated using Annual
Compensation, which is defined to include both base salary and non-equity
incentive plan compensation for a calendar year. Benefits under this Plan are
subject to offset for amounts paid under the qualified Defined Benefit Pension
Plan.
Retirement Plan for Senior
Officers
The CEO
participates in the Retirement Plan for Senior Officers (RPSO). Participants
in the RPSO receive full compensation for the first 12 months after retirement.
Thereafter, a participant may elect to receive annual lifetime retirement
benefits equal to 60% of final compensation, or 54% of such compensation with
50% of such amount to be paid to a surviving spouse for a specified period after
death of the participant. Final compensation is deemed to be the higher of
either the compensation paid during the last 12 months of active employment with
the Company or the highest compensation received in any calendar year of the
last three years preceding the date of retirement. Compensation under this plan
is defined to be base salary plus non-equity incentive award.
Generally,
no benefits are payable until the participant accumulates 10 years of credited
service at age 60, or 20 years of credited service. Reduced benefits may be paid
to a participant who retires (other than for disability) before age 65 with less
than 20 years credited service. The CEO is currently the only active employee
participating in the RPSO, and he has 34 years of credited service, meaning he
is fully vested for retirement benefits.
All benefits
under this plan are subject to annual cost-of-living increases as approved by
the Compensation Committee. Retired participants and their spouses are also
entitled to receive full medical expense benefits for their lifetimes. The
benefits payable under the plan are not subject to Social Security or qualified
Defined Benefit Pension Plan offsets.
32
The
following table relates to the foregoing plans and presents information
determined as of December 31, 2007.
PENSION BENEFITS
|
|
|
|
|
|
|
Present
Value
|
|
Payments
|
|
|
|
|
Number of
Years
|
|
of
Accumulated
|
|
During
Last
|
|
|
|
|
Credited
Service
|
|
Benefit
|
|
Fiscal
Year
|
Name
|
|
|
Plan Name
|
|
(#)
|
|
($)(1)
|
|
($)
|
Daniel
P. Amos
|
|
Retirement Plan for Senior Officers
|
|
34
|
|
50,627,497
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
34
|
|
794,251
|
|
0
|
|
|
|
|
|
|
|
|
|
Kriss
Cloninger III
|
|
Supplemental Executive Retirement Plan
|
|
16
|
|
11,330,400
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
16
|
|
331,465
|
|
0
|
|
|
|
|
|
|
|
|
|
Akitoshi Kan
|
|
Supplemental Executive Retirement Plan
|
|
27
|
|
6,003,138
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
27
|
|
650,798
|
|
0
|
|
|
|
|
|
|
|
|
|
Ronald E.
Kirkland
|
|
|
Aflac Incorporated Defined Benefit Pension Plan
|
|
8
|
|
152,179
|
|
0
|
|
|
|
|
|
|
|
|
|
Paul
S. Amos II
|
|
Supplemental
Executive Retirement Plan
|
|
3
|
|
58,662
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Aflac Incorporated Defined Benefit Pension Plan
|
|
3
|
|
21,948
|
|
0
|
____________________
(1)
|
|
Assumed retirement age for all
calculations was the earliest retirement age for unreduced benefits.
Assumptions used to calculate pension benefits are more fully described in
note 12, "Benefit Plans, in the Notes to the Consolidated Financial
Statements in the Company's Annual Report to Shareholders for the year
ended December 31, 2007.
|
33
NONQUALIFIED DEFERRED COMPENSATION
The
following 2007 Nonqualified Deferred Compensation table shows for 2007 the
executive and Company contributions to, and earnings and account balances under,
the Aflac Incorporated Executive Deferred Compensation Plan (the EDCP), an
unfunded, unsecured deferred compensation plan, with respect to the NEOs.
2007 NONQUALIFIED DEFERRED COMPENSATION
|
|
|
Executive
|
|
Registrant
|
|
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions in
|
|
Contributions in
|
|
Aggregate
Earnings
|
|
Withdrawals/
|
|
Balance
at
|
|
|
Last Fiscal
Year
|
|
Last Fiscal
Year
|
|
in Last
Fiscal Year
|
|
Distributions
|
|
Last
Fiscal
|
Name
|
|
|
($)(1)
|
|
($)(1)
|
|
($)(2)
|
|
($)
|
|
Year-end ($)(3)
|
Daniel P. Amos
|
|
218,830
|
|
0
|
|
98,090
|
|
0
|
|
1,086,929
|
Kriss
Cloninger III
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Akitoshi Kan
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Ronald E.
Kirkland
|
|
|
482,941
|
|
293,696
|
|
10,568
|
|
0
|
|
1,450,884
|
Paul S. Amos II
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
____________________
(1)
|
|
The $218,830 deferred
for Mr. Amos and the registrant contribution of $293,636 deferred for Mr.
Kirkland have been included in the Summary Compensation Table for the
current year. The $482,941 deferred for Mr. Kirkland was included in the
2006 Summary Compensation Table. All amounts deferred are net of
appropriate taxes.
|
|
|
|
(2)
|
|
The Company does not
pay or credit above market earnings on amounts deferred by
executives.
|
|
(3)
|
|
Of these balances, the
following amounts were reported in the Summary Compensation Tables in
prior year proxy statements: Mr. Amos, $835,582; Mr. Kirkland,
$1,366,447.
|
The EDCP
allows certain officers, including the NEOs (the Participants), to defer up to
100% of their base salaries and up to 100% of their annual non-equity incentive
awards. The Company may make discretionary matching or other discretionary
contributions in such amounts, if any, that the Compensation Committee may
determine from year to year. The EDCP also allows Participants to elect to defer
restricted stock awarded under a Company restricted stock program and stock
options that are grandfathered under Internal Revenue Code Section 409A, as
discussed below. Matching or other discretionary contributions and restricted
stock deferrals may be subject to vesting conditions.
The EDCP is
subject to the requirements of Section 409A of the Internal Revenue Code. The
Company intends to amend the EDCP document to conform to Section 409As
requirements on or before the deadline for adopting such amendments. In the
interim, the EDCP is administered in good faith compliance with the requirements
of Section 409A. Deferred amounts earned and vested prior to 2005
(grandfathered amounts) under the EDCP are not subject to Section 409As
requirements and continue to be governed generally under the terms of the EDCP
and the tax laws in effect before January 1, 2005, as applicable.
In addition
to amounts that the NEOs elected to defer and amounts of discretionary
contributions the Company credited to the NEOs accounts, the amounts in the
Aggregate Balance column include investment earnings (and losses) determined
under the phantom investments described below. Account balances may be invested
in phantom investments selected by Participants from an array of investment
options that substantially mirror the funds available under the Aflac
Incorporated 401(k) Plan. The array of available investment options changes from
time to time. As of December 31, 2007, Participants could choose from among
several different investment options, including domestic and international
equity, income, short-term investment, blended and Company stock funds.
Participants can change their investment selections daily (unless prohibited by
the fund or trading restrictions on Company stock) by contacting the EDCPs
third-party recordkeeper in the same manner that applies to participants in the
401(k) Plan.
Each fiscal
year, when Participants elect to defer compensation under the EDCP, they also
may elect the timing and form of their future distributions attributable to
those deferrals, with a separate election permitted for each type deferral
(i.e., salary, non-equity incentive award, stock option, or restricted stock
award deferral). Under this process, each NEO may elect for distributions
attributable to deferrals to either be made or begin in a specific year (whether
or not employment has then ended) or at a time that begins six months after the
NEOs termination of employment. Each NEO may elect for any distribution to be
made in a lump sum or in up to 10 annual installments. Distributions
attributable to discretionary contributions are made in the form and at the time
specified by the Company.
34
An NEO may
delay the timing and form of his or her distributions attributable to his or her
deferrals as long as the change is made at least 12 months before the initial
distribution date. With respect to non-grandfathered amounts, new elections must
satisfy the requirements of Section 409A. In general, Section 409A requires that
distributions may not be accelerated (other than for hardships) and any delayed
distribution may not begin earlier than five years after the initial
distribution date.
Deferral
amounts for which no distribution elections have been made are distributed in a
lump sum six months after an NEO separates from service.
POTENTIAL PAYMENTS UPON TERMINATION
OR CHANGE IN CONTROL
Pursuant to
the employment agreement between the Company and Mr. Daniel Amos (the
Executive), the Company remains obligated to continue compensation and
benefits to the Executive for the scheduled term of the agreement if the
employment of the Executive is terminated by the Company without good cause.
If the Executives employment is terminated by the Company for good cause, or
by the Executive without good reason, the Company is generally obligated to
pay compensation and benefits only to the date of termination (except that the
Executive is entitled to benefits under the RPSO if the termination is not for
good cause). Good cause generally means (i) the willful failure by the
Executive to substantially perform his management duties for more than 60 days,
(ii) intentional conduct by the Executive causing substantial injury to the
Company, or (iii) the conviction or plea of guilty by the Executive of a felony
crime involving moral turpitude. Good reason is defined to include a breach of
the agreement, a diminution or change in the Executives title, duties, or
authority, or a relocation of the Companys principal offices. Upon voluntary
termination without good reason or termination by the Company for good
cause, the Executive is prohibited for a two-year period from directly or
indirectly competing with the Company.
The
agreement provides that compensation and benefits continue for certain specified
periods in the event that the Executive becomes totally disabled. Upon the death
of the Executive, his estate is to be paid an amount, payable over a three-year
period, equal to the Executives base salary and any non-equity incentive award
actually paid during the last three years of his life.
Upon a
change in control of the Company, the employment agreement is extended for an
additional three-year period. If, following a change in control, the Executives
employment with the Company is terminated by the Company without good cause,
or by the Executive for good reason, the Company must pay to the Executive,
among other payments but in lieu of any further salary payments subsequent to
the date of termination, a lump-sum severance payment equal to three times the
sum of the Executives base salary and non-equity incentive award under the MIP
(as paid during periods specified in the agreement).
A change in
control is generally deemed to occur when (i) a person or group acquires
beneficial ownership of 30% or more of the Common Stock; (ii) during any period
of two consecutive years, individuals who constitute the Board at the beginning
of such period, and cease for any reason to constitute a majority of the Board;
or (iii) the shareholders approve a liquidation or sale of substantially all of
the assets of the Company or certain merger and consolidation transactions.
Mr. Kriss
Cloninger III, President and CFO of the Company, Mr. Akitoshi Kan, Chairman of
Aflac Japan and Aflac International, and Mr. Paul S. Amos II, President of Aflac
and COO of Aflac U.S., also have employment agreements with the Company that
contain provisions relating to termination, disability, death, and changes in
control of the Company substantially similar to such provisions in Mr. Daniel
Amos employment agreement, as described above.
Under the
employment agreements of Messrs. Cloninger, Kan, and Paul Amos, each is a
participant in the SERP but not the RPSO. Under the SERP, as amended, in the
event that a participants employment with the Company is terminated within two
years of a change in control of the Company other than for death, disability
or cause, or a participant terminates his employment during such period for
good reason, the participant becomes 100% vested in his retirement benefits
and is entitled to receive a lump-sum amount equal to the actuarial equivalent
of the annual retirement benefit to which he would have been entitled had he
remained in the employ of the Company until (i) age 55 (in the case of a
participant who is not yet 55); (ii) age 60 (in the case of a participant who is
at least 55, but not yet 60); or (iii) age 65 (in the case of a participant who
is at least 60, but not yet 65), as the case may be. A change in control shall
generally occur under the same circumstances described as a change in control
in Mr. Daniel Amos employment agreement. Cause for this purpose generally
means (i) the participants willful failure to substantially perform his duties
with the Company (other than that resulting from illness or after a participant
gives notice of termination of employment for good reason) after a written
demand for substantial performance is delivered to the participant by the Board
or (ii) the willful engaging by the participant in conduct materially injurious
to the Company. Good reason is defined for this purpose to include various
adverse changes in employment status, duties, and/or compensation and benefits
following a change in control. Benefits may be reduced to the extent that they
are not deductible by the Company for income tax purposes.
35
The table
below reflects the amount of
compensation
payable
to each of the NEOs in the event
of
termination
of
such
executives
employment.
The
amounts
shown
assume in all cases that the
termination
was
effective
on
December
31, 2007, and
therefore
includes
amounts
earned
through
such time and
includes
estimates
of the
amounts
which
would be paid to the NEOs upon their
termination.
Due to the
number
of factors that affect
the nature and amount of any
benefits
under the various
termination
scenarios,
actual
amounts
paid or
distributed
may be
different.
Messrs.
Daniel Amos,
Cloninger,
and Kan are the only
NEOs who are eligible to receive
immediate
retirement
benefits.
See
Pension
Benefits
and
Nonqualified
Deferred
Compensation
above for more
information
about these
benefits.
The
provision
for
potential
payments
upon
termination,
retirement,
death,
disability,
and
change in control in the NEOs
employment
contracts
are
generally
similar with the
exception
of Mr.
Kirkland,
who does not have an
employment
agreement
with the
Company.
The
agreements
impose
various non-
competition
and other
requirements
upon
termination
of
employment.
As noted in the table that
follows,
the
benefits
provided
and
requirements
imposed
vary with the
circumstances
under which the
termination
occurs.
36
2007 POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL
|
|
|
|
|
Before Change in
Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without "Good
|
|
Company
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
Cause" or by
|
|
Termination
|
|
without "Good
|
|
Voluntary
|
|
|
|
|
|
|
|
Control termination
|
|
|
|
|
employee for
|
|
for "Good
|
|
Reason" and no
|
|
Termination with
|
|
|
|
|
|
|
|
without "Good Cause"
|
|
|
|
|
"Good Reason"
|
|
Cause"
|
|
competition
|
|
competition
|
|
|
|
|
|
|
or
for "Good Reason"
|
Name
|
|
Benefit
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
Death ($)(5)
|
|
Disability ($)(6)
|
|
($)(7)
|
Daniel P.
Amos
|
|
Salary
|
|
3,330,433
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3,768,905
|
|
|
1,933,800
|
|
|
0
|
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(11)
|
|
10,080,042
|
|
|
2,813,035
|
|
|
2,813,035
|
|
|
0
|
|
|
10,374,236
|
|
|
7,032,588
|
|
|
2,813,035
|
|
|
|
Severance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
12,306,705
|
|
|
|
Retirement
(8)
|
|
(9
|
)
|
|
794,251
|
|
|
(9
|
)
|
|
(9
|
)
|
|
26,095,359
|
|
|
(9
|
)
|
|
(9
|
)
|
|
|
EDCP
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
311,000
|
|
|
0
|
|
|
314,000
|
|
|
314,000
|
|
|
314,000
|
|
|
317,000
|
|
|
317,000
|
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
11,471,958
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
11,471,958
|
|
|
11,471,958
|
|
|
11,471,958
|
|
|
|
Life
Insurance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
Totals
(14)
|
|
76,907,860
|
|
|
4,694,215
|
|
|
54,841,461
|
|
|
52,028,426
|
|
|
53,611,387
|
|
|
72,469,772
|
|
|
78,623,124
|
|
|
|
|
|
Kriss Cloninger
III
|
|
Salary
|
|
1,824,746
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,389,108
|
|
|
1,239,450
|
|
|
0
|
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(11)
|
|
4,639,330
|
|
|
1,446,025
|
|
|
1,446,025
|
|
|
0
|
|
|
5,257,322
|
|
|
3,615,063
|
|
|
1,446,025
|
|
|
|
Severance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
6,816,975
|
|
|
|
Retirement
(8)
|
|
(9
|
)
|
|
331,465
|
|
|
(9
|
)
|
|
(9
|
)
|
|
6,542,174
|
|
|
(9
|
)
|
|
(9
|
)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
52,000
|
|
|
0
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
51,000
|
|
|
51,000
|
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
5,350,740
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
5,350,740
|
|
|
5,350,740
|
|
|
5,350,740
|
|
|
|
Life
Insurance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
Totals
(14)
|
|
23,528,681
|
|
|
1,777,490
|
|
|
13,155,890
|
|
|
11,709,865
|
|
|
20,039,344
|
|
|
21,918,118
|
|
|
25,326,605
|
|
3
7
|
|
|
|
Before Change in
Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
without "Good
|
|
Company
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
Cause" or by
|
|
Termination
|
|
without "Good
|
|
Voluntary
|
|
|
|
|
|
|
|
Control termination
|
|
|
|
|
employee for
|
|
for "Good
|
|
Reason" and no
|
|
Termination with
|
|
|
|
|
|
|
|
without "Good Cause"
|
|
|
|
|
"Good Reason"
|
|
Cause"
|
|
competition
|
|
competition
|
|
|
|
|
|
|
|
or
for "Good Reason"
|
Name
|
|
Benefit
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
Death ($)(5)
|
|
Disability ($)(6)
|
|
($)(7)
|
Akitoshi
Kan
|
|
Salary
|
|
1,237,500
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,575,000
|
|
|
825,000
|
|
|
0
|
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(11)
|
|
2,559,160
|
|
|
797,280
|
|
|
797,280
|
|
|
0
|
|
|
2,968,410
|
|
|
1,993,200
|
|
|
797,280
|
|
|
|
Severance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
4,041,840
|
|
|
|
Retirement
(8)
|
|
(9
|
)
|
|
650,798
|
|
|
(9
|
)
|
|
(9
|
)
|
|
3,365,442
|
|
|
(9
|
)
|
|
(9
|
)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
45,000
|
|
|
0
|
|
|
41,000
|
|
|
41,000
|
|
|
0
|
|
|
45,000
|
|
|
45,000
|
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
3,283,950
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3,283,950
|
|
|
3,283,950
|
|
|
3,283,950
|
|
|
|
Life
Insurance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
Totals
(14)
|
|
13,811,546
|
|
|
1,448,078
|
|
|
7,492,216
|
|
|
6,694,936
|
|
|
14,981,296
|
|
|
12,801,086
|
|
|
14,822,006
|
|
|
|
Ronald E.
Kirkland
|
|
Salary
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
288,000
|
|
|
0
|
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(11)
|
|
580,207
|
|
|
580,207
|
|
|
580,207
|
|
|
0
|
|
|
580,207
|
|
|
580,207
|
|
|
580,207
|
|
|
|
Retirement
(8)
|
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|
73,289
|
|
|
(9
|
)
|
|
(9
|
)
|
|
|
EDCP
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
(10
|
)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,437,050
|
|
|
1,437,050
|
|
|
0
|
|
|
|
Life
Insurance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
Totals
(14)
|
|
2,183,270
|
|
|
2,183,270
|
|
|
2,183,270
|
|
|
1,603,063
|
|
|
4,041,430
|
|
|
3,908,320
|
|
|
2,183,270
|
|
|
|
Paul S. Amos
II
|
|
Salary
|
|
805,100
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,117,550
|
|
|
603,825
|
|
|
0
|
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(11)
|
|
1,734,138
|
|
|
533,581
|
|
|
533,581
|
|
|
0
|
|
|
1,856,850
|
|
|
1,333,953
|
|
|
533,581
|
|
|
|
Severance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,808,393
|
|
|
|
Retirement
(8)
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
21,948
|
|
|
(9
|
)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12)
|
|
20,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
17,000
|
|
|
31,000
|
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
|
2,648,900
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,648,900
|
|
|
2,648,900
|
|
|
2,648,900
|
|
|
|
Life
Insurance
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
Totals
(14)
|
|
5,208,138
|
|
|
533,581
|
|
|
533,581
|
|
|
0
|
|
|
6,123,300
|
|
|
4,625,626
|
|
|
6,102,484
|
|
38
____________________
(1)
|
|
Salary and non-equity
incentive award would be paid semi-monthly and all health and welfare
benefits would continue for the remainder of the contract
term.
|
|
|
|
(2)
|
|
Termination for good
cause eliminates the salary and non-equity incentive award obligation for
the remainder of the contract period and the executive forfeits his
participation in any supplemental retirement plan.
|
|
(3)
|
|
Voluntary termination
by the executive without good reason eliminates the salary and non-equity
incentive award obligation for the remainder of the contract
term.
|
|
(4)
|
|
If the executive
leaves the Company to go into direct competition, he will eliminate the
right to any further salary and non-equity incentive award obligation on
the part of the Company.
|
|
(5)
|
|
Upon death, the
executives estate is entitled to receive terminal pay (paid in equal
installments over 36 months) equal to the amount of the executives base
pay and non-equity incentive award for the previous 36 months of his life.
Additionally, retirement benefits in this column reflect the present value
of the accumulated benefit obligation for a surviving spouse
annuity.
|
|
(6)
|
|
Any actual Company
paid disability benefits would be offset by the maximum annual amount
allowed ($96,000) under the Company sponsored disability income plan for
all executives except for Mr. Kirkland.
|
|
(7)
|
|
Termination after a
change in control entitles the executive to a lump-sum severance payment
of three times the sum of: (i) the executives annual base salary in
effect immediately prior to the change in control, and (ii) the highest
non-equity incentive award paid in the year preceding the termination date
or the year preceding the change in control.
|
|
(8)
|
|
Retirement benefits
expressed in dollars and disclosed in certain columns of this table relate
to termination events where the executive would receive a benefit
different from that disclosed in the Pension Benefits table. Generally,
the termination events resulting in a payment in lieu of the amount
disclosed in the Pension Benefits table are termination for good cause
and death, except for Paul Amos who has less than the required years of
credited service to qualify for certain pension benefits.
|
|
(9)
|
|
See the Pension
Benefits table in this Proxy Statement for the present value of the
accumulated benefit obligation for the applicable executive.
|
|
(10)
|
|
See the Nonqualified
Deferred Compensation section in this Proxy Statement, including the table
that details deferred compensation balances for the
executives.
|
|
(11)
|
|
The non-equity
incentive award amounts on this line include in all instances, except for
termination with competition, the 2007 earned non-equity incentive award
that was not paid until February 2008.
|
|
(12)
|
|
Represents the
estimated lump sum present value of all premiums that would be paid for
applicable health and welfare plan benefits.
|
|
(13)
|
|
Represents the
estimated value of accelerated vesting of stock options and awards. The
value for stock options and awards was determined as follows: for stock
options, the difference between the exercise price and the closing price
on the NYSE on the last business day of the year multiplied by the number
of unvested option shares; for stock awards, the number of unvested stock
awards multiplied by the same closing price used for options.
|
|
(14)
|
|
Totals were calculated
to present a full walk-away value and include salary, non-equity incentive
award, severance where applicable, the present value of the NEOs
accumulated benefit under all retirement plans as presented above in the
Pension Benefits table or as a surviving spouse benefit in the death
column, the value of nonqualified deferred compensation as presented in
the 2007 Nonqualified Deferred Compensation table, the present value of
any health and welfare benefits, the value of long-term equity incentives
that would accelerate vesting and life insurance proceeds upon
death.
|
39
DIRECTOR COMPENSATION
Directors
who also serve as officers of the Company or its subsidiaries are not entitled
to compensation as Board members. All other Directors of the Company
(Non-employee Directors) receive $40,000 annually for service as such. A
Non-employee Director serving on one or more committees of the Board receives an
additional $7,200 annually for that service. A Non-employee Director serving on
the Audit Committee receives an additional $7,200 annually for that service.
Each Non-employee Director also receives $2,000 for attendance at each meeting
of the Board of Directors. In addition, the chairmen of the Compensation
Committee, Audit Committee, and Corporate Governance Committee receive
additional annual fees of $10,000, $12,000, and $7,500, respectively.
When a
Non-employee Director first joins the Board of Directors, he or she is granted
an award of nonqualified stock options, stock appreciation rights, restricted
stock, or a combination thereof with a value as determined by the Board of
Directors, not in excess of the value of a nonqualified stock option covering an
aggregate of 10,000 shares of Common Stock. In the following calendar year, and
for each year thereafter, each Non-employee Director may, at the discretion of
the Board, receive nonqualified stock options, stock appreciation rights,
restricted stock, or a combination thereof with a value not in excess of the
value of a nonqualified stock option covering an aggregate of up to 5,000 shares
of Common Stock. If the Board grants stock options, it may permit Non-employee
Directors to elect to receive restricted stock in lieu thereof. In 2007, all
Non-employee Directors received nonqualified stock options covering 4,000 shares
of Common Stock, except for three Non-employee Directors who elected to receive
all or a portion of such stock option grant in the form of restricted stock. The
exercise price for the stock options is the closing market price of the Common
Stock on the date of grant. Options granted to each Non-employee Director become
exercisable under the terms and conditions as determined by the Board of
Directors at the date of grant. Grants of options made to Non-employee Directors
in 2007 become exercisable in equal installments on each of the next four
anniversaries of the date of the option, and restricted stock awards issued in
2007 become vested on the fourth anniversary of the date of the award, in each
case if the Non-employee Director continues to be a Director through such date.
However, upon cessation of service by reason of retirement, a Non-employee
Director becomes immediately vested in all outstanding stock options and awards
that have not yet expired, as long as the Non-employee Director has completed at
least one full year of vesting.
Non-employee
Directors, with the exception of those who are or within one year will become
retirement eligible, may elect to have all or a portion of their Board annual
retainer and/or meeting fees paid in the form of immediately vested nonqualified
stock options, restricted stock that vests upon four years of continued service,
or a combination thereof as determined by the Board of Directors. In 2007, none
of the Non-employee Directors made such an election.
40
The following table identifies each item
of compensation paid to Non-employee Directors for 2007.
2007 DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
Change in
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
and
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
Fees Earned
or
|
|
|
|
|
|
Compensation
|
|
All
Other
|
|
|
|
|
Paid in
Cash
|
|
Stock
Awards
|
|
Option
Awards
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name(1)
|
|
|
$
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
$
|
Yoshiro Aoki
|
|
39,467
|
|
0
|
|
56,568
|
|
0
|
|
1,714
|
|
97,749
|
Michael H. Armacost
|
|
59,200
|
|
0
|
|
55,840
|
|
1,289
|
|
3,107
|
|
119,436
|
Joe Frank Harris
|
|
59,200
|
|
0
|
|
55,840
|
|
0
|
|
749
|
|
115,789
|
Elizabeth J. Hudson
|
|
59,200
|
|
0
|
|
55,840
|
|
0
|
|
749
|
|
115,789
|
Douglas W. Johnson
|
|
66,400
|
|
0
|
|
60,821
|
|
0
|
|
3,451
|
|
130,672
|
Robert
B. Johnson
|
|
69,200
|
|
22,739
|
|
27,920
|
|
0
|
|
3,972
|
|
123,831
|
Charles B. Knapp
|
|
66,400
|
|
0
|
|
55,840
|
|
0
|
|
749
|
|
122,989
|
Barbara K. Rimer,
Dr. PH
|
|
|
59,200
|
|
0
|
|
55,840
|
|
9,301
|
|
749
|
|
125,090
|
Marvin R. Schuster
|
|
73,900
|
|
0
|
|
55,840
|
|
20,166
|
|
3,479
|
|
153,385
|
David
Gary Thompson
|
|
59,200
|
|
0
|
|
57,769
|
|
0
|
|
3,734
|
|
120,703
|
Robert L. Wright
|
|
78,400
|
|
5,294
|
|
43,674
|
|
17,122
|
|
3,441
|
|
147,931
|
John
Shelby Amos II
|
|
59,200
|
|
0
|
|
55,840
|
|
0
|
|
3,571,177
|
|
3,686,217
|
Kenneth S. Janke Sr.
|
|
59,200
|
|
45,468
|
|
0
|
|
0
|
|
931
|
|
105,599
|
E.
Stephen Purdom
|
|
59,200
|
|
0
|
|
55,840
|
|
24,426
|
|
83,524
|
|
222,990
|
____________________
(1)
|
|
Daniel P. Amos, Chairman and CEO;
Paul S. Amos II, President, Aflac and COO, Aflac U.S.; and Kriss Cloninger
III, President, CFO, and Treasurer, are not included in the table, as they
are employees of the Company and thus do not receive compensation for
their services as Directors. The compensation received by Messrs. Daniel
Amos, Paul Amos, and Cloninger as employees of the Company is shown in the
Summary Compensation Table.
|
|
|
|
(2)
|
|
This column represents the dollar
amount recognized in accordance with SFAS No. 123(R) for financial
statement purposes with respect to the 2007 fiscal year for the fair value
of restricted stock granted in 2007 as well as prior fiscal years. The
fair values of the awards granted on August 14, 2007, were calculated
using the closing stock price on August 14, 2007, of $52.59. Each
Non-employee Director may elect, in the year prior to the grant, to
convert all or a portion of any annual stock option grant to restricted
stock based upon a conversion formula approved by the Board of Directors.
The following Non-employee Directors have outstanding stock awards that
will each vest upon the fourth anniversary of the awards: Mr. Kenneth
Janke, Sr., 4,871; Mr. Robert B. Johnson, 2,436; and Mr. Robert L. Wright,
1,058.
|
41
(3)
|
|
This column represents the dollar
amount recognized for financial statement purposes for the fiscal year
ended December 31, 2007, in accordance with SFAS No. 123(R) and thus
includes amounts from options granted in and prior to 2007. Assumptions
used to calculate SFAS No. 123(R) are more fully described in Note 10
"Share-Based Transactions" in the Notes to the Capital Consolidated
Financial Statements in the Company's Annual Report to Shareholders for
the year ended December 31, 2007. The fair value of the options granted to
Non-employee Directors as of August 14, 2007, at an option price of $52.59
and with vesting of 25% per year on each of the four anniversaries of the
option grant, was estimated in accordance with SFAS No. 123(R) using the
multiple option approach of the Black-Scholes-Merton option pricing model.
The fair value per option for each of the options four vesting periods
was $14.19 for the options vesting on August 14, 2008; $15.55 for the
options vesting on August 14, 2009; $16.75 for the options vesting on
August 14, 2010; and $17.83 for the options vesting on August 14, 2011.
The fair value per option was based on an assumption of four years of
expected life from each of the four vesting dates, expected volatility of
25%, expected dividend yield of 1.3% and a risk free interest rate of
4.7%. As of December 31, 2007, each Non- employee Director had the
following number of stock options outstanding: Yoshiro Aoki, 10,000;
Michael H. Armacost, 26,000; Joe Frank Harris, 26,000; Elizabeth J.
Hudson, 26,000; Douglas W. Johnson, 26,000; Robert B. Johnson, 28,000;
Charles B. Knapp, 26,000; Barbara K. Rimer, Dr. PH, 26,000; Marvin R.
Schuster, 46,000; David Gary Thompson, 18,000; Robert L. Wright, 42,000;
John Shelby Amos II, 26,000; Kenneth S. Janke Sr., 10,000; E. Stephen
Purdom, 26,000.
|
|
|
|
(4)
|
|
The Company maintains a
retirement plan for Non-employee Directors who have attained age 55 and
completed at least five years of service as a Non-employee Director.
Effective 2002, newly elected Non-employee Directors are not eligible for
participation in this plan. The annual benefit paid to a Non-employee
Director upon retirement (or to his or her spouse in the event of death
prior to completion of payments under the plan) is equal to the
Non-employee Director's compensation for the 12 months preceding
retirement, including retainer and regular Board member fees, but
excluding committee fees, paid for a period of time equal to the number of
completed years served. The Non-employee Directors do not participate in
any nonqualified deferred compensation plans. The aggregate change in the
actuarial present value of the accumulated benefit obligation for John
Shelby Amos II, Joe Frank Harris, Elizabeth J. Hudson, Kenneth S.
Janke, Sr., and Charles B. Knapp was a decrease of
$16,888, $9,818, $2,737, $15,631, and $3,895, respectively. Yoshiro Aoki,
Douglas W. Johnson, Robert B. Johnson and David Gary Thompson do not
participate in the plan.
|
|
(5)
|
|
Included in All Other
Compensation for John Shelby Amos II, who presently serves as the State
Sales Coordinator-Alabama/West Florida, is $3,569,428 in renewal and
first-year sales commissions before expenses. The compensation arrangement
with John Shelby Amos II was no more favorable when contracted than those
of other State Sales Coordinators. Additionally, included in All Other
Compensation is $80,000 paid to E. Stephen Purdom for consulting services
provided to Aflac Japan.
|
RELATED PERSON
TRANSACTIONS
The Company
recognizes that transactions between the Company and any of its Directors or
executives can present potential or actual conflicts of interest and create the
appearance that Company decisions are based on considerations other than the
best interests of the Company and its shareholders. Accordingly, consistent with
the Companys Code of Business Conduct and Ethics, as a general matter, it is
the Companys preference to avoid such transactions. Nevertheless, the Company
recognizes that there are situations where such transactions may be, or may not
be, inconsistent with the best interests of the Company and its shareholders.
Therefore, the Company has adopted a formal policy which requires the Companys
Audit Committee to review and, if appropriate, to approve or ratify any such
transactions. Pursuant to the policy, the Audit Committee will review any
transaction in which the Company is or will be a participant and the amount
involved exceeds $120,000, and in which any of the Companys Directors or
executives had, has or will have a direct or indirect material interest. After
its review the Audit Committee will only approve or ratify those transactions
that are in, or are not inconsistent with, the best interests of the Company and
its shareholders, as the Audit Committee determines in good faith.
Each of the
following ongoing transactions, which commenced prior to the adoption of the
formal policy, has been reviewed and ratified by the Audit Committee:
In 2007,
Aflac paid $145,844 to a corporation of which Maria Theresa Land, the sister of
John Shelby Amos II, is the sole shareholder. This amount was earned as renewal
commissions before expenses by W. Donald Land, the deceased husband of Maria
Theresa Land. W. Donald Land served as State Sales Coordinator-Florida with
Aflac from 1975 until May 1990. In 2007, Aflac paid $376,834 to Michael S.
Kirkland, the son of Ronald E. Kirkland. Michael Kirkland serves as a State
Sales Coordinator-Texas East.
42
This amount was earned as renewal and
first-year commissions before expenses. State Sales Coordinators are not
salaried employees but are independent contractors compensated on a commission
basis and are required to pay their own expenses, including travel, office
expenses, incentives for District and Regional Sales Coordinators and Associates
in their states, and recruiting and training costs. The compensation arrangement
with W. Donald Land and Michael Kirkland was no more favorable when contracted
than those of other State Sales Coordinators.
In 2007,
Aflac paid $291,459 to John William Amos, the son of John Shelby Amos II. This
amount was earned as renewal and first-year commissions before expenses. John
William Amos serves as a Regional Sales Coordinator-Alabama/West Florida. In
2007, $286,523 was paid by Aflac to Joe Frank Harris Jr., the son of Joe Frank
Harris. This amount was earned as renewal and first-year commissions before
expenses. Joe Frank Harris Jr. serves as a Regional Sales
Coordinator-Georgia/Northwest. Regional Sales Coordinators are not salaried
employees but are independent contractors compensated on a commission basis and
are required to pay their own expenses. The compensation arrangement with John
William Amos and Joe Frank Harris Jr. is no more favorable than with other
Regional Sales Coordinators.
For services
rendered in 2007, the Company paid $468,888 in salary and non-equity incentive
award to Kenneth S. Janke Jr., the son of Kenneth S. Janke Sr. Mr. Janke Jr.
serves as Senior Vice President, Investor Relations. In addition, he received
such employee benefits and other compensation (including equity awards) as were
generally made available to senior management of the Company. For services
rendered in 2007, Aflac paid $145,134 in salary and non-equity incentive award
to Jonathan S. Kirkland, the son of Ronald E. Kirkland. Mr. Jonathan Kirkland
serves Aflac as Sales Strategy Consultant. For services rendered in 2007, Aflac
paid $134,127 in salary and non-equity incentive award to J. Matthew Loudermilk,
the son of Joey M. Loudermilk the Executive Vice President, General Counsel and
Corporate Secretary of the Company. Mr. J. Matthew Loudermilk serves as Second
Vice President, Associate Counsel, of Aflac and Assistant Corporate Secretary of
the Company and Aflac.
In addition, they received such employee benefits and other
compensation (including equity awards) pursuant to the Companys equity award
and benefit programs. All of these employees also participated in all fringe
benefit programs generally available to employees and their compensation is
commensurate with that of their peers.
EQUITY COMPENSATION PLAN INFORMATION
The
following table provides information with respect to compensation plans under
which our equity securities are authorized for issuance to our employees or
Non-employee Directors, as of December 31, 2007.
|
|
|
Number of
Securities
|
|
|
|
Remaining Available
for
|
|
Number of Securities
to
|
Weighted-Average
|
Future Issuance Under
Equity
|
|
Be Issued Upon
Exercise
|
Exercise Price of
|
Compensation Plans
|
|
of Outstanding
Options,
|
Outstanding
Options,
|
Excluding
Securities
|
|
Warrants and
Rights
|
Warrants and
Rights
|
Reflected in Column
(a)
|
Plan
Category
|
(a)
|
(b)
|
(c)
|
Equity Compensation
Plans Approved by
|
|
|
|
Shareholders
|
16,576,738
|
$34.46
|
22,631,973
|
Equity Compensation
Plans Not Approved by
|
|
|
|
Shareholders
|
-0-
|
-0-
|
-0-
|
Total
|
16,576,738
|
$34.46
|
22,631,973
|
*Of the shares listed in column (c),
11,026,017 shares are available for grant other than in the form of options,
warrants, or rights (i.e., in the form of restricted stock or restricted stock
units).
AUDIT COMMITTEE REPORT
The Audit
Committee of the Companys Board of Directors is composed of four directors,
each of whom, the Board has determined, is independent as defined by the NYSE
listing standards and SEC rules, and is financially literate. The Board has
determined that at least one member of the Audit Committee is an audit committee
financial expert as defined by the SEC rules. Mr. Douglas W. Johnson, with 30
years as an auditor with Ernst & Young, 20 of those years as a partner,
working primarily with the insurance industry segment, is the audit committee
financial expert. The Audit Committee operates under a written charter adopted
by the Board of Directors.
Management
has the primary responsibility for the Companys financial statements and the
reporting process, including the system of internal controls. The independent
registered public accounting firm is responsible for performing an independent
audit of the Companys consolidated financial statements in conformity with the
auditing standards of the Public Company Accounting Oversight Board (United
States) and issuing a report thereon. The Audit Committee has general oversight
responsibility to monitor and oversee these processes on behalf of the Board of
Directors.
43
In
connection with these responsibilities, the Audit Committee has met with
management and the independent registered public accounting firm to review and
discuss the Companys audited consolidated financial statements for the year
ended December 31, 2007. The Audit Committee has also discussed with the
independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees) and the NYSE. The Audit Committee has also received the written
disclosures and the letter from the independent registered public accounting
firm required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and has discussed with the independent
registered public accounting firm its independence. The Audit Committee has
reviewed this report and such firms work throughout the year in order to
evaluate the independent registered public accounting firms qualifications,
performance, and independence.
Additionally, the Audit Committee has monitored the Companys compliance
with Section 404 of the Sarbanes-Oxley Act of 2002 regarding the reporting
related to internal control over financial reporting. This monitoring process
has included regular reports and representations by financial management of the
Company, the internal auditors, and by KPMG LLP, the independent registered
public accounting firm. The Audit Committee has also reviewed the certifications
of Company executive officers contained in the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 2007 filed with the SEC, as well as
reports issued by KPMG LLP, included in the Companys Annual Report on Form 10-K
related to its audit of: (i) the consolidated financial statements, and (ii) the
effectiveness of internal control over financial reporting.
Based upon
the Audit Committees discussions with management and the independent registered
public accounting firm, as set forth above, and the Audit Committees review of
the representations of management and the independent registered public
accounting firm, the Audit Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in the Companys
Annual Report on Form 10-K for the year ended December 31, 2007, for filing with
the SEC.
Audit Committee
Robert L. Wright, Chairman
Douglas
W. Johnson (financial expert)
Charles B. Knapp
Marvin R. Schuster
2. AMENDMENT TO ARTICLE IV OF THE
COMPANYS ARTICLES OF INCORPORATION TO INCREASE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Description of the Proposed
Amendment
The proposed
amendment to Article IV of the Articles of Incorporation being submitted for
shareholder approval would increase the number of shares of Common Stock which
the Company is authorized to issue from one billion (1,000,000,000) to one
billion nine hundred million (1,900,000,000). The full text of the proposed
amendment is attached to this Proxy Statement as Appendix A and should be read
carefully.
Purposes and Effects of Increasing
the Number
of Authorized Shares of Common Stock
As of
February 27, 2008, there were 474,813,182 shares of Common Stock outstanding;
184,305,312
shares of Common Stock held in Treasury; 38,430,268 shares of Common
Stock reserved for issuance pursuant to the 1997 Stock Option Plan and the
Long-Term Incentive Plan; and 302,451,238 shares of Common Stock authorized,
unissued and unreserved. The additional 900,000,000 shares of Common Stock to be
authorized if this amendment is approved would increase the number of
authorized, unissued and unreserved shares to 1,202,451,238
.
The additional shares
would be a part of the existing class of Common Stock, and if and when issued,
would have the same rights and privileges as the shares of Common Stock
presently outstanding. See Description of Voting Rights.
The Board of
Directors believes that it is desirable to have the additional authorized shares
of Common Stock available for possible future financing and acquisition
transactions, stock dividends or splits and other general corporate purposes.
However, at the date of this Proxy Statement, the Company has no agreements,
commitments or plans with respect to the sale or issuance of any of the
additional shares of Common Stock as to which authorization is
sought.
The
additional shares of Common Stock would be available for issuance without
further action by the shareholders and without the accompanying delay and
expense involved in calling a special meeting of shareholders, unless such
action is required by applicable law or the rules of any stock exchange on which
the Companys securities may be listed. The NYSE, on which the issued shares of
the Companys Common Stock are presently listed, generally requires shareholder
approval as a prerequisite to listing shares when the present or potential
issuance of shares could result in an increase in the number of shares of Common
Stock outstanding by at least 20%. Failure to comply with the NYSE requirements
could result in the delisting of the Companys Common Stock. The Company is also
listed on the Tokyo Stock Exchange, which has similar rules.
44
It should be
noted that the issuance of additional shares of Common Stock could be
disadvantageous to existing shareholders since such issuance might serve to
dilute their percentage interest in the Company. Holders of Common Stock do not
have pre-emptive rights to purchase any additional shares of Common Stock that
may be issued.
Vote Required
The
affirmative vote of the holders of a majority of the outstanding voting rights
of Common Stock entitled to vote at the Annual Meeting of the Shareholders is
required to approve the proposed amendment (see Description of Voting
Rights).
THE BOARD OF DIRECTORS RECOMMENDS
UNANIMOUSLY A
VOTE FOR THE INCREASE OF AUTHORIZED
SHARES OF COMMON STOCK.
3. PROPOSAL TO ADOPT AN AMENDED AND
RESTATED
MANAGEMENT INCENTIVE
PLAN
The Company
presently has in effect a Management Incentive Plan (MIP) that, absent
extension, will expire at the end of this 2008 fiscal year (although payments
with respect to all awards previously granted thereunder would still be paid out
in accordance with their terms). The MIP was initially approved by the Board of
Directors in 1985, and amended and restated in 1994, 1999 and, most recently,
effective beginning 2004.
In order to
continue and to enhance the effectiveness of the MIP, the Board of Directors, in
accordance with the recommendation of its Compensation Committee, has amended
and restated the MIP (as amended and restated, the
2009 Management Incentive
Plan,
hereinafter referred to as the 2009 MIP), subject to approval by shareholders
at the annual meeting. The Board of Directors principal purpose in adopting
these amendments is to extend the term of the MIP beyond the end of the current
fiscal year and not to enhance or otherwise modify the available benefits,
although the cap on annual benefits for employees subject to the deduction
limits of Section 162(m) of the Code is being changed to $6 million from the
lesser of $4 million or three times annual salary.
In
particular, the amendments to the MIP (i) extend its term through the end of the
2013 fiscal year (provided that payments with respect to all awards granted
thereunder before that time will be paid out in accordance with their terms),
(ii) to change the cap on annual benefits for certain executive employees, and
(iii) make certain other nonmaterial technical changes.
The 2009 MIP
is designed to ensure that any compensation that may be payable under the 2009
MIP will qualify as performance-based compensation within the meaning of Section
162(m) of the Code, and therefore is fully deductible by the Company for federal
income tax purposes. Section 162(m) of the Code generally denies deductions by
an employer for compensation in excess of $1 million per year that is paid to
covered
employees
(i.e., the chief executive officer and the three other most highly compensated
executive officers, other than the chief financial officer, at the end of the
fiscal year). However, performance-based compensation is excluded from this
deduction limit, provided that (among other requirements): (1) the material
terms pursuant to which the compensation is to be paid, including the employees
eligible to receive the compensation, a description of the business criteria on
which the performance goals are based and the maximum amount of compensation
that could be paid to any covered employee, are disclosed to and approved by the
shareholders in a separate vote prior to the payment, and (2) prior to payment,
a committee consisting of two or more
outside directors
within the meaning of
Section 162(m) of the Code (i.e., the Compensation Committee of the Board of
Directors) certifies that the performance goals and any other material terms
have been satisfied. In light of these requirements, the 2009 MIP is being
submitted to the shareholders for approval at the 2008 Annual Meeting.
If the
shareholders approve the 2009 MIP, it will take effect for performance awards,
if any, payable with respect to fiscal years of the Company commencing on or
after January 1, 2009. If the required shareholder approval is not obtained, the
2009 MIP will be null and void.
DESCRIPTION OF PLAN
The
description of the 2009 MIP summarized below is qualified, in its entirety, by
reference to the text of the 2009 MIP as set forth in Appendix B.
The purposes
of the 2009 MIP are to reinforce corporate, organizational and
business-development goals; to promote the achievement of year-to-year and
long-range financial and other business objectives; to directly tie a portion of
participant compensation to the performance of the Company; and to reward the
performance of individual officers and other employees in fulfilling their
personal responsibilities for long-range achievement. To this end, the 2009 MIP
provides for the granting of performance awards to employees of the Company and
its subsidiaries (including employees who are also executive officers and
Directors) who possess a capacity for contributing in substantial measure to the
successful performance of the Company.
45
The 2009 MIP
will be administered by the Compensation Committee of the Board of Directors,
which is composed entirely of directors who are not employees of the Company and
who are also
outside directors
within the meaning of Section 162(m) of the Code. The
Compensation Committee will (1) select the employees who participate in the 2009
MIP, (2) grant all awards under the 2009 MIP, (3) determine the terms and
conditions, including the performance goals, of such awards (which need not be
identical), (4) certify whether the performance goals have been attained, (5)
make adjustments in the performance goals in recognition of unusual or
non-recurring events that affect the Company or the financial statements of the
Company, or in response to certain changes in applicable laws, regulations or
accounting principles, (6) construe and interpret the 2009 MIP and awards
thereunder, (7) make rules and regulations in connection with the administration
and operation of the 2009 MIP, and (8) make all other determinations necessary
or desirable in administering the 2009 MIP.
The
Compensation Committee, in its sole discretion, will determine which employees
will be eligible to receive awards under the 2009 MIP and what the terms of
those awards will be. Because no determination has yet been made concerning
which individuals will receive awards (if any) or what their terms will be, the
benefits to be provided under the 2009 MIP cannot be determined at this
time.
For each
fiscal year commencing with 2009, the Compensation Committee will establish the
performance goals that must be met during the fiscal year as a condition of
receipt of awards under the 2009 MIP. Performance goals may include any or all
of the following: (1) attainment of an amount of
consolidated net
earnings
(as defined below), (2) attainment of a percentage of
return on equity
(as defined below), (3)
attainment of amounts of
operating earnings per diluted share
(as defined below), excluding all or
a portion of the effects of translating foreign currency of business segments to
U.S. dollars for financial reporting purposes; (4) increases in the market price
of Company Common Stock or levels of total return to shareholders; and (5)
attainment of goals established based on the financial performance of the
Company or the Company together with its subsidiaries or individual subsidiaries
or business segments of the Company relating to increases in premium income,
investment income, total revenues, operating expenses, pretax operating
earnings, premiums in force, number of policies in force, total new annualized
premium sales and policy conversions (i.e., issuance of current policy contracts
to existing policyholders in exchange for surrender of policies issued in prior
years). With respect to participants who are not executive officers of the
Company, performance goals may also include personal performance goals.
Performance goals for executive officers will not include personal
goals.
For purposes
of the 2009 MIP: (1)
consolidated net earnings
means the net earnings of the
Company for the fiscal year determined in conformity with accounting principles
generally accepted in the United States and reported in the Companys audited
financial statements for such fiscal year, but before any provision for the
cumulative effect of accounting changes required to be adopted by generally
accepted accounting principles in respect of such fiscal year; (2)
operating
earnings per diluted share
means the net earnings before realized investment gains and
losses, the impact of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities and nonrecurring items divided by the weighted-average number
of shares outstanding for the period plus the weighted-average shares for the
dilutive effect of share-based awards; and (3)
return on equity
means the quotient
obtained by dividing (i) operating earnings for a fiscal year by (ii) the
average of common shareholders equity of the Company as of the beginning and
the end of the fiscal year (provided that such common shareholders equity will
exclude the effect of unrealized gains and losses recognized in a separate
equity component under SFAS No. 115).
The
Compensation Committee will specify with respect to a fiscal year the
performance goals applicable to each award and minimum, target and maximum
levels applicable to each performance goal. Unless otherwise determined by the
Compensation Committee: the minimum level reflects the level of performance at
which 50% of the target award is earned (and below which no payment will be
made); the target level reflects the level at which 100% of the performance goal
is achieved; and the maximum level reflects the level of performance at which
200% of the target award is earned. Awards for any fiscal year may be expressed
as a dollar amount or as a percentage of the participants
annual base
salary.
Annual
base salary
means: (i) with respect to any executive officer, the annual rate of
base salary of such executive officer in effect as of the first day of any
fiscal year (or, if an executive officer was not employed as of the first day of
a fiscal year, the annual rate of base salary in effect as of such executive
officers first day of employment); and (ii) with respect to any other
participant, unless otherwise determined by the Company, the base salary paid to
such participant during any fiscal year.
Unless
otherwise provided by the Compensation Committee in connection with specified
terminations of employment, or upon the occurrence of a
change in
control
(as defined in the 2009 MIP), awards will be made only if and to the extent the
performance goals established for the particular fiscal year have been attained.
Notwithstanding the foregoing, any participant who is a covered employee under
Section 162(m) of the Code may not receive an award for any fiscal year that
exceeds six million dollars. Awards will be paid to participants, in cash,
within a reasonable period of time (but in any event within 2½ months) following
the end of the fiscal year to which the awards relate. With respect to
participants who are covered employees, unless otherwise determined by the
Compensation Committee, payment will be made only after achievement of the
applicable performance goals has been certified by the Compensation
Committee.
46
Notwithstanding any other provision of the 2009 MIP to the contrary, if a
change in control occurs while any awards remain outstanding, then the
performance period (i.e., the fiscal year) ongoing at the time of such change in
control will be deemed to have been completed, the maximum level of performance
with respect to the applicable performance goals will be deemed to have been
attained and a pro rata portion (based on the number of full and partial months
that have elapsed with respect to the performance period) of each outstanding
award will become payable in cash to participants.
The 2009 MIP
may be amended, suspended or terminated at any time by the Board of Directors or
the Compensation Committee, provided, however, that no amendment that requires
shareholder approval in order for the 2009 MIP to comply with Section 162(m) of
the Code will be effective unless the amendment is so approved, and no amendment
shall adversely affect any rights of a participant under an outstanding award
without the participants consent.
The 2009 MIP
will terminate at the end of the 2013 fiscal year, but payment with respect to
all awards granted under the 2009 MIP before that time will be paid out in
accordance with their terms.
As explained
above, the benefits to be provided under the 2009 MIP cannot be determined at
this time. However, non-equity incentive awards paid to the NEOs in respect of
the 2007 fiscal year under the MIP, as in effect for that year, are noted in the
2007 Summary Compensation Table on page 23. Non-equity incentive awards paid to
the executive officers under that plan in respect of the 2007 fiscal year
totaled approximately $8,150,853, and non-equity incentive awards paid to all
other plan participants in respect of the 2007 fiscal year totaled approximately
$6,157,789. The Non-employee Director group will not be eligible to participate
in the 2009 MIP.
THE BOARD OF DIRECTORS RECOMMENDS
UNANIMOUSLY A VOTE FOR
APPROVAL OF THE AMENDED AND RESTATED MANAGEMENT
INCENTIVE PLAN
4. ADVISORY VOTE ON EXECUTIVE
PAY-FOR-PERFORMANCE COMPENSATION
In November
2006, an interest was expressed by a shareholder in casting a non-binding
advisory vote on the overall executive pay-for-performance compensation policies
and procedures employed by the Company, as described in the CD&A and the
tabular disclosure regarding named executive officer compensation (together with
the accompanying narrative disclosure) in this Proxy Statement. We believe that
our compensation policies and procedures are centered on a pay-for-performance
culture and are strongly aligned with the long-term interests of our
shareholders.
We also
believe that both the Company and shareholders benefit from responsive corporate
governance policies and constructive and consistent dialogue. Thus, with Board
approval, the Company announced in February 2007 that the Company would
voluntarily provide shareholders with the right to cast an advisory vote on our
compensation program at the annual meeting of shareholders in 2009 when our
disclosure could reflect three years of compensation data under the newly
adopted SEC disclosure guidelines.
Subsequently, we concluded that the expanded disclosure of compensation
information to be provided in this Proxy Statement would already provide our
shareholders the information they need to make an informed decision as they
weigh the pay of our executive officers in relation to the Companys
performance. As a result, on November 14, 2007, the Company announced that its
Board of Directors accelerated to 2008 an advisory shareholder vote on the
Companys executive compensation disclosures. This proposal, commonly known as a
Say-on-Pay
proposal, gives you as a shareholder the opportunity to endorse or not
endorse our executive pay program and policies through the following resolution:
Resolved, that the shareholders approve the overall executive
pay-for-performance compensation policies and procedures employed by the
Company, as described in the Compensation Discussion and Analysis and
the tabular disclosure regarding named executive officer compensation (together
with the accompanying narrative disclosure) in this Proxy Statement.
Because your
vote is advisory, it will not be binding upon the Board. However, the
Compensation Committee will take into account the outcome of the vote when
considering future executive compensation arrangements.
While we
believe this
Say-on-Pay
proposal demonstrates our commitment to our shareholders, that
commitment extends beyond adopting innovative corporate governance practices. We
also are committed to achieving a high level of total return for our
shareholders.
Since August 1990, when Mr. Daniel
Amos was appointed as our Chief Executive Officer through December 2007, our
Companys total return to shareholders, including
reinvested cash dividends, has exceeded 3,867% compared with 660% for the Dow
Jones Industrial Average and 549% for the S&P 500. During the same period,
the companys market capitalization has grown from $1.2 billion to over $30
billion.
47
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR
APPROVAL OF THE PAY-FOR-PERFORMANCE COMPENSATION
POLICIES AND PROCEDURES EMPLOYED BY
THE COMPENSATION COMMITTEE, AS DESCRIBED
IN THE COMPENSATION DISCUSSION AND ANALYSIS,
AND THE TABULAR DISCLOSURE
REGARDING NAMED EXECUTIVE OFFICER COMPENSATION (TOGETHER
WITH THE ACCOMPANYING NARRATIVE DISCLOSURE) IN THIS PROXY
STATEMENT.
5. RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
In February
2008, the Audit Committee voted to appoint KPMG LLP, an independent registered
public accounting firm, to perform the annual audit of the Companys
consolidated financial statements for the fiscal year 2008, subject to
ratification by the shareholders.
Representatives of KPMG LLP are expected to be present at the 2008 Annual
Meeting of Shareholders with the opportunity to make a statement if they so
desire. Such representatives are expected to be available to respond to
appropriate questions.
The
aggregate fees for professional services rendered to the Company by KPMG LLP for
the years ended December 31, were as follows:
|
2007
|
|
2006
|
Audit fees Audit of the Companys consolidated financial
|
|
|
|
statements for the years ended December 31*
|
$3,993,446
|
|
$3,855,618
|
Audit related
fees (audits of subsidiaries and
|
|
|
|
employee benefit
plans)
|
114,644
|
|
109,854
|
Tax fees
|
1,500
|
|
1,300
|
All other
fees
|
35,000
|
|
30,000
|
Total fees:
|
$4,144,590
|
|
$3,996,772
|
____________________
(*)
|
|
The audit fees for 2007 and 2006
include $1,822,861 and $1,758,578, respectively for the services rendered
for the attestation with respect to, and related reviews of, the Companys
internal control over financial reporting as required under Section 404 of
the Sarbanes-Oxley Act of 2002.
|
The Audit
Committee of the Board of Directors has considered whether the provision of the
non-audit professional services is compatible with maintaining KPMG LLPs
independence and has concluded that it is. The Audit Committee pre-approves all
audit and non-audit services provided by KPMG LLP.
THE BOARD OF DIRECTORS RECOMMENDS
UNANIMOUSLY A VOTE FOR
RATIFICATION OF THE SELECTION OF KPMG LLP
AS THE COMPANY
S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
Shareholder Proposals
For a
shareholders proposal to be included in the Companys Proxy Statement for the
2009 Annual Meeting of Shareholders, the shareholder must follow the procedures
of Rule 14a-8 under the Exchange Act, and the proposal must be received by the
Secretary of the Company by November 24, 2008. To be timely, shareholder
proposals submitted outside the processes of Rule 14a-8 must be received by the
Secretary of the Company after January 7, 2009, and before February 6, 2009.
48
Annual Report
The Company
has delivered a copy of its Annual Report to each shareholder entitled to vote
at the 2008 Annual Meeting of Shareholders. A copy of the Companys Form 10-K is
available at no charge to all shareholders. For a copy, write to:
Kenneth S.
Janke Jr.
Senior Vice
President, Investor Relations
Aflac Incorporated
Worldwide Headquarters
1932 Wynnton Road
Columbus, Georgia 31999
|
By
Order of the Board of Directors,
|
|
|
/s/ Joey M. Loudermilk
|
|
|
|
Joey
M. Loudermilk
|
|
Secretary
|
|
March 24,
2008
|
|
49
Appendix A
AMENDMENT TO ARTICLE IV OF ARTICLES
OF INCORPORATION
The first sentence of Article IV shall be
amended to read in its entirety as follows:
The Corporation shall have authority to
issue 1,900,000,000 Shares of common stock having a par value of $.10 per share
(the Common Stock).
50
Appendix B
AFLAC INCORPORATED
AMENDED AND
RESTATED
2009 MANAGEMENT INCENTIVE
PLAN
1.
Purposes.
The purposes of the Aflac Incorporated
Amended and Restated 2009 Management Incentive Plan (the 2009 MIP) are to
reinforce corporate, organizational and business-development goals; to promote
the achievement of year-to-year and long-range financial and other business
objectives; to directly tie a portion of participants compensation to the
performance of the Company; and to reward the performance of individual officers
and other employees in fulfilling their personal responsibilities for long-range
achievements.
2.
Definitions.
The following terms, as used herein, shall
have the following meanings:
|
(a)
|
|
Affiliate
means an affiliate of Aflac, as defined
in Rule 12b-2 promulgated under Section 12 of the Exchange
Act.
|
|
|
|
(b)
|
|
Aflac
shall mean Aflac Incorporated, a
Georgia corporation.
|
|
|
|
(c)
|
|
Annual Base Salary
shall mean: (i) with respect to any
Executive Officer, the annual rate of base salary of such Executive
Officer in effect as of the first day of any Performance Period (or, if an
Executive Officer was not employed as of the first day of a Performance
Period, the annual rate of base salary in effect as of such Executive
Officers first day of employment); and (ii) with respect to any other
Participant, unless otherwise determined by the Company, the base salary
paid to such Participant during any Performance Period.
|
|
|
|
(d)
|
|
Award
shall mean an annual non-equity
incentive compensation award, granted pursuant to the 2009 MIP, which is
contingent upon the attainment of Performance Goals with respect to a
Performance Period.
|
|
|
|
(e)
|
|
Award Agreement
shall mean any written agreement,
contract, or other instrument or document between Aflac and a Participant
evidencing an Award.
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(f)
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Board
shall mean the Board of Directors of
Aflac.
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(g)
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Change in Control
shall mean the occurrence of an event
described in Section 6(f) hereof.
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(h)
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Code
shall mean the Internal Revenue Code of 1986, as
amended.
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(i)
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Committee
shall mean the Compensation Committee
of the Board.
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(j)
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Company
shall mean, collectively, Aflac and its
subsidiaries.
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(k)
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Consolidated Net Earnings
shall mean the net earnings of
the Company for the Performance Period determined in conformity with
accounting principles generally accepted in the United States and reported
in the Companys audited financial statements for such Performance Period,
but before any provision for the cumulative effect of accounting changes
required to be adopted by generally accepted accounting principles in
respect of such Performance Period.
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(l)
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Covered Employee
shall have the meaning set forth in
Section 162(m)(3) of the Code.
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(m)
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Exchange Act
shall mean the Securities Exchange Act
of 1934, as amended.
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(n)
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Executive Officer
shall mean an
executive
officer
of Aflac within the meaning of the Exchange Act.
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(o)
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Operating Earnings Per Diluted Share
means the net
earnings before realized investment gains and losses, the impact of
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities and nonrecurring items
divided by the weighted-average number of shares outstanding for the
period plus the weighted-average shares for the dilutive effect of
share-based awards.
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51
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(p)
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Participant
shall mean an officer or other employee
of the Company who is, pursuant to Section 4 of the 2009 MIP, selected to
participate herein.
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(q)
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Performance Goal
shall mean the criteria and objectives,
determined by the Committee, which must be met during the applicable
Performance Period as a condition of the Participants receipt of payment
with respect to an Award. Performance Goals may include any or all of the
following: (i) attainment of an amount of Consolidated Net Earnings during
a Performance Period, (ii) attainment of a percentage of Return on Equity
for a Performance Period, (iii) attainment of amounts of Operating
Earnings Per Diluted Share of the Company, excluding all or a portion of
the effect of translating foreign currency of business segments to U.S.
dollars for financial reporting purposes, for a Performance Period, (iv)
increases in the market price of Stock or levels of total return to
shareholders during the Performance Period and (v) attainment of goals
established based on the financial performance of Aflac, the Company or
individual subsidiaries or business segments of the Company relating to
increases in premium income, investment income, total revenues, operating
expenses, pretax operating earnings, premiums in force, number of policies
in force, new sales and policy conversions (i.e., issuance of current
policy contracts to existing policyholders in exchange for surrender of
policies issued in prior years). With respect to Participants who are not
Executive Officers, Performance Goals may also include such personal
performance goals as the Committee shall, from time to time,
establish.
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(r)
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Performance Period
shall mean the Companys fiscal
year.
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(s)
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Plan
shall mean the Aflac Incorporated Amended and Restated
2009 Management Incentive Plan.
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(t)
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Return on Equity
shall mean the quotient obtained by
dividing (i) Operating Earnings for a Performance Period by (ii) the
average of common shareholders equity of the Company as of the beginning
and the end of the Performance Period. Such common shareholders equity
shall exclude the effect of unrealized gains and losses recognized in a
separate equity component under Statement of Financial Accounting
Standards No. 115.
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(u)
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Stock
shall mean shares of Common Stock, par
value $.10 per share, of Aflac.
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3.
Administration.
The 2009 MIP shall be administered by the
Committee. The Committee shall have the authority in its sole discretion,
subject to and not inconsistent with, the express provisions of the 2009 MIP, to
administer the 2009 MIP and to exercise all the powers and authorities either
specifically granted to it under the 2009 MIP or necessary or advisable in the
administration of the 2009 MIP, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the terms, conditions, restrictions and
performance criteria, including Performance Goals, relating to any Award; to
certify whether the Performance Goals have been attained; to determine whether,
to what extent, and under what circumstances an Award may be settled, cancelled,
forfeited, or surrendered; to make adjustments in the Performance Goals in
recognition of unusual or non-recurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles; to construe and interpret the 2009
MIP and any Award; to prescribe, amend and rescind rules and regulations
relating to the 2009 MIP; to determine the terms and provisions of Award
Agreements; and to make all other determinations deemed necessary or advisable
for the administration of the 2009 MIP.
The Committee shall consist of two or more
persons, each of whom shall be an
outside director
within the meaning of
Section 162(m) of the Code. The Committee may appoint a chairperson and a
secretary and may make such rules and regulations for the conduct of its
business as it shall deem advisable, and shall keep minutes of its meetings. All
determinations of the Committee shall be made by a majority of its members
either present in person or participating by conference telephone at a meeting
or by written consent. The Committee may delegate to one or more of its members
or to one or more agents such administrative duties as it may deem advisable,
and the Committee or any person to whom it has delegated duties as
aforementioned may employ one or more persons to render advice with respect to
any responsibility the Committee or such person may have under the 2009 MIP. All
decisions, determinations and interpretations of the Committee shall be final
and binding on all persons, including the Company, the Participant (or any
person claiming any rights under the 2009 MIP from or through any Participant)
and any shareholder.
No member of the Board or the Committee
shall be liable for any action taken or determination made in good faith with
respect to the 2009 MIP or any Award granted hereunder.
4.
Eligibility.
Awards may be granted to officers and
other employees of the Company in the sole discretion of the Committee. Subject
to Section 5(b) below, in determining the persons to whom Awards shall be
granted and the Performance Goals relating to each Award, the Committee shall
take into account such factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the 2009 MIP.
52
5.
Terms of Awards.
Awards granted pursuant to the 2009 MIP
shall be evidenced by an Award Agreement in such form as the Committee shall
from time to time approve.
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(a)
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In
General
. The Committee shall specify
with respect to a Performance Period the Performance Goals applicable to
each Award and minimum, target and maximum levels applicable to each
Performance Goal. Except as may otherwise be determined by the Committee
for any Performance Period: the minimum level reflects the level of
performance at which 50% of the performance goal is achieved and below
which no payment shall be made; the target level reflects the level of
performance at which 100% of the Performance Goal is achieved; and the
maximum level reflects the level of performance at which 200% of the
Performance Goal is achieved. Awards for any Performance Period may be
expressed as a dollar amount or as a percentage of the Participants
Annual Base Salary. Unless otherwise provided by the Committee in
connection with specified terminations of employment, or except as set
forth in Section 6(f) hereof, payment in respect of Awards shall be made
only if and to the extent the Performance Goals with respect to such
Performance Period have been attained.
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(b)
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Special Provisions
Regarding Awards
. Notwithstanding
anything to the contrary contained in this Section 5, in no event shall
payment in respect of Awards granted for a Performance Period be made to a
Participant who is a Covered Employee in an amount that exceeds six
million dollars.
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(c)
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Time and Form of
Payment
. Unless otherwise determined by
the Committee, all payments with respect of Awards granted under this Plan
shall be made, in cash, within a reasonable period (but in any event
within 2½ months) after the end of the Performance Period. In the case of
Participants who are Covered Employees, unless otherwise determined by the
Committee, such payments shall be made only after achievement of the
Performance Goals has been certified by the
Committee.
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6.
General Provisions.
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(a)
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Compliance with
Legal Requirements
. The 2009 MIP and
the granting and payment of Awards, and the other obligations of the
Company under the 2009 MIP and any Award Agreement or other agreement,
shall be subject to all applicable federal and state laws, rules and
regulations, and to such approvals by any regulatory or governmental
agency as may be required.
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(b)
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Nontransferability
. Awards shall
not be transferable by a Participant except by will or the laws of descent
and distribution.
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(c)
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No Right To
Continued Employment
. Nothing in the
2009 MIP or in any Award granted or any Award Agreement or other agreement
entered into pursuant hereto shall confer upon any Participant the right
to continue in the employ of the Company or to be entitled to any
remuneration or benefits not set forth in the 2009 MIP or such Award
Agreement or other agreement or to interfere with or limit in any way the
right of the Company to terminate such Participants
employment.
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(d)
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Withholding
Taxes
. The Company shall have the right
to withhold the amount of any taxes that the Company may be required to
withhold before delivery of payment of an Award to the Participant or
other person entitled to such payment, or to make such other arrangements
for the withholding of taxes that the Company deems
satisfactory.
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(e)
|
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Amendment,
Termination and Duration of the 2009 MIP
. The Board or the Committee may at any time, and from time to time
alter, amend, suspend, or terminate the 2009 MIP in whole or in part;
provided that no amendment that requires shareholder approval in order for
the 2009 MIP to continue to comply with Code Section 162(m) shall be
effective unless the same shall be approved by the requisite vote of the
shareholders of the Company. Notwithstanding the foregoing, no amendment
shall affect adversely any of the rights of any Participant, without such
Participants consent, under any Award theretofore granted under the 2009
MIP. The 2009 MIP shall terminate at the completion of the Performance
Period that ends in 2013; provided that all payments with respect to
Awards previously granted under the 2009 MIP shall be paid out pursuant to
the terms of the 2009 MIP.
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(f)
|
|
Change in
Control
. Notwithstanding any other
provision of the 2009 MIP to the contrary, if, while any Awards remain
outstanding under the 2009 MIP, a
Change in
Control
of Aflac (as defined in this Section 6(f)) shall occur, the
Performance Period outstanding at the time of such Change in Control shall
be deemed to have been completed, the maximum level of performance set
forth under the respective Performance Goals shall be deemed to have been
attained and a pro rata portion (based on the number of full and partial
months that have elapsed with respect to each Performance Period) of each
outstanding Award granted to each Participant for the outstanding
Performance Period shall become payable in cash to each
Participant.
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53
For purposes of this paragraph 6(f), a
Change in Control of Aflac shall occur upon the happening of the earliest to
occur of the following:
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(i) any
person,
as such term is used in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act
(other than (1) Aflac, or any of its subsidiaries, (2) any trustee or
other fiduciary holding securities under a benefit plan of Aflac or any of
its subsidiaries, (3) any underwriter temporarily holding securities
pursuant to an offering of such securities, or (4) any corporation owned,
directly or indirectly, by the shareholders of Aflac in substantially the
same proportions as their ownership of Stock), is or becomes the
beneficial owner
(as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any
securities acquired directly from the Company or its Affiliates)
representing thirty percent (30%) or more of the combined voting power of
Aflacs then outstanding voting securities;
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(ii) during any period
of not more than two consecutive years, individuals who, at the beginning
of such period constitute the Board, and any new director (other than an
individual whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of Aflac)
whose election by the Board or nomination for election by Aflacs
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority
thereof;
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(iii) there is
consummated a merger or consolidation of Aflac or any direct or indirect
subsidiary of Aflac with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of Aflac
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit
plan of Aflac, at least seventy-five percent (75%) of the combined voting
power of the voting securities of Aflac or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation effected to implement a recapitalization of Aflac (or
similar transaction) in which no
person
(as hereinabove
defined), directly or indirectly, acquires more than fifty percent (50%)
of the combined voting power of Aflacs then outstanding securities (not
including any securities acquired directly from Aflac or its Affiliates);
or
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(iv) the shareholders
of Aflac approve a plan of complete liquidation or dissolution of Aflac or
there is consummated an agreement for the sale or disposition by Aflac of
all or substantially all of Aflacs assets (or any transaction having a
similar effect), other than a sale or disposition by Aflac of all or
substantially all of Aflacs assets to an entity, at least 75% of the
combined voting power of the voting securities of which are owned by
shareholders of Aflac in substantially the same proportions as their
ownership of Aflac immediately prior to such sale.
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(g)
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Participant
Rights
. No Participant shall have any
claim to be granted any Award under the 2009 MIP, and there is no
obligation for uniformity of treatment for Participants. Awards under the
2009 MIP shall be subject to any applicable policies of Aflac, including
without limitation any policies relating to the recoupment of compensation
upon a restatement of financial results.
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(h)
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Unfunded Status of
Awards
. The 2009 MIP is intended to
constitute an
unfunded
plan for incentive compensation. With
respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the 2009 MIP or any Award shall give any such
Participant any rights that are greater than those of a general creditor
of the Company.
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(i)
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Governing
Laws
. The 2009 MIP and all
determinations made and actions taken pursuant hereto shall be governed by
the laws of the State of Georgia without giving effect to the conflict of
laws principles thereof.
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(j)
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Effective
Date
. The 2009 MIP shall take effect
upon its adoption by the Board; provided that the 2009 MIP shall be
subject to the requisite approval of the shareholders of the Company in
order to comply with Section 162(m) of the Code. In the absence of such
approval, the 2009 MIP (and any Awards made pursuant to the 2009 MIP with
respect to the 2009 fiscal year or thereafter) shall be null and
void.
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(k)
|
|
Beneficiary
. A Participant may
file with the Committee a written designation of a beneficiary on such
form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated beneficiary survives
the Participant, the executor or administrator of the Participants estate
shall be deemed to be the grantees beneficiary.
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(l)
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|
Interpretation
. The 2009 MIP is designed and intended to comply, to the
extent applicable, with Sections 162(m) and 409A of the Code, and all
provisions hereof shall be construed in a manner to so
comply.
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54
PROXY
AFLAC
INCORPORATED
Worldwide
Headquarters
1932 Wynnton Road, Columbus,
Georgia 31999
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel P.
Amos, Kriss Cloninger III, and E. Stephen Purdom, as Proxies or any one of them,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of Common Stock of
Aflac Incorporated held of record by the undersigned on February 27, 2008, at
the Annual Meeting of the Shareholders to be held on Monday, May 5, 2008, at
10:00 a.m., or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ALL PROPOSALS
The following proposals are being
submitted to the Shareholders:
1.
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Election of 17 Directors of the Company. To vote your
Shares for
all
Director nominees, mark the For box. To withhold
voting for all nominees, mark the Withheld box. If you do not wish your
Shares voted For a particular nominee, mark the Exceptions
box.
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*EXCEPTIONS: To withhold authority to vote for any
individual nominee, strike a line through that nominees name in the list
below.
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01.
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Daniel P. Amos
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07.
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Joe Frank Harris
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13.
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E. Stephen Purdom
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For
o
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Withheld
o
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Exceptions*
o
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02.
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John Shelby Amos II
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08.
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Elizabeth J. Hudson
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14.
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Barbara K. Rimer, Dr. PH
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03.
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Paul S. Amos II
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09.
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Kenneth S. Janke Sr.
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15.
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Marvin R. Schuster
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04.
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Yoshiro Aoki
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10.
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Douglas W. Johnson
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16.
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David Gary Thompson
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05.
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Michael H. Armacost
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11.
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Robert B. Johnson
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17.
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Robert L. Wright
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06.
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Kriss Cloninger III
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12.
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Charles B. Knapp
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2.
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To approve the amendment of Article IV of the Companys
Articles of Incorporation to increase the Companys authorized shares of
$.10 par value Common Stock from 1,000,000,000 shares to 1,900,000,000
shares.
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For
o
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Against
o
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Abstain
o
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3.
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To adopt the amended and restated management incentive
plan (the 2009 Management Incentive Plan).
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For
o
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Against
o
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Abstain
o
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4.
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To approve the following advisory (non-binding)
proposal:
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For
o
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Against
o
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Abstain
o
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Resolved, that the shareholders approve the overall executive
pay-for-performance compensation policies and procedures employed by the
Company, as described in the Compensation Discussion and Analysis and the
tabular disclosure regarding named executive officer compensation
(together with the accompanying narrative disclosure) in this Proxy
Statement.
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5.
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To ratify the appointment of KPMG LLP as independent
registered public accounting firm of the Company for the year ending
December 31, 2008.
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For
o
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Against
o
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Abstain
o
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THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS OF THE UNDERSIGNED
SHAREHOLDER. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4 AND 5, AND ACCORDING TO THE DISCRETION OF THE PROXY
HOLDERS ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
Only if you agree with the voting
rights below, you can vote by telephone or internet. **QUICK **EASY**IMMEDIATE**
Call ***Toll Free*** On a Touch Tone
Telephone for Telephone Voting, or, Vote over the internet using the Address
Below.
PHONE
VOTING
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INTERNET
VOTING
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1-888-297-9553
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OR
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www.voteyourproxy.com
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PROXY
#
COMPANY#
ACCT.#
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According to the
records of the Company you are entitled to the following number of
votes:
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VOTING
RIGHTS
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Sign here as
name(s) appears on
account:
X_________________________________________________
X_________________________________________________
Date_____________________________________,
2008
If acting as Attorney, Executor, Trustee or in
other
representative capacity, please sign name and title.
If you do
not agree with the voting rights, check here
o
and complete, sign and date the reverse
side.
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B-1
FIRST CLASS
Description of Voting Rights
In
accordance with the Companys Articles of Incorporation, shares of the Companys
Common Stock, par value $.10 per share (the Common Stock) are entitled to one
vote per share until they have been held by the same beneficial owner for a
continuous period of greater than 48 months prior to the record date of the
meeting, at which time they become entitled to 10 votes per share. Where a share
is transferred to a transferee by gift, devise, or bequest, or otherwise through
the laws of inheritance, descent, or distribution from the estate of the
transferor, or by distribution to a beneficiary of shares held in trust for such
beneficiary, the transferee is deemed to be the same beneficial owner as the
transferor for purposes of determining the number of votes per share. Shares
acquired as a direct result of a stock split, stock dividend, or other
distribution with respect to existing shares (dividend shares) are deemed to
have been acquired and held continuously from the date on which the shares with
regard to which the issued dividend shares were acquired. Shares of Common Stock
acquired pursuant to the exercise of a stock option are deemed to have been
acquired on the date the option was granted.
Shares of
Common Stock held in street or nominee name are presumed to have been held
for less than 48 months and are entitled to one vote per share
unless
this presumption is
rebutted by providing evidence to the contrary to the Board of Directors of the
Company.
Shareholders desiring to rebut this
presumption should complete and execute the affidavit appearing on the reverse
side of their proxy. The Board of Directors reserves the right to require
evidence to support the affidavit.
Only if you do not agree with the
voting rights
shown on the front of this
Proxy should you complete the following:
Affidavit
Under the penalties of perjury, I do
solemnly swear that I am entitled to the number of votes set forth below because
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I agree to
provide evidence to support this statement
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Shares @
1 Vote/Share
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=
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Votes
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at the
request of the Company.
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Shares @
10
Votes/Share
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=
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Votes
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Total
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=
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Votes
|
Sign here
X
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X
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Date
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|
, 2008
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Compound Annual
Returns
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1-Year
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5-Year
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10-Year
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17-Year*
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Aflac
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38.2
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%
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17.1
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%
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18.3
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%
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22.0
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%
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S&P Life & Health
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11.0
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19.7
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6.9
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12.2
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S&P 500
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5.5
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12.8
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5.9
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11.4
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Dow Jones
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8.9
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12.2
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7.4
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12.5
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Includes reinvested cash dividends computed
quarterly as of December 31, 2007.
*This reflects Dan Amos tenure as CEO.
Dan Amos is
chairman and chief executive officer of Aflac Incorporated. Mr. Amos
joined Aflac in 1973 and worked in the sales area for 10 years. He was
named president of Aflac in 1983; chief operating officer in 1987; chief
executive officer of Aflac Incorporated in 1990, and chairman in 2001.
The tremendous
growth of Aflac during Dans 18 year tenure as CEO is well documented.
Revenues have grown from $2.7 billion to $15.4 billion as of December 31,
2007. Aflacs market capitalization has grown from $1.2 billion in 1990 to
over $30 billion, without acquiring any companies, during the same period.
In 2007, for the 18
th
year in a row Aflac has increased
operating earnings per diluted share by at least 15%, before the impact of
currency translation. Additional highlights include:
-
Branding the company Aflac and
launching of the Aflac Duck Campaign. Today, Aflac is a top national
brand and was ranked by
Forbes
magazine as one of the Top 25
Power Brands in the United States.
-
Diversification of Aflac
products to meet a wider array of consumer needs.
-
Being the first company to
voluntarily agree to let shareholders vote on executive
compensation.
-
Establishment and company wide
support of the Aflac Cancer Center and Blood Disorders Service of
Childrens Healthcare of Atlanta.
-
Aflacs total return to
shareholders, including reinvested cash dividends, was 3,867% (August
1990 through December 2007).
Mr. Amos has
received the Dr. Martin Luther King, Jr. Unity Award and the
Anti-Defamation Leagues Torch of Liberty Award. He has also been
recognized for the past several years by
Institutional Investor
magazine as one of the top CEOs in the country, and
has been named by CNN as a CEO of the Week. He most recently was named as
one of the 100 Most Influential People in Business Ethics by
Ethisphere
magazine, a global
publication focused on the correlation between ethics and profit.
Under Mr. Amos
leadership, Aflac has been recognized for the companys people-first
approach to management. In January 2008, Aflac was included in
Fortune
magazines list of The 100 Best Companies
to Work For in America for the tenth consecutive year. Since 1993, Aflac
has appeared on
Hispanic
magazine's Corporate
100: The Top 100 Companies Providing the Most Opportunities to Hispanics,
and also has been named to
Working Mother
magazines list of the 100 Best Companies for Working Mothers.
Mr. Amos is a
member of the board of directors of Synovus Financial Corp. and is a
member of the boards of trustees of Children's Healthcare of Atlanta and
House of Mercy of Columbus. He previously served as a member of the
Consumer Affairs Advisory Committee of the Securities and Exchange
Commission. He is the former chairman of the board of The Japan America
Society of Georgia and former chairman of the University of Georgia
Foundation.
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For more information, please
contact:
Laura
Kane
Second Vice President,
External Communications
telephone: 706.596.3493
fax:
706.320.2288
Kenneth S. Janke Jr.
Senior Vice President, Investor Relations
telephone:
706.596.3264
toll free: 800.235.2667, option 3
fax:
706.324.6330
© Aflac Incorporated
About Aflac
For more than 50 years, Aflac products have helped provide peace of
mind and reduce financial burdens for millions of people facing
life-interrupting medical events.
Aflac is the number one provider of guaranteed renewable insurance
in the United States. Aflac insures one out of four households in Japan
and is the number one insurance company in terms of individual policies in
force in Japan. Aflac is rated AA by both Standard & Poors and Fitch
Ratings and Aa2 (Excellent) by Moodys for financial strength. A.M. Best
rates Aflac as A+ (Superior) for financial strength and operating
performance.
Aflac has been included in
Fortune
magazines
listing of Americas Most Admired Companies for seven consecutive years.
In January 2008, Aflac was included in
Fortune
magazines list of the 100 Best Companies to Work For in America
for the tenth consecutive year.
Aflac has also been included on
Black Enterprise
magazines 40 Best Companies for Diversity list. In
2008,
Ethisphere
magazine recognized Aflac
as one of the worlds Most Ethical Companies.
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