AFLAC
INCORPORATED
_________________________
PROXY STATEMENT
_________________________
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE
HELD MONDAY, MAY 4, 2009
_________________________
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 the Company for use at the Annual Meeting
of Shareholders to be held on Monday, May 4, 2009, 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 Director 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 20,
2009.
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
This year,
as permitted by the U.S. Securities and Exchange Commission (SEC) rules, we
are pleased to provide proxy materials to our shareholders via the Internet.
Accordingly, we have mailed to most of our shareholders a notice about the
Internet availability of this Proxy Statement and our 2008 Annual Report instead
of a paper copy of those documents. The notice contains instructions on how to
access those documents over the Internet, how to vote online at
www.proxyvote.com
and how to request and receive a paper copy of our
proxy materials, including this Proxy Statement and our 2008 Annual Report.
Shareholders who select the online access option to the Proxy Statement,
Annual Report, and other account mailings through
af
linc
®
, Aflacs secure online account management
system, will receive electronic notice of availability of these proxy materials.
All shareholders who do not receive a notice and did not already elect online
access will receive a paper copy of the proxy materials by mail.
We believe that this new process will conserve natural
resources and reduce the costs of printing and distributing our proxy
materials.
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 24, 2009, will be
entitled to vote at the meeting. At that date, the number of outstanding shares
of Common Stock entitled to vote was 467,424,114. According to the Companys
records, this represents the following voting rights:
419,386,607
|
Shares
|
@
|
1
|
Vote Per Share
|
=
|
419,386,607
|
Votes
|
48,037,507
|
Shares
|
@
|
10
|
Votes Per
Share
|
=
|
480,375,070
|
Votes
|
467,424,114
|
Shares
|
|
|
Total
|
|
899,761,677
|
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 4,674,241,140. However, for the purposes of this Proxy
Statement, it is assumed that the total votes available to be cast at the
meeting will be 899,761,677.
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. Abstentions are counted as shares
present at the meeting for purposes of determining whether a quorum exists. 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 are also counted as
shares present at the meeting for purposes of determining whether a quorum
exists.
Pursuant to
the Companys Bylaws, in an uncontested election, a director shall be elected if
the votes cast for such nominees election exceed the votes cast against such
nominees election, provided a quorum is present. An abstention or broker
non-vote, if any, with respect to the election of one or more nominees will not
be counted as a vote cast and will have no effect on the election of such
nominee or nominees. 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. Broker non-votes, if any, and abstentions will have the effect of
votes against other proposals at the meeting.
If a nominee
who is already serving as a director is not re-elected at the annual meeting in
an uncontested election, under Georgia law the director would continue to serve
on our Board of Directors as a holdover director. However, under our Director
Resignation Policy, as amended by the Board on February 10, 2009, any holdover
director who stood for election but the votes cast for such director did not
exceed the votes cast against such director, must offer to tender his or her
resignation to our Chairman of the Board. The Corporate Governance Committee
will consider such resignation and 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 voted against 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 90 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 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. If a nominee who was not already serving as a director is not
elected at the annual meeting, that nominee would not become a director and
would not serve on our Board of Directors as a holdover
director.
2
In a
contested election at an annual meeting of shareholders (a situation in which
the number of nominees exceeds the number of directors to be elected), the
standard for election of directors would be a plurality of the shares
represented in person or by proxy at any such meeting and entitled to vote on
the election of directors.
Principal Shareholders
No person,
as of February 24, 2009, 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
|
|
8,742,327
|
|
87,423,270
|
|
2.1
|
|
9.5
|
1932 Wynnton
Road
|
|
1 Vote Per
Share
|
|
1,380,507
|
|
1,380,507
|
|
|
|
|
Columbus, GA 31999
|
|
|
|
10,122,834
|
|
88,803,777
|
|
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
(*) 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 for election as Director 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
|
|
|
|
Voting
Rights
|
|
|
|
|
|
|
|
|
|
|
Stock
Beneficially
|
|
Percent of
|
|
on
|
|
Percent
of
|
|
|
|
|
|
|
Year
First
|
|
Owned
|
|
Outstanding
|
|
February
24,
|
|
Available
|
Name
|
|
Principal Occupation
(1)
|
|
Age
|
|
Elected
|
|
on February 24, 2009
(2)
|
|
Shares
|
|
2009
|
|
Votes
|
Daniel P. Amos
|
|
Chairman, the Company and Aflac,**
|
|
57
|
|
1983
|
|
10,122,834
|
|
2.1
|
|
88,803,777
|
|
9.5
|
|
|
Chief Executive Officer (CEO), the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company and Aflac; President, Aflac,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until January 2007; Director, Synovus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Corp., Columbus, GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Shelby Amos II
|
|
Alabama/West Florida State Sales
|
|
56
|
|
1983
|
|
1,027,448
|
|
.2
|
|
10,215,890
|
|
1.1
|
|
|
Coordinator, Aflac
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos II
|
|
President, Aflac, since January 2007;
|
|
33
|
|
2007
|
|
3,534,342
|
|
.7
|
|
34,692,099
|
|
3.7
|
|
|
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.,
|
|
63
|
|
2007
|
|
3,382,126
|
|
.7
|
|
30,382,126
|
|
3.2
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director, Mizuho Bank, Ltd., Tokyo,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan, until April 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael H. Armacost
|
|
Shorenstein Distinguished Fellow,
|
|
71
|
|
1994
|
|
48,947
|
|
*
|
|
435,470
|
|
*
|
|
|
Stanford University Asia-Pacific Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Center, Stanford, CA; Director, USEC Inc.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bethesda, MD; Former U.S. Ambassador
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger III
|
|
President, the Company; Chief Financial
|
|
61
|
|
2001
|
|
1,145,890
|
|
.2
|
|
6,600,634
|
|
.7
|
|
|
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
|
|
73
|
|
1991
|
|
87,498
|
|
*
|
|
820,980
|
|
.1
|
|
|
State University, Atlanta, GA, until 2009;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board, Harris Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corp., Cartersville, GA; Former Governor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the State of Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elizabeth J. Hudson
|
|
Executive Vice President,
|
|
59
|
|
1990
|
|
104,743
|
|
*
|
|
993,430
|
|
.1
|
|
|
Communications, National Geographic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Society, Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
Shares
of Common
|
|
|
|
Voting
Rights
|
|
|
|
|
|
|
|
|
|
|
Stock
Beneficially
|
|
Percent of
|
|
on
|
|
Percent of
|
|
|
|
|
|
|
Year
First
|
|
Owned
|
|
Outstanding
|
|
February 24,
|
|
Available
|
Name
|
|
Principal Occupation
(1)
|
|
Age
|
|
Elected
|
|
on February 24, 2009
(2)
|
|
Shares
|
|
2009
|
|
Votes
|
Kenneth S. Janke Sr.
|
|
Chairman Emeritus, National Association
|
|
74
|
|
1989
|
|
131,136
|
|
*
|
|
1,240,489
|
|
.1
|
|
|
of Investors Corp. (NAIC), Madison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heights, MI, since October 2006;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman, NAIC, until October 2006;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retired, Chairman, President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director, NAIC Growth Fund,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Madison Heights, MI, until April 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas W. Johnson
|
|
Retired, Audit Partner, Ernst & Young,
|
|
65
|
|
2004
|
|
26,329
|
|
*
|
|
206,267
|
|
*
|
|
|
Atlanta, GA, until June 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B. Johnson
|
|
Senior Counselor, Porter Novelli PR, since
|
|
64
|
|
2002
|
|
29,676
|
|
*
|
|
241,141
|
|
*
|
|
|
November 2003; Chairman, One
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America Foundation, Washington, D.C.,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until December 2007; Assistant to the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President of the United States,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington, D.C., until February 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles B. Knapp
|
|
Director of Educational Development, CF
|
|
62
|
|
1990
|
|
65,805
|
|
*
|
|
604,050
|
|
.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;
|
|
61
|
|
1987
|
|
246,363
|
|
.1
|
|
2,346,630
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.2
|
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|
Retired Medical Director, Columbus
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Clinic, Columbus, GA; Retired Director,
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Trust Company Bank, Columbus, GA
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|
Barbara K. Rimer, Dr. PH
|
|
Dean, Gillings School of Global Public
|
|
60
|
|
1995
|
|
28,235
|
|
*
|
|
228,350
|
|
*
|
|
|
Health, University of North Carolina,
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|
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Chapel Hill, NC, since June 2005;
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Alumni Distinguished Professor,
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|
University of North Carolina, Gillings
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School of Global Public Health,
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Chapel Hill, NC, since January 2003;
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Deputy Director, Lineberger
|
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Comprehensive Cancer Center,
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Chapel Hill, NC, from
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January 2002 until May 2004
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Marvin R. Schuster
|
|
Chairman of the Board, Schuster
|
|
71
|
|
2000
|
|
80,000
|
|
*
|
|
656,000
|
|
.1
|
|
|
Enterprises, Inc., Columbus, GA, (owner of
|
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63 Burger King restaurants in the
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Southeast)
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David Gary Thompson
|
|
Retired, Chief Executive Officer, Georgia
|
|
62
|
|
2005
|
|
21,500
|
|
*
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|
21,500
|
|
*
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|
|
Banking, Wachovia Bank, N.A. and
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Executive Vice President, Wachovia
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Corporation, Atlanta, GA, until December
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2004; Director, Georgia Power Company
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(a Southern Company subsidiary)
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Robert L. Wright
|
|
Chairman, FE Holdings Inc., Alexandria, VA,
|
|
71
|
|
1999
|
|
55,084
|
|
*
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|
361,084
|
|
*
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|
|
since September 2008; Chairman Emeritus,
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Dimensions
International, Alexandria, VA,
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until July
2007; Former Chairman
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Flight Explorer, Alexandria,
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VA, from July 2007 until September 2008;
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Former
Associate Administrator,
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U.S. Small Business
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Administration
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5
____________________
(*)
|
|
Percentage not listed
if less than .1%.
|
|
(**)
|
|
American Family Life
Assurance Company of Columbus (Aflac) is a wholly owned subsidiary of
the Company.
|
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|
|
(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,
4,514,821; John Shelby Amos II, 20,000; Paul S. Amos II, 65,000; Yoshiro
Aoki, 2,500; Michael H. Armacost, 20,000; Kriss Cloninger III, 669,000;
Joe Frank Harris, 20,000; Elizabeth J. Hudson, 20,000; Kenneth S. Janke
Sr., 10,000; Douglas W. Johnson, 20,000; Robert B. Johnson, 25,000;
Charles B. Knapp, 20,000; E. Stephen Purdom, 20,000; Barbara K. Rimer, Dr.
PH, 20,000; Marvin R. Schuster, 40,000; David Gary Thompson, 10,500; and
Robert L. Wright, 39,000. Also includes shares of restricted stock awarded
under the 2004 Long-Term Incentive Plan for: Daniel P. Amos, 179,783; Paul
S. Amos II, 40,936; and Kriss Cloninger III, 122,529, 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., 4,529; Robert B.
Johnson, 1,765; 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 1,240,000; 50,000; 561,454; and 46,936 shares
pledged for Daniel P. Amos, John Shelby Amos II, Paul S. Amos II, and
Kriss Cloninger III, respectively.
|
|
|
|
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|
Also includes the
following shares:
|
|
|
|
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|
Daniel P. Amos: 102,095 shares owned
by his spouse, which includes options to purchase 80,000 shares that are
exercisable within 60 days; 3,271,855 shares owned by partnerships of
which he is a partner; 654,488 shares owned by trusts with him
as trustee; 824,688 shares owned by the Daniel P. Amos Family Foundation,
Inc.; 90,221 shares owned by a trust with his spouse as trustee; 72,962
shares owned by his spouses children; and 20,082 shares owned by the Paul
S. Amos Family Foundation, Inc.
|
|
|
|
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|
John Shelby Amos II: 280,128 shares
owned by his children with Mr. Amos as trustee; and 14,422 shares owned by
a corporation of which he is a controlling
shareholder.
|
|
|
|
|
|
Paul S. Amos II: 6,997 shares owned
by his spouse; 16,766 shares owned by his children; 165,753 shares owned
by a trust with his spouse as trustee; 528,648 shares owned by trusts;
15,000 shares owned by a partnership of which he is a partner; 27,300
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; 824,688 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: 3,379,626 shares owned
by The Mizuho Trust & Banking Co., Ltd. Mr. Aoki shares the power to
vote these shares.
|
|
|
|
|
|
Kriss Cloninger III:
27,021 shares owned by his spouse; 47 shares owned by his spouses
children; 65,420 shares owned by partnerships of which Mr. Cloninger is a
partner; and 82,243 shares owned by a trust with Mr. Cloninger as
trustee.
|
|
|
|
|
|
Kenneth S. Janke Sr.: 73,865 shares
owned by a trust with Mr. Janke as trustee; 34,554 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 1,622 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 24, 2009, 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 2008 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 24, 2009
|
|
|
|
Percent
|
|
|
|
|
Name and Principal Occupation for five
years
|
|
Shares (1)
|
|
of Shares
|
|
Votes
|
|
Percent of Votes
|
Tohru Tonoike
|
|
53,327
|
|
*
|
|
53,327
|
|
*
|
President and Chief Operating Officer, Aflac Japan,
|
|
|
|
|
|
|
|
|
since July 2007; Deputy President, Aflac Japan,
from
|
|
|
|
|
|
|
|
|
February 2007 until July 2007; President, Dai-Ichi
|
|
|
|
|
|
|
|
|
Kangyo Asset Management Co., Ltd., from April 2005
|
|
|
|
|
|
|
|
|
until January 2006; Managing Executive Officer,
|
|
|
|
|
|
|
|
|
Mizuho Corporate Bank, Ltd., from April 2004,
|
|
|
|
|
|
|
|
|
until April 2005; Executive Officer, Mizuho
Corporate
|
|
|
|
|
|
|
|
|
Bank, Ltd., from April 2003 until April 2004
|
|
|
|
|
|
|
|
|
|
Joey M. Loudermilk
|
|
592,300
|
|
.1
|
|
4,919,750
|
|
.5
|
Executive Vice President, General Counsel,
|
|
|
|
|
|
|
|
|
and Corporate Secretary, the Company
|
|
|
|
|
|
|
|
|
|
All Director nominees and executive
|
|
21,968,501
|
|
4.6
|
|
191,283,414
|
|
19.3
|
officers as a group
|
|
|
|
|
|
|
|
|
(32 persons)
|
|
|
|
|
|
|
|
|
____________________
(1)
|
|
Includes options to
purchase shares that are exercisable within 60 days for: Joey M.
Loudermilk, 316,146; and all Directors and executive officers as a group,
6,512,802. Also includes shares of restricted stock awarded under the 2004
Long-Term Incentive Plan for: Tohru Tonoike, 53,327; Joey M. Loudermilk,
28,884; and all Directors and executive officers as a group, 598,753,
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 2,033,378 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: executive officers Susan R.
Blanck who failed to timely file a Form 4 when shares were distributed from her
Executive Deferred Compensation Plan; and W. Jeremy Jeffery, who failed to
timely file two Form 4s when he purchased shares.
CORPORATE GOVERNANCE
Director Independence
The Board of
Directors annually assesses the independence of each Director nominee. The Board
has determined that with respect to 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, which rotates among the chairpersons of the Corporate Governance,
Audit, and Compensation Committees. In August 2008, Mr. Marvin R. Schuster,
Chairman of the Corporate Governance Committee, presided at the meeting of the
Non-employee Directors in executive session and currently serves as the
presiding Director.
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 2008 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 (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 2008,
the Board of Directors met seven 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 17 times during 2008, 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 on
page 43; (iii) to monitor the independence and performance of the Company's
independent registered public accounting firm and the performance of the
Company's internal auditing department; (iv) to assist Board oversight of the
Company's 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.
9
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 three times during 2008.
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 to the Board Non-employee Director compensation consistent with such policy.
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 in 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.
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 six times in 2008.
Compensation Committee Interlocks and
Insider Participation
During 2008,
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.
No member of the Compensation Committee serving during 2008 had any relationship
requiring disclosure under the section titled Related Persons Transactions in
this Proxy Statement. During 2008, 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 last year 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 CD&A.
II.
Executive
Summary
This
CD&A pertains to our executive officers and in particular the following
executive officers, whose 2008 compensation is set out in the Summary
Compensation Table below (our named executive officers or NEOs).
|
Daniel P.
Amos
|
Chairman and
CEO
|
|
Kriss Cloninger
III
|
President, CFO,
and Treasurer
|
|
Paul S. Amos
II
|
President, Aflac
and COO, Aflac U.S.
|
|
Tohru
Tonoike
|
President, COO,
Aflac Japan
|
|
Joey M.
Loudermilk
|
Executive Vice
President, General Counsel, and Corporate Secretary
|
As described
further below, and in keeping with our pay for performance philosophy, the
Companys CEO voluntarily elected to forgo certain compensation otherwise
provided for under his employment agreement or earned under the Companys
non-equity incentive plan for the year ended December 31, 2008.
In November
2008, Mr. Daniel P. Amos announced he had decided to voluntarily forgo the
golden parachute components in his employment agreement. Under his original
employment agreement, Mr. Amos would have been entitled to receive three years
of salary and bonus in the event of a change in control or certain other
termination events. Mr. Amos executed an amendment to his agreement in December
2008 removing these provisions, which would have resulted in potential cash
payments of approximately $13 million upon the occurrence of a triggering event
at that time. The elimination of these potential payments has been reflected in
the 2008 Potential Payments Upon Termination or Change in Control table
below.
Additionally, Mr. Amos elected to forgo his 2008 non-equity incentive of
approximately $2.8 million that he earned based on achievement of operating
performance measures. In addition, Mr. Cloninger voluntarily reduced his
non-equity incentive for 2008 by 35% or approximately $477,000.
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. The actual goals are fully
described below under the section Management Incentive Plan. The goals are
developed using a corporate financial model. The ranges are set to allow for the
achievement of our overall corporate objectives and each goal has a
realistically obtainable maximum payout to discourage excessive risk taking. As
noted later in this report, the maximum of the range for the goals is typically
achieved only 25% of the time on average.
11
Longer term
equity incentives are provided to executive officers in two forms: stock options
whose future value depends 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 to help the
Company retain their services. These plans are fully described in Sections V and
VI of this CD&A.
To help the
Committee execute its responsibilities, the Consultant annually provides the
Committee with 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 the component companies 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 VIII of this CD&A.
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 peer group
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, 2007 performance results determined the stock award provided to our
CEO in August of 2008. In all but one year in which this approach to the CEOs
compensation was used, the Companys performance rank placed it in the upper
half, and in the majority of years, the upper quartile among the peer companies.
That was the case again for the 2007 performance year, when the Companys
performance rank was in the 56
th
percentile.
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 such
philosophy.
12
Philosophy
Component
|
Rationale/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
and 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 and stock ownership
guidelines
|
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 eleven years for which such data
has been gathered.
|
|
|
|
The peer group consists of 16 major insurance companies identified
below. The peer group did not change from 2006 through 2008. 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 consist of: 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.
|
|
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.
|
|
13
|
|
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, the present value
of long-term equity incentive grants is greater than target annual cash
incentives.
|
|
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 primarily based 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, excluding foreign currency changes) 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 February 2009, the Committee,
with the assistance of the Consultant and management, reviewed the target
award levels for both annual and long-term incentives for the NEOs and
other executive officers. As a result, the annual non-equity incentive
target award for Paul S. Amos was increased from 100% to 120% of salary
based on his time in the job and additional responsibilities. The target
award levels for our NEOs for calendar year 2008 were:
|
|
|
Target Incentive as Percent of Salary
|
|
|
Annual Non-Equity
|
Annualized
|
|
NEOs
|
Incentive
|
Long-Term
Equity Incentives
|
|
Daniel P.
Amos
|
200%
|
Performance-Based
|
|
Kriss Cloninger
III
|
150%
|
350%
|
|
Paul S. Amos
II
|
100%
|
250%
|
|
Tohru
Tonoike
|
100%
|
250%
|
|
Joey M.
Loudermilk
|
80%
|
200%
|
4.
|
|
Mix of long-term
incentives
|
|
|
|
In 2008, 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 2008 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 66% and PBRS
represented 34% of total long-term incentives for the CEO. For all other
NEOs, stock options ranged from 41% to 58% and PBRS ranged from 42% to 59%
of total long-term equity incentive value. See page 18 for a more detailed
discussion of our long-term equity incentive plan.
|
|
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 CEO through December 31, 2008, the Companys total return to
shareholders, including reinvested cash dividends, has exceeded 2,852%
compared with 418% for the Dow Jones Industrial Average and 309% for the
S&P 500.
|
|
|
|
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 2008 as it had in 2007 and
2006, and no material changes are anticipated for
2009.
|
14
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 the CEOs recommendations for the salaries of the CFO and all other
executive officers.
In the
aggregate, the total base salaries of the Companys executive officers are at
the 50th percentile of the survey results for these same positions at peer
companies. Virtually all executive officers including our NEOs 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 2008 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 2008 U.S. Compensation Planning Survey for the
insurance industry, which reflected expected base salary increases for calendar
year 2008. The President of Aflac Japan received a 10% increase and the
President of Aflac received two salary adjustments in 2008. The first was a 7%
increase at the beginning of the year, and the second was an 11% market
adjustment in September based on a report presented by the Consultant to the
Committee. The increases for these two NEOs were above the 2008 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.
Management Incentive
Plan
All of the
NEOs are eligible to participate in a non-equity incentive plan sponsored
by the Company. The non-equity incentive plan, referred to as the MIP, has been
submitted to and approved by shareholders.
Performance
targets are set annually for the plan, and cash payouts are made to executives
based on actual performance as more fully described below.
The
Companys MIP uses specific performance objectives to provide potential annual
non-equity incentive awards for the NEOs, 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.
15
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 2008 was to increase operating earnings in a
range of 14% to 16%, or $3.72 to $3.80 per diluted share. The target objective
was set at the lower end of the range or $3.72 per share and the maximum was set
at the upper end of the range or $3.80 per share, all on a constant currency
basis. If the target performance was not attained, no bonus would be paid for
this performance objective. The actual attained result of $3.76 per share fell
in the middle of the range and resulted in a 15% 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 2008, 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 2008, 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, eliminating any currency effect
The actual 2008 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
|
|
8.0%
|
|
|
|
10.0%
|
|
|
|
12.0%
|
|
|
Percentage
increase in premium income
|
|
8.5%
|
|
|
|
9.5%
|
|
|
|
10.5%
|
|
|
Percentage increase in premium income minus the
|
|
|
|
|
|
|
|
|
|
|
|
|
percentage increase in controllable
expenses
|
|
-2.0%
|
|
|
|
0.0%
|
|
|
|
2.0%
|
|
|
Percentage
increase in pretax operating earnings
|
|
6.0%
|
|
|
|
7.5%
|
|
|
|
9.0%
|
|
|
|
|
|
Aflac Japan business segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
increase in new annualized premiums
|
|
3.0%
|
|
|
|
5.0%
|
|
|
|
7.0%
|
|
|
Percentage increase in premium income
|
|
3.6%
|
|
|
|
4.2%
|
|
|
|
4.6%
|
|
|
Actual
operating expenses compared to budget (Yen in millions)
|
|
131,850
|
|
|
|
130,544
|
|
|
|
129,239
|
|
|
|
($
in millions)*
|
|
1,274
|
|
|
|
1,262
|
|
|
|
1,249
|
|
|
Percentage increase in pretax operating earnings before
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
allocated from the U.S. operations and
eliminating any currency effect
|
|
11.0%
|
|
|
|
12.5%
|
|
|
|
14.0%
|
|
|
____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
* Yen amounts converted to dollars
using the weighted average exchange rate for 2008 of 103.46 yen to the
dollar
|
|
|
|
|
|
|
|
|
|
|
|
Actual
performance was determined after the close of the year and presented to the
Committee for discussion and approval at its February 2009 meeting. The actual
non-equity incentive plan payments to the NEOs are reflected in the 2008 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. 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.
16
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. 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.
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
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. No adjustments were
made to the 2008 incentive plan performance results.
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 for 2008:
|
Weightings of Annual Incentive Measures as Percent of Target
Award
|
Executive
|
Corporate
|
U.S.
Operations
|
Japan
Operations
|
Total
|
Daniel P.
Amos
|
50.0%
|
15.0%
|
35.0%
|
100%
|
Kriss Cloninger
III
|
50.0
|
17.0
|
33.0
|
100
|
Paul S. Amos
II
|
20.0
|
60.0
|
20.0
|
100
|
Tohru
Tonoike
|
10.0
|
|
90.0
|
100
|
Joey M.
Loudermilk
|
50.0
|
25.0
|
25.0
|
100
|
The following table reflects targets, earned and paid percentages of
salary for the non-equity incentive measures based on 2008 performance results
for the NEOs:
Executive
|
Target as
Percent of Salary
|
Earned as
Percent of Salary
|
Paid as Percent
of Salary
|
Daniel P.
Amos
|
200%
|
211%
|
0% *
|
Kriss Cloninger
III
|
150
|
162
|
106 *
|
Paul S. Amos
II
|
100
|
91
|
91
|
Tohru
Tonoike
|
100
|
106 **
|
106
**
|
Joey M.
Loudermilk
|
80
|
95
|
95
|
____________________
*
|
|
See the Executive
Summary of this CD&A for a description of the non-equity incentive
paid to the CEO and CFO for 2008.
|
**
|
|
Includes amounts
accrued for a deferred retirement benefit for Mr. Tonoike as more fully
described in the Summary Compensation Table and the Non-qualified Deferred
Compensation Table below.
|
17
Downward
adjustments were made to the 2008 non-equity incentive plan payments for the CEO
and CFO. The adjustments were voluntary on the part of the CEO and CFO as the
Company exceeded target performance on the primary financial goal, which
accounts for half of their potential award.
For additional
information about the MIP, please refer to the 2008 Grants of Plan-Based Awards
table, which shows the threshold, target, and maximum award amounts payable
under the MIP for 2008, and the 2008 Summary Compensation Table, which
shows the actual amount of non-equity incentive plan compensation paid to our
NEOs for 2008.
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 2008, the performance period is January 1, 2008
through December 31, 2010. The sole performance measure for determining vesting
is achieving a cumulative growth rate of at least 44.3% 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 44.3% cumulative growth, was
reviewed and approved by the Committee at its February 2008 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 respective annual growth rates of 14%,
13% and 12% over the 2008-2010 time period, excluding the impact of foreign
currency fluctuations, as compared to the preceding 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 in 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.
It is
important to note that all of the options for which compensation expense has
been included in the Summary Compensation Table under the column option awards
are referred to as out of the money options. This means that even though the
SFAS 123(R) compensation expense for the option has been included as a component
of total compensation for the named NEOs, the stock option actually had no
economic value based on the Companys closing stock price on February 24, 2009
(the record date for the mailing of this Proxy Statement).
Most of the
Companys stock option and restricted stock 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 the closing market value of the underlying
shares on the grant date. For grants made 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 VIII below.
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 NEOs.
Executive Deferred Compensation
Plan
The
U.S.-based 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.
18
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 U.S.-based 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.
VII.
Additional Executive Compensation Practices and
Procedures
1.
|
|
Equity Granting
Policies
|
|
|
|
The February meeting
of the Committee is held approximately one to 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 a per share 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 a per
share 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 except for Mr. Tonoike, who has not
been in his current position for at least four years. The Corporate
Governance Committee approved a moratorium for compliance with the stock
ownership guidelines at its meeting held in February 2009, based on the
significant decline in the Companys common stock price in early
2009.
|
|
3.
|
|
Employment
Agreements
|
|
|
|
The Company has
employment agreements with the NEOs and certain other executives in key
roles. The 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. Agreements 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.
|
|
|
|
In November 2008, Mr.
Daniel P. Amos announced he had decided to voluntarily forgo the golden
parachute components in his employment agreement. Under his original
employment agreement, Mr. Amos would have been entitled to receive three
years of salary and bonus in the event of a change in control or certain
other termination events. Mr. Amos executed an amendment to his agreement
in December 2008 removing these provisions, which would have resulted in
potential cash payments of approximately $13 million upon the occurrence
of a triggering event at that time. The elimination of these potential
payments has been reflected in the 2008 Potential Payments Upon
Termination or Change in Control table below.
|
19
|
|
In the case of Mr. Tonoikes employment agreement, the
Company has a unique retirement obligation. For the years 2007 through
2010, the Company is obligated to provide for a special retirement benefit
equal to 110% of all amounts actually paid to Mr. Tonoike as performance
bonus compensation under the Companys MIP. This amount is payable upon
termination as a lump sum retirement benefit and the annual accrual for
this obligation has been included in the non-equity incentive plan
compensation column of the Summary Compensation Table and in the
Nonqualified Deferred Compensation Table.
|
|
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 allows 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 takes 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 2007 and 2008. However, the Committee deferred payment of the
nondeductible amount in excess of $1 million until the CEOs retirement.
In early 2009, the Company identified a clerical error in the amounts
actually deferred for the CEO in previous years. The Company intends to
correct these errors as soon as possible in order to comply with the
intent of the Committee to defer all amounts in excess of $1
million.
|
|
|
|
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 awarded to executive officers and to balance the value of stock
options with those of TBRS awarded to other award recipients. Of
particular concern to the Company 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 do
option grants fair value and their 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.
|
20
|
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 per share exercise price is the closing price of a common share on
the day it is granted.
|
VIII.
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)
|
·
|
|
Earnings Per
Share Growth (1)
|
·
|
|
Net Income
(2)
|
·
|
|
Return on
Revenues (2)
|
·
|
|
Net Income
Growth (1)
|
·
|
|
Return on
Average Equity (2)
|
·
|
|
Premium Income
(1)
|
·
|
|
Return on
Average Assets (2)
|
·
|
|
Premium Income
Growth (1)
|
·
|
|
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 8th in
2008 for 2007 results, which equated to the 56th 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 3.8% for 2008,
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 2008 are shown
below.
|
2008 CEO Compensation Determination
|
$
11,311,116
|
|
56th percentile Total Direct Compensation
(TDC)
|
-4,102,235
|
|
CEO FY 2007 Total Cash Compensation
(TCC)
|
7,208,881
|
|
Gap between Market TDC and CEO
TCC
|
-1,777,127
|
|
Feb. 2008 grant of 37,763 PBRS with a
value of $47.06 per share
|
-1,788,005
|
|
Feb. 2008 grant of 128,541 stock options
with a value of $13.91 per option share
|
$
3,643,749
|
|
Remaining Gap
|
261,952
|
|
Number of options with a value of
$13.91 per option share granted 8/08 (value equal to the Remaining
Gap)
|
9.
|
|
At its December
meeting, the Committee sets the CEOs salary for the next calendar year.
At its 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 higher Company performance rank for 2007, the CEOs Total
Direct Compensation in 2008 increased by 20% from its 2007 level. It is
noteworthy that the 2007 median performance results for the peer group
decreased by 8% over its 2006 median.
|
|
|
|
The Company believes
it is important for shareholders and other interested parties to note that
2008 was the 11th 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 11 years. Furthermore, the Companys average percentile
performance rank over this 11-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 that 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 2008. These five
officers are referred to as our NEOs in this Proxy Statement.
2008 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)
|
|
($)(6)
|
|
($)(7)
|
Daniel P.
Amos
|
|
2008
|
|
1,338,200
|
|
2,811,103
|
|
5,388,388
|
|
0
|
|
0
|
|
189,202
|
|
9,726,893
|
Chairman and
CEO
|
|
2007
|
|
1,289,200
|
|
2,751,918
|
|
5,627,872
|
|
2,813,035
|
|
2,062,763
|
|
289,925
|
|
14,834,713
|
|
|
2006
|
|
1,242,000
|
|
1,734,126
|
|
8,646,283
|
|
2,208,897
|
|
0
|
|
291,950
|
|
14,123,256
|
|
Kriss
Cloninger III
|
|
2008
|
|
857,700
|
|
1,600,744
|
|
1,926,566
|
|
913,119
|
|
0
|
|
162,453
|
|
5,460,582
|
President, CFO,
and Treasurer
|
|
2007
|
|
826,300
|
|
1,248,746
|
|
2,097,196
|
|
1,446,025
|
|
1,732,808
|
|
167,079
|
|
7,518,154
|
|
|
2006
|
|
796,000
|
|
667,807
|
|
2,544,802
|
|
1,109,027
|
|
208,637
|
|
167,467
|
|
5,493,740
|
|
Paul S. Amos
II
|
|
2008
|
|
466,667
|
|
445,434
|
|
508,563
|
|
426,534
|
|
443,905
|
|
115,189
|
|
2,406,292
|
President, Aflac
and COO
|
|
2007
|
|
402,550
|
|
287,687
|
|
442,855
|
|
533,581
|
|
9,019
|
|
109,570
|
|
1,785,262
|
Aflac
U.S.
|
|
2006
|
|
365,000
|
|
168,050
|
|
306,733
|
|
440,738
|
|
64,193
|
|
314,432
|
|
1,659,146
|
|
Tohru Tonoike
(1)
|
|
2008
|
|
518,316
|
|
501,674
|
|
350,820
|
|
547,023
|
|
0
|
|
159,621
|
|
2,077,454
|
President and
COO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aflac
Japan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joey M.
Loudermilk
|
|
2008
|
|
503,500
|
|
394,237
|
|
637,944
|
|
480,088
|
|
112,353
|
|
17,294
|
|
2,145,416
|
Executive Vice
President,
|
|
2007
|
|
485,000
|
|
319,979
|
|
648,733
|
|
521,860
|
|
149,388
|
|
14,646
|
|
2,139,606
|
General Counsel,
and
|
|
2006
|
|
467,500
|
|
200,342
|
|
366,035
|
|
441,788
|
|
369,222
|
|
14,592
|
|
1,859,479
|
Corporate
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
____________________
(1)
|
|
Includes payments made to Mr.
Tonoike in yen for salary, non-equity incentive plan compensation and some
perquisites and converted to dollars by dividing the actual yen
denominated payments by the weighted average exchange rate for 2008 of
103.46 yen to the dollar.
|
|
(2)
|
|
Includes $227,147 deferred for
Mr. Daniel Amos. The amount has been included in the Nonqualified Deferred
Compensation table below.
|
|
(3)
|
|
Represents the charges for 2008
pursuant to SFAS 123(R) for grants made in 2008 and earlier years. The
Companys SFAS 123(R) valuation assumptions are described in Note 10
Share-Based Transactions in the Notes to the Consolidated Financial
Statements in the Companys Annual Report to Shareholders for the year
ended December 31, 2008. The grant date closing market value for the
options and restricted stock included in these columns was $47.25, $47.84,
$52.59, $61.81, and $55.72 for the grant dates February 14, 2006, February
13, 2007, August 14, 2007, February 12, 2008, and August 12, 2008,
respectively. See page 18 of this Proxy Statement for a more detailed
discussion of our outstanding equity grants compared to recent market
value.
|
|
(4)
|
|
The amount reported in this
column for Mr. Tonoike has two components. Mr. Tonoike's earned bonus is
paid one-half in cash and the other half is increased by 10% and deferred
until his termination date. The total amount has been included in the
Summary Compensation Table above and the deferred amount including the 10%
addition has been included in the 2008 Nonqualified Deferred Compensation
table below.
|
|
(5)
|
|
Mr. Daniel P. Amos participates
in the Defined Benefit Pension Plan and the Retirement Plan for Senior
Officers. The change in his aggregate pension value for 2008 was a net
negative $683,453 which consisted of a negative $686,637 for the
Retirement Plan for Senior Officers and a positive $3,184 for the Defined
Benefit Pension Plan. Mr. Cloninger participates in the Defined Benefit
Pension Plan and the Supplemental Executive Retirement Plan and the change
in his aggregate pension value was a net negative $296,358 which consisted
of a negative $340,540 for the Supplemental Executive Retirement Plan and
a positive $44,182 for the Defined Benefit Pension Plan.
|
|
(6)
|
|
Additional information regarding
all other compensation is provided in the All Other Compensation or
Perquisites tables below.
|
|
(7)
|
|
The NEOs did not receive any
discretionary bonus awards for 2008. Base salary is typically the smallest
component of total compensation for the NEOs, as the majority of their
total compensation is based on performance awards on a cash and equity
basis.
|
24
The
following table identifies the amount of each item included for 2008 in the All
Other Compensation column in the Summary Compensation Table above.
2008 ALL OTHER
COMPENSATION
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Other
|
|
|
|
|
|
Renewal
|
|
|
|
|
|
|
Personal
|
|
Insurance
|
|
Company
|
|
Commissions
|
|
|
|
|
|
|
Benefits
|
|
Premiums
|
|
Contribution
to
|
|
from
Previous
|
|
|
Name
|
|
Year
|
|
($)(1)
|
|
($)
|
|
401(k) Plan ($)
|
|
Job
($)(2)
|
|
Total($)
|
Daniel P.
Amos
|
|
2008
|
|
179,980
|
|
2,322
|
|
6,900
|
|
0
|
|
189,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
2008
|
|
151,989
|
|
3,564
|
|
6,900
|
|
0
|
|
162,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos
II
|
|
2008
|
|
56,699
|
|
432
|
|
6,900
|
|
51,158
|
|
115,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tohru Tonoike
(3)
|
|
2008
|
|
158,483
|
|
1,138
|
|
0
|
|
0
|
|
159,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joey M.
Loudermilk
|
|
2008
|
|
7,563
|
|
2,831
|
|
6,900
|
|
0
|
|
17,294
|
____________________
(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.
|
|
(3)
|
|
The amounts reported
for Mr. Tonoike for perquisites and insurance premiums were paid in yen
and converted to dollars by dividing the actual yen denominated payments
by the weighted average exchange rate for 2008 of 103.46 yen to the
dollar.
|
25
The following table identifies the incremental cost to the Company of
each perquisite included for 2008 in the All Other Compensation table above.
2008 PERQUISITES
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
Personal
Use
|
|
|
|
|
|
|
|
and
Other
|
|
|
|
|
of
Company
|
|
Financial
|
|
Security
|
|
|
|
Personal
|
|
|
|
|
Aircraft
|
|
Planning
|
|
Services
|
|
|
|
Benefits
|
Name
|
|
Year
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
Other ($)(4)
|
|
($)(5)
|
Daniel P.
Amos
|
|
2008
|
|
10,372
|
|
0
|
|
169,608
|
|
0
|
|
179,980
|
|
Kriss Cloninger
III
|
|
2008
|
|
122,184
|
|
7,657
|
|
18,641
|
|
3,507
|
|
151,989
|
|
Paul S. Amos
II
|
|
2008
|
|
42,708
|
|
0
|
|
13,512
|
|
479
|
|
56,699
|
|
Tohru Tonoike
(6)
|
|
2008
|
|
0
|
|
304
|
|
0
|
|
158,179
|
|
158,483
|
|
Joey M.
Loudermilk
|
|
2008
|
|
0
|
|
7,563
|
|
0
|
|
0
|
|
7,563
|
____________________
(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 Companys Board of Directors for security
reasons and to maximize the effectiveness of the executives time.
Included in the amount reported for Mr. Cloninger is $10,601 for attending
outside board of directors meetings for a board of directors on which he
serves.
|
|
(2)
|
|
Financial planning
fees are direct charges by the provider of the services. They are
available on a limited basis to the executive management of the
Company.
|
|
(3)
|
|
Incremental costs for
security services include the salaries and benefits of security officers
and the actual costs of any security equipment, monitoring and maintenance
fees.
|
|
(4)
|
|
Amounts included in
the other column for Mr. Cloninger and Mr. Paul Amos are charges for the
use of Company automobile transportation. The amount included in the other
column for Mr. Tonoike includes the cost of a leased car, driver and
related expenses.
|
|
(5)
|
|
The Company did not
gross up for tax purposes any of the perquisites described in this
table.
|
|
(6)
|
|
The amounts reported
for Mr. Tonoike for financial planning and other were paid in yen and
converted to dollars by dividing the actual yen denominated payment by the
weighted average exchange rate for 2008 of 103.46 yen to the
dollar.
|
26
The
following table provides information with respect to the 2008 grants of
plan-based awards for the NEOs.
2008
GRANTS
OF PLAN-
BASED
AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Estimated Future Payouts Under
|
|
Option
Awards:
|
|
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards
(1)
|
|
Equity Incentive Plan Awards
(2)
|
|
Number
of
|
|
Exercise
or
|
|
Grant
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Base
Price
|
|
Fair Value
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
of
Option
|
|
Stock
and
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
Option
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
Awards ($)
|
Daniel P.
Amos
|
|
2/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,541
|
|
61.81
|
|
2,438,024
|
|
|
2/12/2008
|
|
|
|
|
|
|
|
18,882
|
|
37,763
|
|
37,763
|
|
|
|
|
|
2,334,131
|
|
|
8/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
261,952
|
|
55.72
|
|
4,483,675
|
|
|
N/A
|
|
669,100
|
|
2,676,400
|
|
4,014,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
2/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,000
|
|
61.81
|
|
1,972,558
|
|
|
2/12/2008
|
|
|
|
|
|
|
|
15,500
|
|
31,000
|
|
31,000
|
|
|
|
|
|
1,916,110
|
|
|
N/A
|
|
321,638
|
|
1,286,550
|
|
2,573,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos
II
|
|
2/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,000
|
|
61.81
|
|
720,742
|
|
|
2/12/2008
|
|
|
|
|
|
|
|
5,500
|
|
11,000
|
|
11,000
|
|
|
|
|
|
679,910
|
|
|
N/A
|
|
186,667
|
|
466,667
|
|
933,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tohru
Tonoike
|
|
2/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
61.81
|
|
758,676
|
|
|
2/12/2008
|
|
|
|
|
|
|
|
5,000
|
|
10,000
|
|
10,000
|
|
|
|
|
|
618,100
|
|
|
N/A
|
|
207,326
|
|
518,316
|
|
1,036,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joey M.
Loudermilk
|
|
2/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
61.81
|
|
493,139
|
|
|
2/12/2008
|
|
|
|
|
|
|
|
4,000
|
|
8,000
|
|
8,000
|
|
|
|
|
|
494,480
|
|
|
N/A
|
|
100,700
|
|
402,800
|
|
805,600
|
|
|
|
|
|
|
|
|
|
|
|
|
27
____________________
(1)
|
|
The amounts shown in Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards reflect the payout
levels for the 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% of
base salary, 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. 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, Paul Amos, Tonoike, and Loudermilk for 2008 were
approximately 14%, 32%, 37%, 51%, and 46% 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 2008 outstanding equity
awards at fiscal year-end for the NEOs.
2008 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
|
|
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
|
|
2,947,099
|
|
|
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
|
|
2,921,750
|
|
|
08/14/07
|
|
107,707
|
|
|
|
52.5900
|
|
08/14/17
|
|
|
|
|
|
|
|
|
02/12/08
|
|
|
|
128,541
|
|
61.8100
|
|
02/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/08
|
|
37,763
|
|
1,731,056
|
|
|
08/12/08
|
|
|
|
261,952
|
|
55.7200
|
|
08/12/18
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
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
|
|
1,146,000
|
|
|
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
|
|
1,741,920
|
|
|
02/12/08
|
|
|
|
104,000
|
|
61.8100
|
|
02/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/08
|
|
31,000
|
|
1,421,040
|
|
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
|
|
343,800
|
|
|
02/13/07
|
|
|
|
25,000
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
7,500
|
|
343,800
|
|
|
02/12/08
|
|
|
|
38,000
|
|
61.8100
|
|
02/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/08
|
|
11,000
|
|
504,240
|
29
2008 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
|
|
($)
|
|
Date
|
|
Date
|
|
(#)
|
|
($)
|
Tohru
Tonoike
|
|
02/13/07
|
|
|
|
25,000
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
20,000
|
|
916,800
|
|
|
02/12/08
|
|
|
|
40,000
|
|
61.8100
|
|
02/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/08
|
|
10,000
|
|
458,400
|
|
Joey M.
Loudermilk
|
|
01/22/01
|
|
56,594
|
|
|
|
29.3438
|
|
01/22/11
|
|
|
|
|
|
|
|
|
11/13/01
|
|
35,000
|
|
|
|
24.9800
|
|
11/13/11
|
|
|
|
|
|
|
|
|
08/13/02
|
|
46,730
|
|
|
|
30.5750
|
|
08/13/12
|
|
|
|
|
|
|
|
|
02/11/03
|
|
36,822
|
|
|
|
31.4650
|
|
02/11/13
|
|
|
|
|
|
|
|
|
08/10/04
|
|
40,000
|
|
|
|
38.3200
|
|
08/10/14
|
|
|
|
|
|
|
|
|
02/08/05
|
|
25,000
|
|
|
|
38.7500
|
|
02/08/15
|
|
|
|
|
|
|
|
|
02/14/06
|
|
|
|
25,000
|
|
47.2500
|
|
02/14/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/14/06
|
|
7,500
|
|
343,800
|
|
|
02/13/07
|
|
25,000
|
|
|
|
47.8400
|
|
02/13/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/13/07
|
|
7,500
|
|
343,800
|
|
|
02/12/08
|
|
|
|
26,000
|
|
61.8100
|
|
02/12/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/12/08
|
|
8,000
|
|
366,720
|
Grant Date
|
|
Options Vesting Schedule
|
02/14/06
|
|
100%
vesting on the third anniversary of the option for Messrs. Paul Amos and
Loudermilk
|
02/13/07
|
|
100%
vesting on the third anniversary of the option for Messrs. Paul Amos and
Tonoike
|
02/12/08
|
|
100%
vesting on the first anniversary of the option for Messrs. Daniel
Amos, Cloninger, and Loudermilk
|
|
|
100%
vesting on the third anniversary of the option for Messrs. Paul Amos and
Tonoike
|
08/12/08
|
|
100%
vesting on the first anniversary of the option for Mr. Daniel
Amos
|
|
|
|
Stock Award
|
|
|
Grant Date
|
|
Stock Award Vesting Schedule
|
02/14/06;
02/13/07 &
02/12/08
|
|
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
2008 for each of the NEOs.
2008 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
|
|
33,998
|
|
859,660
|
|
65,589
|
|
3,935,340
|
Kriss Cloninger
III
|
|
432,000
|
|
10,509,286
|
|
25,000
|
|
1,500,000
|
Paul S. Amos
II
|
|
0
|
|
0
|
|
5,000
|
|
300,000
|
Tohru
Tonoike
|
|
0
|
|
0
|
|
0
|
|
0
|
Joey M.
Loudermilk
|
|
69,854
|
|
2,774,223
|
|
7,500
|
|
450,000
|
PENSION BENEFITS
The Company maintains tax-qualified,
noncontributory defined benefit pension plans that cover the NEOs other than Mr.
Tonoike, and it also maintains nonqualified supplemental retirement plans
covering the NEOs other than Mr. Tonoike, as described below. Mr. Tonoike
participates in a defined benefit plan maintained in Japan specific to the terms
of his employment agreement.
The Company does not
credit extra years of service under any of its retirement plans, unless required
by employment agreements under certain termination events such as termination
following a change-in-control or termination without cause. Messrs. Daniel Amos,
Cloninger, and Loudermilk are eligible to receive immediate retirement benefits.
For Mr. Daniel Amos, retirement benefits fall under the provisions of the U.S.
tax qualified plan and the Retirement Plan for Senior Officers, and for Messrs.
Cloninger and Loudermilk, retirement benefits fall under the U.S. tax qualified
plan and 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 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 at least 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 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 actuarially reduced rates). The maximum retirement
benefit was limited, in accordance with IRC Section 415, to $185,000 for 2008.
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
$230,000 for 2008. These limitation amounts for future years will be indexed for
cost-of-living adjustments.
Benefits under the Japanese
retirement 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 Plan. Mr. Cloninger, Mr. Paul
Amos, and Mr. Loudermilk 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.
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 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 35 years of credited service, meaning he
is fully vested for retirement benefits.
All benefits
under the RPSO 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 RPSO are not subject to Social Security or qualified Plan
offsets.
32
The
following table relates to the forgoing plans and presents information
determined as of December 31, 2008.
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
|
|
35
|
|
49,797,055
|
|
0
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
35
|
|
797,435
|
|
0
|
|
Kriss Cloninger
III
|
|
Supplemental Executive Retirement Plan
|
|
17
|
|
10,989,860
|
|
0
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
17
|
|
375,647
|
|
0
|
|
Paul S. Amos
II
|
|
Supplemental Executive Retirement Plan
|
|
4
|
|
495,364
|
|
0
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
4
|
|
29,151
|
|
0
|
|
Tohru
Tonoike
|
|
Aflac Japan Defined Benefit Pension Plan
|
|
2
|
|
0
|
|
0
|
|
Joey M.
Loudermilk
|
|
Supplemental Executive Retirement Plan
|
|
25
|
|
3,768,900
|
|
0
|
|
|
Aflac
Incorporated Defined Benefit Pension Plan
|
|
25
|
|
673,326
|
|
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 Companys Annual Report to Shareholders for
the year ended December 31, 2008.
|
NONQUALIFIED DEFERRED COMPENSATION
The
following 2008 Nonqualified Deferred Compensation table shows, for Mr. Daniel
Amos, Company contributions to, and earnings and account balances under, the
Aflac Incorporated Executive Deferred Compensation Plan, an unfunded, unsecured
deferred compensation plan. The table also includes the amount contributed and
the year end accrued balance in dollars for a deferred retirement obligation for
Mr. Tonoike. Mr. Tonoike does not participate in the EDCP but the Company is
obligated to accrue a deferred retirement benefit under the terms of his
employment agreement.
2008 NONQUALIFIED DEFERRED
COMPENSATION
|
|
|
|
Registrant
|
|
Aggregate
|
|
|
|
|
|
|
Executive
|
|
Contributions in
|
|
Earnings
in
|
|
Aggregate
|
|
Aggregate
Balance
|
|
|
Contributions in Last
|
|
Last Fiscal
Year
|
|
Last
Fiscal
|
|
Withdrawals/
|
|
at Last
Fiscal Year-
|
Name
|
|
Fiscal Year ($)
|
|
($)(1)
|
|
Year ($)(2)
|
|
Distributions ($)
|
|
end ($)
|
Daniel P. Amos
|
|
0
|
|
227,147
|
|
-386,411
|
|
0
|
|
927,665
|
|
|
|
|
|
|
|
|
|
|
|
Kriss Cloninger
III
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Paul S. Amos II
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
Tohru
Tonoike
|
|
0
|
|
286,536
|
|
0
|
|
0
|
|
502,031
|
|
|
|
|
|
|
|
|
|
|
|
Joey M. Loudermilk
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
____________________
(1)
|
|
The $227,147 deferred for Mr.
Amos has been included in the Summary Compensation Table above for the current
year. Additionally, previous years deferrals included in the Aggregate
Balance column were reported as compensation in prior periods.
The amount reported for Mr. Tonoike has been included in the non-equity
incentive plan column in the Summary Compensation Table
above.
|
|
(2)
|
|
The Company does not pay or
credit above market earnings on amounts deferred by
executives.
|
33
The EDCP
allows certain U.S.-based officers, including the NEOs other than Mr. Tonoike
(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 IRC
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 IRC. The Company amended the
EDCP document to conform to Section 409As requirements in December 2008.
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 401(k) Plan. The
array of available investment options changes from time to time. As of December
31, 2008, Participants could choose from among several different investment
options, including domestic and international equity, income, short-term
investment, blended and Company Common Stock funds. Participants can change
their investment selections daily (unless prohibited by the fund or trading
restrictions on Company Common 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 either to 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.
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 original
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
The Company
has employment agreements with all of the NEOs. The agreements are substantially
similar in nature and contain provisions relating to termination, disability,
death and changes in control of the Company. As previously mentioned in our
CD&A, Mr. Daniel Amos, in the fourth quarter of 2008, decided to voluntarily
forgo certain golden parachute and other severance components in his
employment agreement (the provisions providing for special payments in
connection with a change in control of the Company or other termination of
employment). The elimination of these potential payments to Mr. Daniel Amos has
been reflected in the 2008 Potential Payments Upon Termination or Change in
Control table below. For the remaining NEOs, the Company remains obligated to
continue compensation and benefits to the NEO for the scheduled term of the
agreement if the employment of the NEO is terminated by the Company without
good cause. If the NEOs employment is terminated by the Company for good
cause, or by the NEO without good reason, the Company is generally obligated
to pay compensation and benefits only to the date of termination (except that
the NEO is entitled to benefits under the RPSO or SERP if the termination is not
for good cause). Good cause generally means (i) the willful failure by the
NEO to substantially perform his management duties for more than 60 days, (ii)
intentional conduct by the NEO causing substantial injury to the Company, or
(iii) the conviction or plea of guilty by the NEO of a felony crime involving
moral turpitude. Good reason is defined to include a breach of the agreement,
a diminution or change in the NEOs 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 NEO is prohibited
for a two-year period from directly or indirectly competing with the Company.
The
agreements provide that compensation and benefits continue for certain specified
periods in the event that the NEO becomes totally disabled. Upon the death of
the NEO, his estate is to be paid an amount, payable over a three-year period,
equal to the NEOs 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 agreements are extended for
an additional three-year period. If, following a change in control, the NEOs
(with the exception of Mr. Daniel Amos) employment with the Company is
terminated by the Company without good cause, or by the NEO for good reason,
the Company must pay to the NEO, 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 NEOs base salary and non-equity
incentive award under the MIP (as paid during periods specified in the
agreement).
34
A change in
control is generally deemed to occur when (i) a person or group acquires
beneficial ownership of 30% or more of the Companys Common Stock; (ii) during
any period of two consecutive years, individuals who constitute the Board at the
beginning of such period 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.
Under the
employment agreements of Messrs. Cloninger, Paul Amos, and Loudermilk, 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 after 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 in the paragraph above.
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, 2008, and therefore
include amounts earned through such time and 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 Loudermilk 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 agreements are
generally similar in nature, with the exception of Mr. Daniel Amos who has
amended his employment agreement to remove provisions that entitle him to
termination payments of salary and non-equity incentives in connection with a
change in control of the Company or his termination by 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.
2008 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
|
|
|
|
|
"Good
Reason"
|
|
Cause"
|
|
competition
|
|
competition
|
|
|
|
|
|
Cause" or
for "Good
|
Name
|
|
Benefit
|
|
($)(1)
|
|
($)
(2)
|
|
($)(3
)
|
|
($)
(4)
|
|
Death
($)(5)
|
|
Disability ($)(6)
|
|
Reason" ($)(7)
|
Daniel P.
Amos
|
|
Salary
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,869,400
|
|
2,007,300
|
|
0
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(8)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
5,021,932
|
|
0
|
|
0
|
|
|
Severance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Retirement
(9)
|
|
(12)
|
|
797,435
|
|
(12)
|
|
(12)
|
|
32,023,965
|
|
(12)
|
|
(12)
|
|
|
EDCP
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
354,000
|
|
0
|
|
356,000
|
|
356,000
|
|
275,000
|
|
359,000
|
|
359,000
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
7,599,905
|
|
0
|
|
7,599,905
|
|
0
|
|
7,599,905
|
|
7,599,905
|
|
7,599,905
|
|
|
Life
Insurance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
500,000
|
|
0
|
|
0
|
|
|
Totals
(14)
|
|
59,476,060
|
|
1,725,100
|
|
59,478,060
|
|
51,878,155
|
|
50,217,867
|
|
61,488,360
|
|
59,481,060
|
|
Kriss Cloninger
III
|
|
Salary
|
|
1,894,088
|
|
0
|
|
0
|
|
0
|
|
2,480,000
|
|
1,286,550
|
|
0
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(8)
|
|
2,929,590
|
|
913,119
|
|
913,119
|
|
0
|
|
4,381,290
|
|
2,282,798
|
|
913,119
|
|
|
Severance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
6,911,175
|
|
|
Retirement
(9)
|
|
(12)
|
|
375,647
|
|
(12)
|
|
375,647
|
|
6,326,128
|
|
(12)
|
|
(12)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
60,000
|
|
0
|
|
56,000
|
|
0
|
|
0
|
|
58,000
|
|
58,000
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
4,308,960
|
|
0
|
|
0
|
|
0
|
|
4,308,960
|
|
4,308,960
|
|
4,308,960
|
|
|
Life
Insurance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
500,000
|
|
0
|
|
0
|
|
|
Totals
(14)
|
|
20,558,145
|
|
1,288,766
|
|
12,334,626
|
|
375,647
|
|
17,996,378
|
|
19,301,815
|
|
23,556,761
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
"Good
Reason"
|
|
Cause"
|
|
competition
|
|
competition
|
|
|
|
|
|
Cause" or
for "Good
|
Name
|
|
Benefit
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
Death ($)(5)
|
|
Disability ($)(6)
|
|
Reason" ($)(7)
|
Paul S. Amos
II
|
|
Salary
|
|
933,334
|
|
0
|
|
0
|
|
0
|
|
1,234,217
|
|
700,001
|
|
0
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(8)
|
|
1,279,602
|
|
426,534
|
|
426,534
|
|
0
|
|
1,827,387
|
|
1,066,335
|
|
426,534
|
|
|
Severance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,000,744
|
|
|
Retirement
(9)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
247,682
|
|
(12)
|
|
(12)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
23,000
|
|
0
|
|
0
|
|
0
|
|
0
|
|
18,000
|
|
35,000
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
1,191,840
|
|
0
|
|
0
|
|
0
|
|
1,191,840
|
|
1,191,840
|
|
1,191,840
|
|
|
Life
Insurance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
500,000
|
|
0
|
|
0
|
|
|
Totals
(14)
|
|
3,427,776
|
|
426,534
|
|
426,534
|
|
0
|
|
5,001,126
|
|
3,500,691
|
|
5,178,633
|
|
Tohru
Tonoike
|
|
Salary
|
|
1,036,632
|
|
0
|
|
0
|
|
0
|
|
871,903
|
|
777,474
|
|
0
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(8)
|
|
1,641,069
|
|
547,023
|
|
547,023
|
|
0
|
|
1,505,445
|
|
1,367,558
|
|
547,023
|
|
|
Severance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,196,017
|
|
|
Retirement
(9)
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
EDCP
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
(13)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
1,375,200
|
|
0
|
|
0
|
|
0
|
|
1,375,200
|
|
1,375,200
|
|
1,375,200
|
|
|
Life
Insurance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
502,610
|
|
0
|
|
0
|
|
|
Totals
(14)
|
|
4,554,932
|
|
1,049,054
|
|
1,049,054
|
|
502,031
|
|
4,757,189
|
|
4,022,262
|
|
5,620,271
|
|
Joey M.
Loudermilk
|
|
Salary
|
|
1,342,667
|
|
0
|
|
0
|
|
0
|
|
1,456,000
|
|
755,250
|
|
0
|
|
|
Non-equity
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Award
(8)
|
|
1,760,323
|
|
480,088
|
|
480,088
|
|
0
|
|
1,923,824
|
|
1,200,220
|
|
480,088
|
|
|
Severance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
3,076,080
|
|
|
Retirement
(9)
|
|
(12)
|
|
673,326
|
|
(12)
|
|
673,326
|
|
2,183,930
|
|
(12)
|
|
(12)
|
|
|
Health &
Welfare Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
|
123,000
|
|
0
|
|
126,000
|
|
0
|
|
0
|
|
127,000
|
|
127,000
|
|
|
Stock
Options & Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)
|
|
1,054,320
|
|
0
|
|
1,054,320
|
|
0
|
|
1,054,320
|
|
1,054,320
|
|
1,054,320
|
|
|
Life
Insurance
|
|
0
|
|
0
|
|
0
|
|
0
|
|
500,000
|
|
0
|
|
0
|
|
|
Totals
(14)
|
|
8,722,535
|
|
1,153,414
|
|
6,102,634
|
|
673,326
|
|
7,118,074
|
|
7,579,016
|
|
9,179,714
|
37
____________________
(1)
|
|
Salary and non-equity
incentive award would be paid semi-monthly for the contract term, with the
exception of Mr. Daniel Amos, who voluntarily gave up his right to such
salary and non-equity incentive payments. 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 obligations 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 obligations 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. Tonoike.
|
|
(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. As previously mentioned, Mr.
Daniel Amos voluntarily gave up his right to these payments by amending
his employment agreement in the fourth quarter of 2008.
|
|
(8)
|
|
The non-equity
incentive award amounts on this line include in all instances, except for
termination with competition, the 2008 non-equity incentive award that was
paid to the NEOs in February 2009.
|
|
(9)
|
|
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.
|
|
(10)
|
|
Represents the
estimated lump sum present value of all premiums that would be paid for
applicable health and welfare plan benefits.
|
38
(11)
|
|
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 excess of the closing price on the NYSE on the last business
day of the year over the option exercise price 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.
|
|
(12)
|
|
See the Pension
Benefits section in this Proxy Statement including the table that
details the accumulated benefit obligation for the
executives.
|
|
(13)
|
|
See the Nonqualified
Deferred Compensation section in this Proxy Statement, including the table
that details deferred compensation balances for the
executives.
|
|
(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 NEO's
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 2008 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 $50,000 annually for service as such. A
Non-employee Director serving on one or more committees of the Board receives an
additional $8,400 annually for that service. A Non-employee Director serving on
the Audit Committee receives an additional $10,000 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 2008, all
Non-employee Directors received nonqualified stock options covering 5,000 shares
of Common Stock, except for one Non-employee Director 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 2008 become exercisable in equal installments on each of the next four
anniversaries of the date of the option, and restricted stock awards issued in
2008 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 2008, 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 2008.
2008 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
|
|
67,867
|
|
0
|
|
76,508
|
|
0
|
|
1,714
|
|
146,089
|
Michael H. Armacost
|
|
67,867
|
|
0
|
|
64,352
|
|
1,969
|
|
1,151
|
|
135,339
|
Joe Frank Harris
|
|
67,867
|
|
0
|
|
64,352
|
|
0
|
|
1,115
|
|
133,334
|
Elizabeth J. Hudson
|
|
67,867
|
|
0
|
|
64,352
|
|
2,113
|
|
1,026
|
|
135,358
|
Douglas W. Johnson
|
|
76,933
|
|
0
|
|
64,352
|
|
0
|
|
3,360
|
|
144,645
|
Robert
B. Johnson
|
|
77,867
|
|
24,895
|
|
39,644
|
|
0
|
|
4,993
|
|
147,399
|
Charles B. Knapp
|
|
76,933
|
|
0
|
|
64,352
|
|
586
|
|
1,026
|
|
142,897
|
Barbara K. Rimer,
Dr. PH
|
|
|
67,867
|
|
0
|
|
64,352
|
|
11,053
|
|
1,026
|
|
144,298
|
Marvin R. Schuster
|
|
84,433
|
|
0
|
|
64,352
|
|
18,466
|
|
3,483
|
|
170,734
|
David
Gary Thompson
|
|
67,867
|
|
0
|
|
66,014
|
|
0
|
|
3,446
|
|
137,327
|
Robert L. Wright
|
|
88,933
|
|
13,939
|
|
37,706
|
|
15,721
|
|
3,446
|
|
159,745
|
John
Shelby Amos II
|
|
67,867
|
|
0
|
|
64,352
|
|
0
|
|
3,595,320
|
|
3,727,539
|
Kenneth S. Janke Sr.
|
|
67,867
|
|
55,155
|
|
2,987
|
|
0
|
|
1,209
|
|
127,218
|
E.
Stephen Purdom
|
|
67,867
|
|
0
|
|
64,352
|
|
23,172
|
|
42,157
|
|
197,548
|
____________________
(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 2008 fiscal year for the
fair value of restricted stock granted in 2008 as well as prior fiscal
years. The fair values of the awards granted on August 12, 2008, were
calculated using the closing stock price on August 12, 2008, of $55.72.
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., 4,529; Mr. Robert B. Johnson, 1,765; 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, 2008, in accordance with SFAS No. 123(R)
and thus includes amounts from options granted in and prior to 2008.
Assumptions used to calculate SFAS No. 123(R) are more fully described in
Note 10 "Share-Based Transactions" in the Notes to the Consolidated
Financial Statements in the Companys Annual Report to Shareholders for
the year ended December 31, 2008. The fair value of the options granted to
Non-employee Directors as of August 12, 2008, at an option price of $55.72
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 $13.77 for the options vesting on August 12, 2009; $15.02 for the
options vesting on August 12, 2010; $16.13 for the options vesting on
August 12, 2011; and $17.12 for the options vesting on August 12, 2012.
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
3.5%. As of December 31, 2008, each Non-employee Director had the
following number of stock options outstanding: Yoshiro Aoki, 15,000;
Michael H. Armacost, 31,000; Joe Frank Harris, 31,000; Elizabeth J.
Hudson, 31,000; Douglas W. Johnson, 31,000; Robert B. Johnson, 33,000;
Charles B. Knapp, 31,000; Barbara K. Rimer, Dr. PH, 31,000; Marvin R.
Schuster, 51,000; David Gary Thompson, 23,000; Robert L. Wright, 47,000;
John Shelby Amos II, 31,000; Kenneth S. Janke Sr., 11,000; and E. Stephen
Purdom, 31,000.
|
|
(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, and Kenneth S. Janke, Sr. was a decrease
of $7,430, $7,499, and $11,933, 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 $3,577,640 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 $40,000 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 2008,
Aflac paid $139,607 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 2008, Aflac paid $421,761 to Michael S.
Kirkland, the son of Ronald E. Kirkland, the Sr. Vice President, Director of
Sales. Michael Kirkland serves as a State Sales Coordinator-Texas East. In 2008,
Aflac paid $618,771 to Jonathan S. Kirkland, the son of Ronald E. Kirkland.
Jonathan Kirkland serves as a State Sales Coordinator-Colorado. The amounts for
Michael Kirkland and Jonathan Kirkland were 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, Michael Kirkland, and Jonathan Kirkland was no more favorable
when contracted than those of other State Sales Coordinators.
42
In 2008,
Aflac paid $345,651 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
2008, $307,055 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.
During 2008,
Aflac Japan, Aflac Insurance Services Co., Ltd., and Aflac Payment Services Co.,
Ltd. leased office space from Seiwa Sogo Tatemono Co., Ltd. Lease payments made
in 2008 totaled $2,374,879. Yoshiro Aoki, a Director of the Company, is and
throughout 2008 was President and a Director of Seiwa Sogo Tatemono.
For services
rendered in 2008, the Company paid $497,603 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 2008, in addition to the amount disclosed above, Aflac paid $32,875
in salary and non-equity incentive award to Jonathan S. Kirkland, the son of
Ronald E. Kirkland. Mr. Jonathan Kirkland served Aflac as Sales Strategy
Consultant for part of the year. For services rendered in 2008, Aflac paid
$139,727 in salary and non-equity incentive award to J. Matthew Loudermilk, the
son of Joey M. Loudermilk. 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 are also eligible to participate 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, 2008.
|
|
|
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
|
16,335,546
|
$37.95
|
20,706,118*
|
Equity Compensation
Plans Not Approved by
|
|
|
|
Shareholders
|
-0-
|
-0-
|
-0-
|
Total
|
16,335,546
|
$37.95
|
20,706,118
|
____________________
*
|
|
Of the shares listed in column (c), 10,725,755 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) (the "PCAOB") 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, 2008. 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 applicable requirements of the PCAOB regarding the independent
registered public accounting firm's communications with the Audit Committee
concerning independence, and has discussed with the independent registered
public accounting firm its independence. The Audit Committee has reviewed this
report and such firm's work throughout the year in order to evaluate the
independent registered public accounting firm's 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, 2008, 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 Committee's discussions with management and the independent registered
public accounting firm, as set forth above, and the Audit Committee's 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, 2008, for filing with
the SEC.
Audit Committee
Robert L. Wright, Chairman
Douglas W.
Johnson (financial expert)
Charles B. Knapp
Marvin R. Schuster
2. ADVISORY VOTE ON EXECUTIVE
PAY-FOR-PERFORMANCE COMPENSATION
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. This advisory shareholder vote, commonly known
as
Say-on-Pay,
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 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.
We believe the 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 CEO through December 31, 2008,
our Companys total return to shareholders, including reinvested cash dividends,
has exceeded 2,852% compared with 418% for the Dow Jones Industrial Average and
309% for the S&P 500.
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
IN THIS PROXY STATEMENT.
44
3. RATIFICATION OF
APPOINTMENT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
In February
2009, 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 2009, subject to
ratification by the shareholders.
Representatives of KPMG LLP are expected to be present at the 2009 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:
|
2008
|
|
2007
|
Audit fees Audit of the Companys consolidated financial
statements for the years ended December 31*
|
$4,063,654
|
|
$3,993,446
|
Audit related
fees (audits of subsidiaries and employee benefit plans)
|
66,600
|
|
114,644
|
Tax fees
|
1,670
|
|
1,500
|
All other
fees
|
0
|
|
35,000
|
Total fees:
|
$4,131,924
|
|
$4,144,590
|
____________________
(*)
|
|
The audit fees for 2008
and 2007 include $1,798,014 and $1,822,861, 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.
45
Shareholder Proposals
For a
shareholders proposal to be included in the Companys Proxy Statement for the
2010 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 20, 2009. To be timely, shareholder
proposals submitted outside the processes of Rule 14a-8 must be received by the
Secretary of the Company after January 4, 2010 and before February 3, 2010.
Annual Report
The Company
has delivered a copy of its Annual Report to each shareholder entitled to vote
at the 2009 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
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|
Secretary
|
|
March 20,
2009
|
|
46
|
AFLAC INCORPORATED
WORLDWIDE
HEADQUARTERS
1932 WYNNTON ROAD
COLUMBUS, GA
31999
|
(ONLY IF YOU AGREE WITH YOUR
VOTING RIGHTS CAN YOU VOTE BY PHONE)
|
|
VOTE BY INTERNET -
www.proxyvote.com
|
Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date, or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
|
|
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
|
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access proxy materials
electronically in future years.
|
|
VOTE BY PHONE - 1-800-690-6903
|
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before the cut-off
date or meeting date, only if you agree with the voting rights on your
proxy. Have your proxy card in hand when you call and then follow the
instructions.
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VOTE BY MAIL
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Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS:
|
AFLAC1
|
|
KEEP THIS PORTION FOR YOUR RECORDS
|
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DETACH AND RETURN THIS PORTION
ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND
DATED.
|
AFLAC
INCORPORATED
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL
DIRECTOR NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND
3
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The following proposals are being submitted to
the Shareholders:
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1.
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Election of 17 Directors of the Company.
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For
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Against
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Abstain
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Nominees:
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1a
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Daniel P. Amos
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o
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o
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o
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1b
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John Shelby Amos II
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o
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o
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o
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1c
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Paul S. Amos II
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o
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o
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o
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1d
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Yoshiro Aoki
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o
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o
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o
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1e
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Michael H. Armacost
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o
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o
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o
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1f
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Kriss Cloninger III
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o
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o
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o
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1g
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Joe Frank Harris
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o
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o
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o
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1h
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Elizabeth J. Hudson
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o
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o
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o
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1i
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Kenneth S. Janke Sr.
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o
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o
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o
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1j
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Douglas W. Johnson
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o
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o
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o
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1k
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Robert B. Johnson
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o
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o
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o
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For
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Against
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Abstain
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1l
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Charles B. Knapp
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o
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o
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o
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1m
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E. Stephen Purdom
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o
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o
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o
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1n
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Barbara K. Rimer, Dr. PH
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o
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o
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o
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1o
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Marvin R. Schuster
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o
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o
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o
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1p
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David Gary Thompson
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o
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o
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o
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1q
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Robert L. Wright
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o
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o
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o
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2.
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To consider and approve the following
advisory (non-binding) proposal:
|
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o
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o
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|
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 in this Proxy Statement."
|
|
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3.
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Ratification of appointment of KPMG
LLP as independent registered public accounting firm of the Company for
the year ending December 31, 2009.
|
|
o
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o
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|
o
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Sign here as name(s) appear(s) on account. If acting as
Attorney, Executor, Trustee or in other representative capacity, please
sign name and title.
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Signature [PLEASE SIGN WITHIN BOX]
|
Date
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Signature (Joint Owners)
|
Date
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Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com.
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 on the reverse side, all the shares of Common Stock of Aflac
Incorporated held of record by the undersigned on February 24, 2009, at
the Annual Meeting of the Shareholders to be held on Monday, May 4, 2009,
at 10:00 a.m., or any adjournment thereof.
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" ALL DIRECTOR NOMINEES IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3, 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.
|
|
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|
|
DESCRIPTION OF VOTING
RIGHTS
In accordance with the Company's Articles of Incorporation,
shares of the Company's 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. 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
I agree to provide evidence to
support this statement at the request of the Company.
|
|
|
Shares @
|
1 Vote/Share
|
|
|
|
|
Sign
here
|
X
|
|
|
|
Shares @
|
10
Votes/Share
|
|
|
|
|
X
|
|
|
Date ___________________ ,
2009
|
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