DEF 14A 1 antm-20180516xdef14a.htm DEF 14A antm_Current_Folio_Proxy No 6

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.   )

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Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material Pursuant to Section 240.14a‑12

 

 

Anthem, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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2018 PROXY  STATEMENT

 

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Annual Meeting of Shareholders

Indianapolis, IN

May 16, 2018

 

 

 


 

About Anthem, Inc.

Anthem is working to transform health care with trusted and caring solutions. Our health plan companies deliver quality products and services that give members access to the care they need. With over 73 million people served by our affiliated companies, including more than 40 million enrolled in our family of health plans, we are one of the nation’s leading health benefits companies. We are an independent licensee of the Blue Cross and Blue Shield Association. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in varying counties as Blue Cross and Blue Shield, Blue Cross or Empire BlueCross BlueShield HealthPlus), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. We also conduct business through arrangements with other Blue Cross and Blue Shield licensees in Louisiana, South Carolina and Western New York. We also conduct business through our Amerigroup subsidiary and other subsidiaries in Colorado, Florida, Georgia, Iowa, Kansas, Maryland, Nevada, New Jersey, New Mexico, Tennessee, Texas, Washington and Washington, D.C. In addition, we conduct business through our Simply Healthcare, HealthSun, Freedom Health and Optimum Healthcare subsidiaries in Florida, and our America’s 1st Choice subsidiary in South Carolina. We also serve customers throughout the country as HealthLink, UniCare, and in certain Arizona, California, Connecticut, Iowa, Nevada, Tennessee and Virginia markets through our CareMore subsidiary. We are licensed to conduct insurance operations in all 50 states and the District of Columbia through our subsidiaries. To find out more about us, go to antheminc.com.

 

 

 

 


 

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April 2, 2018

To Our Shareholders:

On behalf of the Anthem Board of Directors, we look forward to welcoming you to our 2018 Annual Meeting, which will be held at Anthem’s headquarters in Indianapolis, Indiana on May 16, 2018 at 8 a.m. Eastern Daylight Time.

Our Annual Meeting is an opportunity to review our 2017 accomplishments, as well as our plans to build on the positive momentum from the past year as we look ahead to 2018 and beyond.

In 2017, Anthem delivered solid performance with growth in both our Commercial and Government businesses. Highlights of the year include:

 

·

Grew medical membership for the fourth consecutive year and now serve more than 40 million consumers.  

·

Increased operating revenue by more than 40 percent over the past five years to more than $89 billion.

·

Grew operating cash flow by 28 percent to $4.2 billion in 2017.

·

Increased average share price of our stock, which more than tripled in the past five years and increased by 56 percent in 2017.

·

Increased our dividend for the 8th consecutive year.

 

We have many opportunities ahead of us in 2018 as we continue to make strategic investments in technology, consumer capabilities and innovative care delivery that will serve our customers and shareholders well into the future. We will remain guided by our values as we strive to make a greater difference for our consumers and communities through our work to address some of the nation’s most pressing health issues and our efforts to improve the affordability and accessibility of health care for all Americans. 

Details for attending the Annual Meeting are included in this proxy statement. Please note that you must submit your request to attend on or before May 7, 2018.  Also enclosed are details for how and when to vote. Your vote is very important to us so, if you are unable to attend the meeting, please vote either online, by mail or by telephone.

Thank you for your continued investment in our Company. We appreciate your confidence in our leadership and we hope to see you in Indianapolis.

 

 

 

 

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Gail K. Boudreaux

Joseph R. Swedish

President and Chief Executive Officer

Executive Chair

 

 

 

 

 

 

 


 

 

 

 

Letter from Lead Director

 

April 2, 2018

Dear Fellow Anthem Shareholders,

Thank you for your investment in Anthem and for trusting us to oversee your interests.  Your Board’s mission is to represent the interests of all shareholders, not in the short-term, but with a long-term perspective. We believe your interests are best served when the Company achieves sustainable results in a responsible manner.  The Board is actively engaged in overseeing Anthem’s business strategies and performance to meet this objective.  I am pleased to share specific actions that the Board has taken in the past year. 

 

Chief Executive Officer Succession & Independent Chair.  One of your Board’s most important responsibilities is to ensure an orderly and stable CEO succession process.  To that end, in November 2017, we unanimously elected Gail K. Boudreaux to succeed Joseph R. Swedish as CEO and President, with Joe continuing to serve as Executive Chair of the Board until May 2018.  The Board would like to recognize Joe for his significant contributions to the Company’s success over the past five years.

 

We have determined that upon Joe’s retirement, the Board will be led once again by an independent Chair.  In February 2018, we announced that Elizabeth E. Tallett, who is currently Chair of the Governance Committee, will assume the independent Chair of the Board position.

 

Board Skills, Diversity & Refreshment.  Board succession planning is also essential to the Company’s success.  As Lead Director, I have the privilege to work with a highly qualified and diverse group of board colleagues who bring thought leadership, perspective and accountability to their roles in overseeing the talented executive team at Anthem.  Refreshing your Board with new perspectives and ideas is critical to ensuring that it remains strategic and forward-looking. 

 

Over the past year, three new Directors have joined the Board and one Director has retired.  In addition to Gail, who was appointed to the Board following her election as President and CEO, we are pleased to welcome new board members Antonio Neri and Bahija Jallal, who both have extensive executive and financial experience, as well as Antonio’s information technology expertise and Bahija’s health care industry experience. Our Board is highly diverse in terms of background, expertise, nationality, ethnicity and gender, including four women directors and four directors from diverse ethnicities.  The average director tenure is approximately six years.

 

Corporate Responsibility.  Anthem believes that corporate responsibility is embedded in our purpose and helps define us as an organization that is committed to creating a health care experience that is simpler, more accessible and more affordable for the consumers we serve. We are focused on living out this purpose through the work of our associates, through the philanthropic efforts of the Anthem Foundation, through our diversity and inclusion initiatives, and by implementing environmentally responsible business practices.  In recognition of the importance of corporate responsibility, the Board’s Governance Committee is charged with monitoring the Company’s corporate social responsibility and environmental sustainability initiatives, to ensure they are effective and timely.

 

On behalf of the Board, thank you for investing in Anthem. We hope to see you at the Annual Meeting. 

 

 

 

 

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George A. Schaefer, Jr.

 

Lead Director

 

 

 

 


 

LOGO

 

 

Notice of Annual Meeting of Shareholders of Anthem, Inc.

 

 

 

Date and Time:

Wednesday, May 16, 2018 at 8:00 a.m. Eastern Daylight Time

 

 

Location:

Anthem, Inc.

 

120 Monument Circle

 

Indianapolis, Indiana 46204

 

 

Items of Business:

    To elect the four members of the Board of Directors identified in the accompanying proxy statement.

 

    To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2018.

 

    To hold an advisory vote to approve the compensation of our named executive officers.

 

    To approve proposed amendments to our Amended and Restated Articles of Incorporation to allow shareholders to call special meetings of shareholders.

 

    If properly presented at the Annual Meeting, to vote on the shareholder proposal set forth in the accompanying proxy statement.

 

    To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement.

 

 

 

 

Record Date:

You can vote if you are a shareholder of record on March 9, 2018.

 

It is important that your shares be represented and voted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares (as described in the accompanying materials) through the Internet, by telephone or, if you received a printed copy of the proxy card by mail, by signing, dating and mailing the proxy card in the envelope provided.

By Order of the Board of Directors,

 

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Kathleen S. Kiefer

Corporate Secretary

Scan this QR code to
vote with your
smartphone or go to

www.envisionreports.com/antm

C:\Users\AF13252\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\UFOB28RK\2018-03-09 ANTM QR Code.jpg

 

 

 

 

You can vote in one of four ways:

 

 

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Visit the website listed on your notice of meeting or proxy card to vote VIA THE INTERNET

 

 

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Call the telephone number on your proxy card to vote BY TELEPHONE

 

 

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If you received printed proxy materials, sign, date and return your proxy card in the envelope provided to vote BY MAIL

 

 

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Attend the Annual Meeting to vote IN PERSON

 

 

 

 

 

 


 

Table of Contents

2018 Proxy Statement Summary

 

 

 

The following is a summary of certain key disclosures in this proxy statement. This is only a summary, and it may not contain all of the information that is important to you. For more complete information, please review this proxy statement as well as our 2017 Annual Report on Form 10‑K.

Annual Meeting of Shareholders

 

 

 

 

 

 

Wednesday, May 16, 2018 at 8:00 a.m., EDT

Anthem, Inc.

120 Monument Circle

Indianapolis, Indiana 46204

 

Record Date: March 9, 2018

 

Proposals to be Voted on and Board Voting Recommendations

 

 

 

Proposals

 

Recommendations

Election of the following persons as directors:

 

FOR EACH NOMINEE

Lewis Hay, III

 

FOR

Julie A. Hill

 

FOR

Antonio F. Neri

 

FOR

Ramiro G. Peru

 

FOR

Ratification of Ernst & Young LLP as Auditors for 2018

 

FOR

Advisory vote to approve the compensation of our Named Executive Officers

 

FOR

Approval of proposed amendments to our Amended and Restated Articles of Incorporation to allow shareholders owning 20% or more of our common stock to call special meetings of shareholders

 

FOR

Shareholder proposal to allow shareholders owning 10% or more of our common stock to call special meetings of shareholders

 

AGAINST

 

2017 Business Highlights

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*Please refer to the GAAP Reconciliation table on page B‑1 for information on Adjusted Net Income and Adjusted Net Income Per Diluted Share (“Adjusted EPS”).

 

Other highlights include:

·

Operating cash flow was approximately $4.2 billion, or 1.1 times net income, for 2017, as compared to approximately $3.2 billion for 2016.

·

Our closing stock price increased by 56.5% from $143.77 on December 30, 2016 to $225.01 on December 29, 2017, the last trading day of 2017. Additionally, the Company paid cash dividends totaling $2.70 per share in 2017.

·

Medical membership grew to over 40 million members.

·

Our strong performance is reflected in the compensation that our Named Executive Officers earned for 2017.

 

 


 

Table of Contents

2018 Proxy Statement Summary (continued)

 

 

CEO Transition

In November 2017, the Board appointed Gail K. Boudreaux as President and Chief Executive Officer, succeeding Joseph R. Swedish, who will continue to serve as Executive Chair of the Board until the 2018 Annual Meeting of Shareholders and thereafter will serve as the senior advisor to the Chief Executive Officer and consultant until May 1, 2020.

 

Compensation Highlights

·

To align the interests and rewards of our Named Executive Officers (“NEOs”) with the long-term interests of our shareholders and drive the achievement of our purpose and vision, while operating within our values and behaviors, our Total Rewards program emphasizes performance-based compensation in the form of our Annual Incentive Plan (“AIP”) and equity grant programs under our Incentive Compensation Plan (“Incentive Plan” or “LTIP”).

·

For 2017, the Compensation Committee continued using a balanced scorecard for the AIP for the NEOs and other members of the executive leadership team, with an 80% weighting for Adjusted Net Income Per Share (“Adjusted EPS”) and a total of 20% weightings for measures related to each of our three strategic pillars, namely, consumer centricity (10%), provider collaboration (5%) and quality of care (5%).

·

Adjusted EPS was selected because it demonstrates whether the top-line growth was profitable and is a primary measure considered by many of our shareholders in assessing our ongoing performance. In addition, earnings-based measures are the most prevalent performance measure used by our direct peers.

·

Both the AIP and our performance stock units granted under the Incentive Plan use Adjusted EPS or Adjusted Net Income as a performance measure, which is calculated on an adjusted, non-GAAP basis to remove certain pre-established categorical amounts, which are reported in our quarterly earnings releases and would generally not be included by the investment community in the determination of our financial results. All adjustments are reviewed and approved by the Compensation Committee. Please refer to the GAAP Reconciliation table on page B-1 for information on Adjusted Net Income and Adjusted EPS.

 

Primary Components of 2017 Target Compensation

(Data for the CEO applies to Mr. Swedish for 2017

Data for “Other NEOs” is an Average for Other NEOs)

 

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AIP and LTIP percentages are based on achievement of an award equal to 100% of target.

 

 


 

Table of Contents

2018 Proxy Statement Summary (continued)

 

 

Corporate Governance

 

Our corporate governance policies reflect our commitment to effective corporate governance and high ethical standards:

 

·

Majority voting for uncontested director elections.

·

Proxy access for shareholder-nominated director nominees.

·

Shareholders have the ability to amend our Bylaws, except for those provisions required by our license agreements with the Blue Cross and Blue Shield Association.

·

Nine of our eleven current directors are independent and only independent directors serve on the Audit, Compensation and Governance Committees.

·

Our Board composition is diverse in gender, race, age, geographic location, experience and skills.

·

We have four women directors and four directors from diverse ethnicities.

·

Average tenure of all directors was approximately 6.3 years at April 2, 2018.

·

We currently have an independent Lead Director who will be replaced by an independent Chair of the Board as of the Annual Meeting.

·

Board oversees director refreshment and succession planning, with three new directors and one retiring director in the past year.

·

Board oversees succession planning for our President and CEO and our other executive officers, addressing both emergency and long-term succession.

·

Board, Committee and individual director performance evaluations are conducted annually, including an evaluation led by an external party at least every three years.

·

Individuals cannot stand for election as directors if 72 years of age or older.

·

Directors cannot serve on more than three other public company boards, and our CEO cannot serve on more than two other public company boards.

·

Executive sessions of the independent directors are held at each in-person board meeting.

·

Short sales, hedging transactions and pledging our stock are prohibited for all directors, officers and associates.

·

Significant stock ownership requirements are in place for directors and executive officers.

·

Our clawback policy applies to executive officers’ incentive compensation in the event of a restatement of our financial statements due to misconduct.

·

Our annual report on Political Contributions and Related Activities is available on our website at www.antheminc.com under “About Anthem, Inc. — Public Affairs — Political Contributions.”

·

Our Corporate Responsibility Report is available on our website at www.antheminc.com under “Corporate Responsibility.”

 

Director Qualifications and Experience

The following chart provides summary information about our directors’ skills and experiences. More detailed information is provided under the description of the “Governance Committee” beginning on page 7 and in each director’s biography beginning on page 19.

Directors

  CEO/COO  

  Insurance  
Industry

  Finance  

  Health Care  
Industry

Marketing/
  Public Relations  

  Information  
Technology

Regulatory/
  Government  

  ESG  

  Diversity  

Gail K. Boudreaux

 

 

R. Kerry Clark

 

 

 

 

 

Robert L. Dixon, Jr.

 

 

 

 

 

 

Lewis Hay, III

 

 

 

Julie A. Hill

 

 

 

Bahija Jallal

 

 

 

 

 

Antonio F. Neri

 

 

 

 

Ramiro G. Peru

 

 

 

 

 

 

George A. Schaefer, Jr.

 

 

 

 

Joseph R. Swedish

 

 

Elizabeth E. Tallett

 

 

 


 

Table of Contents

2018 Proxy Statement Summary (continued)

 

 

Shareholder Engagement

We believe that building positive relationships with our shareholders is critical to our long-term success. For this reason, we spend significant time meeting with our shareholders, listening to their concerns and responding to their feedback. Over the past year, management engaged with our largest shareholders, representing in aggregate approximately 50% of our outstanding shares, on our corporate governance practices, including on the proposed amendments to our Amended and Restated Articles of Incorporation to give shareholders the right to call special meetings of shareholders. In addition, our management team regularly offers shareholders the opportunity to discuss our quarterly results and other topics of interest to shareholders. We value our relationship with our shareholders and believe that we strengthen our ability to lead the Company by constructively discussing our business and strategy.

We were pleased that our shareholders overwhelmingly approved the non-binding advisory vote on our executive compensation in 2017, as approximately 94% of votes cast were voted in favor of the proposal. Nevertheless, we continue to examine our executive compensation program to assure alignment between the interests of our executive officers and our shareholders.

 

 

 

 


 

Table of Contents

Table of Contents

 

 

 

Page

PROXY STATEMENT 

1

Purpose 

1

Record Date 

1

Quorum 

1

Vote Required 

1

GOVERNANCE OF THE COMPANY 

3

Board Leadership Structure 

3

Board Role in Risk Oversight 

3

Policies on Corporate Governance 

4

BOARD AND COMMITTEE MEMBERSHIP 

6

Director Independence 

6

Meetings and Committees of the Board 

6

Communications with the Board 

11

Board Attendance at Annual Meeting of Shareholders 

11

REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS 

12

Policy 

12

Current Transactions 

12

STANDARDS OF ETHICAL BUSINESS CONDUCT 

13

COMPENSATION OF NON-EMPLOYEE DIRECTORS 

14

2017 Compensation of Non-Employee Directors 

14

Anthem Board of Directors’ Deferred Compensation Plan 

15

Board Equity Compensation and Stock Ownership Guidelines 

15

Matching Gift Program 

15

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

16

Stock Held by 5% or More Beneficial Owners 

16

Stock Held by Directors, Nominees and Executive Officers 

16

Section 16(a) Beneficial Ownership Reporting Compliance 

17

PROPOSAL NO. 1 — ELECTION OF DIRECTORS 

18

Recommendation 

18

NOMINEES FOR DIRECTOR 

19

Three-Year Term to Expire at the 2021 Annual Meeting of Shareholders 

19

DIRECTORS CONTINUING IN OFFICE 

21

Terms Expiring at the 2019 Annual Meeting of Shareholders 

21

Terms Expiring at the 2020 Annual Meeting of Shareholders 

23

PROPOSAL NO. 2 — RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

25

Appointment 

25

Recommendation 

25

AUDIT COMMITTEE MATTERS 

26

Independent Registered Public Accounting Firm’s Fees 

26

The Audit Committee’s Consideration of Independence of Independent Registered Public Accounting Firm 

26

Audit Committee Pre-Approval Policy 

26

Audit Committee Report 

26

EXECUTIVE OFFICERS OF THE COMPANY 

28

Executive Officers 

28

 

 


 

Table of Contents

Table of Contents (continued)

 

 

 

Page

PROPOSAL NO. 3 — ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS 

30

Recommendation 

30

EXECUTIVE COMPENSATION 

31

Compensation Discussion and Analysis 

31

Compensation Committee Report 

49

Assessment of Compensation-Related Risks 

50

Compensation Tables 

51

CEO Pay Ratio 

60

COMPENSATION PLANS 

61

PROPOSAL NO. 4 — APPROVAL OF PROPOSED AMENDMENTS TO OUR ARTICLES OF INCORPORATION TO ALLOW SHAREHOLDERS OWNING 20% OR MORE OF OUR COMMON STOCK TO CALL SPECIAL MEETINGS OF SHAREHOLDERS  

68

Recommendation 

71

PROPOSAL NO. 5 — SHAREHOLDER PROPOSAL TO ALLOW SHAREHOLDERS OWNING 10% OR MORE OF OUR COMMON STOCK TO CALL SPECIAL MEETINGS OF SHAREHOLDERS 

72

Recommendation 

73

VOTING AND MEETING INFORMATION 

75

Voting 

75

Internet Availability of Proxy Materials 

75

Shareholders 

76

Inspector of Election 

76

Confidentiality of Votes 

76

Householding 

76

Additional Information 

77

Annual Meeting Admission 

77

Cost of Solicitation 

77

Shareholder Proposals and Nominations for Next Year’s Annual Meeting 

78

Incorporation by Reference 

79

ANNEX A 

A-1

Proposed Amended and Restated Articles of Incorporation of Anthem, Inc. 

A-1

ANNEX B 

B‑1

GAAP Reconciliation 

B‑1

 

 

 

 

 

 

 


 

Table of Contents

Proxy Statement

 

ANTHEM, INC.

120 Monument Circle

Indianapolis, Indiana 46204

Annual Meeting of Shareholders

May 16, 2018

Purpose

This proxy statement is being made available to shareholders on or about April 2, 2018 in connection with a solicitation by the Board of Directors (the “Board”) of Anthem, Inc. (“Anthem,” the “Company,” “we,” “us” or “our”) of proxies to be voted at the annual meeting of shareholders (the “annual meeting”) and any adjournments or postponements, to be held at 8:00 a.m., Eastern Daylight Time, Wednesday, May 16, 2018, at Anthem, Inc., 120 Monument Circle, Indianapolis, Indiana 46204, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. Shareholders will be admitted to the annual meeting beginning at 7:30 a.m., Eastern Daylight Time. You must have an admission ticket, as well as a form of government-issued photo identification, in order to be admitted to the annual meeting. For instructions on requesting admission tickets, see page 77 of this proxy statement.

Record Date

At the close of business on March 9, 2018, the record date for the annual meeting, there were 255,851,046 shares of our common stock outstanding and entitled to vote at the annual meeting.

Quorum

In order for business to be conducted at the annual meeting, 25% of the votes entitled to be cast on a matter, represented in person or by proxy, must be present.

Vote Required

You will have one vote for each share held. Shares of our common stock represented by properly executed proxies will be voted at the annual meeting in accordance with the choices indicated on the proxy. Abstentions on a specific proposal will be considered as present at the annual meeting and will be counted for purposes of determining whether a quorum is present.

If you provide specific voting instructions, your shares will be voted as you instruct. If you sign, date and return your proxy card, but do not provide instructions, your shares will be voted:

   FOR Proposal 1 -

election of each director nominee

   FOR Proposal 2 -

ratification of the appointment of the independent registered public accounting firm for 2018

   FOR Proposal 3 -

advisory vote to approve the compensation of our Named Executive Officers

   FOR Proposal 4 -

approval of proposed amendments to our Amended and Restated Articles of Incorporation (the “Articles of Incorporation”) to allow shareholders owning 20% or more of our common stock to call special meetings of shareholders

   AGAINST Proposal 5 -    

shareholder proposal to allow shareholders owning 10% or more of our common stock to call special meetings of shareholders

 

 

 

 

 

 

Anthem, Inc. 2018 Proxy Statement    

1

 


 

Table of Contents

Proxy Statement (continued)

 

Each proposal at the annual meeting will be approved if the proposal receives more votes “for” than “against.”

Abstentions will have no effect on the outcome of any proposal. If your shares of our common stock are held in street name, and you do not provide your broker with voting instructions, your broker has the discretion to vote your shares of common stock for or against Proposal 2 only, the ratification of the appointment of our independent registered public accounting firm, and not any of the other proposals. If your broker does not have discretion to vote your common stock without your instructions, this is referred to as a “broker non-vote.” Broker non-votes will not be considered as votes cast on, and will have no effect on the outcome of, the remaining proposals other than Proposal 2.

 

 

 

 

 

2

    Anthem, Inc. 2018 Proxy Statement

 


 

Table of Contents

Governance of the Company

 

Our business is managed under the direction of the Board. The Board has responsibility for establishing broad corporate policies and for our overall performance. We believe that the only results worth achieving are those achieved with integrity and a commitment to excellence. Accordingly, we have long recognized the importance of, and have always placed a high priority upon, having good corporate governance measures in place.

Board Leadership Structure

The Board has the flexibility to establish a leadership structure that works best for the Company at a particular time and reviews that structure periodically. At times during our past, the positions of Chair of the Board and Chief Executive Officer (“CEO”) have been held by two different people and, at other times, the positions have been combined and held by the same person. The Board believes that it is important to implement an effective and efficient leadership structure that provides stability, while maintaining strong oversight of management.

In December 2015, the Board appointed Joseph R. Swedish as the Chair of the Board and combined the Chair and CEO roles. In doing so, the Board considered Mr. Swedish’s extensive experience in the health care industry and his oversight of our growth, financial performance and strategy since he was elected as our CEO in March 2013. In November 2017, the Board appointed Gail K. Boudreaux as CEO and President, succeeding Mr. Swedish.  Mr. Swedish continued to serve as Executive Chair of the Board, and will continue to serve in that role until the annual meeting, at which time Elizabeth E. Tallett will be the independent Chair of the Board. Given that Ms. Boudreaux has recently joined the Company, the Board believes that having an independent Chair of the Board allows Ms. Boudreaux to concentrate on overseeing the management of our business, while Ms. Tallett oversees the functioning of the Board and our corporate governance.

Our Corporate Governance Guidelines require that our independent directors elect a Lead Director annually when the positions of Chair and CEO are filled by the same person or when the Chair is not an independent director. The Board elected George A. Schaefer, Jr. to serve as the Lead Director, and he will serve in that role until the annual meeting when Ms. Tallett begins serving as independent Chair of the Board. The Lead Director presides at meetings of the Board and shareholders in the Chair’s absence, presides at all meetings of the independent directors (which are scheduled at each in-person Board meeting), serves as a liaison between the Chair and the independent directors, approves information sent to the Board, approves Board schedules and meeting agendas, has the authority to call additional meetings of the Board and the independent directors and is available for consultation and direct communication, if requested, with major shareholders. The Board also recognizes the important leadership roles played by the Chair of each of the committees of the Board. The Board evaluates its leadership structure from time to time and changes it as circumstances warrant.

Board Role in Risk Oversight

Our Board oversees the risk management processes that have been designed, and are implemented by our executives, to determine whether those processes are functioning as intended and are consistent with our business and strategy. The Board oversees our exposure to major enterprise risks and, with the assistance of the Audit Committee, oversees the processes by which we assess, monitor and manage our exposure to major risks. The Board reviews and approves certain risk tolerance levels and action plans regarding major risks. In addition to the responsibilities delegated to the Audit Committee, the Board delegates to its committees responsibility for assisting in the oversight of categories of risk within their areas of responsibility. See also “Executive Compensation — Assessment of Compensation-Related Risks” in this proxy statement for a description of the Compensation Committee’s role in overseeing compensation-related risks. A description of the enterprise risks facing us is included in Part I, Item 1A “Risk Factors” in our 2017 Annual Report on Form 10‑K.

In addition to its oversight of certain risks as delegated by the Board, the Audit Committee is specifically tasked with the following as it relates to enterprise risk management activities:

·

Review the appointment, promotion or dismissal of the Chief Risk Officer, who serves as the head of the internal enterprise risk management function;

·

Review and discuss our enterprise risk management framework, processes and governance structure;

 

 

 

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·

Review and discuss our major financial risk exposures, and any other categories of risk delegated by the Board to the Audit Committee from time to time, and the steps management has taken to assess, monitor and manage such exposures; and

·

Discuss the responsibilities, budget and staffing of our enterprise risk management function.

We have an Enterprise Risk Council to oversee our enterprise risk management activities. The Enterprise Risk Council is comprised of members of our executive leadership team and the Chief Risk Officer. Roles and responsibilities of the Enterprise Risk Council include:

·

Drive an effective enterprise risk management culture;

·

Continually evaluate and bring forward emerging risk insight;

·

Review and approve risk tolerance levels (subject to Board review and approval where appropriate);

·

Act on risk tolerance breaches;

·

Engage with the Chief Audit Executive to ensure appropriate two-way communication regarding our enterprise risks;

·

Review the Master Audit Plan to ensure there is appropriate coverage of the highest risk areas;

·

Review and approve the evaluation and prioritization of enterprise risks;

·

Review enterprise action plans against risks;

·

Review and approve the policies and procedures for monitoring and mitigating enterprise risks, as well as any required regulatory filings; and

·

Review and support resource requirements (subject to Board review where appropriate).

The Chief Risk Officer provides quarterly updates of enterprise risk management activities conducted through the Enterprise Risk Council to the Board and/or the Audit Committee, including separate executive sessions with the Audit Committee.

Policies on Corporate Governance

Our corporate governance policies reflect our goal of adopting best practices to promote a high level of performance from the Board and management. We believe our corporate governance practices promote the long-term interests of our shareholders and strengthen Board and management accountability.

Among the practices we adhere to are the following:

·

Annual review of our corporate governance documents for compliance with their terms and enhancements to improve corporate governance;

·

Majority voting for the election of directors in uncontested elections, with directors who fail to receive the required majority vote required to tender their resignation for consideration by the Board;

·

Proxy access for shareholder nominated director nominees;

·

Shareholders have the ability to amend our Bylaws, except for those provisions required by our license agreements with the Blue Cross and Blue Shield Association;

·

No supermajority voting requirements in our Articles of Incorporation;

·

Opted out of the Indiana Control Share Acquisitions Statute;

·

Nine of our eleven current directors are “independent” under all applicable standards;

·

Independent Audit, Compensation and Governance Committees;

·

Independent Lead Director who is elected annually by the independent directors when the positions of Chair and CEO are filled by the same person or when the Chair is not an independent director;

·

We currently have an independent Lead Director who will be replaced by an independent Chair of the Board as of the annual meeting;

·

Board oversees succession planning for our President and CEO and our other executive officers, addressing both emergency and long-term succession;

·

Board oversees director refreshment and succession planning, with three new directors and one retiring director in the past year;

·

Board, Committee and individual director performance evaluations are conducted annually, including an evaluation led by an external party at least every three years;

 

 

 

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·

Individuals cannot stand for election as a director if 72 years of age or older;

·

Prohibition on service by independent directors on more than three other public company boards, and by our CEO on more than two other public company boards;

·

Our Board composition is diverse in gender, race, age, geographic location, experience and skills;

·

We have four women directors and four directors from diverse ethnicities;

·

Average tenure of all directors was approximately 6.3 years at April 2, 2018;

·

Rotation of lead partner of our independent registered public accounting firm at least every five years;

·

Board and its Committees have the authority to engage consultants and advisors at our expense;

·

Executive sessions of the independent directors without management present are held at every in-person Board meeting;

·

Several avenues for shareholders to communicate with the Board and management, including periodic investor days and earnings release conference calls and webcasts, dedicated email addresses for the Board and for Committee Chairs, and specific outreach to shareholders initiated by us or in response to engagement requests;

·

The Board encourages directors to participate in continuing education programs and reimburses directors for the expenses of such participation;

·

Clawback policy to recover incentive compensation payments from our executive officers in the event of a restatement of our financial statements due to misconduct;

·

Prohibition on tax gross-ups on payments made in connection with a change in control or on perquisites, subject only to honoring contractual requirements when assuming agreements upon a merger or other business combination;

·

Prohibition on short sales, hedging transactions and pledges of our stock by all officers, associates and directors;

·

Prohibition on repricing of stock options and stock appreciation rights without shareholder approval;

·

Standards of Ethical Business Conduct applicable to our Board, executive officers and associates;

·

Governance Committee monitors our corporate social responsibility and environmental sustainability initiatives, including our Corporate Responsibility Report; and

·

Significant stock ownership guidelines that align our executive officers’ and directors’ interests with those of shareholders.

Due to existing contractual obligations with the Blue Cross and Blue Shield Association (“BCBSA”), we are required to maintain a classified board structure. However, our Corporate Governance Guidelines provide that, if the BCBSA requirement for a classified board structure is eliminated or is no longer applicable to us, the Board will submit amendments to our Articles of Incorporation recommending approval by the shareholders to eliminate the classified board structure. The amendment would be submitted at the next annual meeting of shareholders occurring after the elimination of the requirement for a classified board, and phase in the annual election of all directors over a three-year period. If our shareholders approve the amendments to our Articles of Incorporation to eliminate the classified board structure as set forth above, the Board will thereafter amend our Bylaws and other governing documents to implement the elimination of our classified board structure as provided in the Board policy.

Current versions of our Articles of Incorporation, Bylaws, Corporate Governance Guidelines, Standards of Ethical Business Conduct, and the charter of each standing committee of the Board are available on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents.”

We will continue to assess and refine our corporate governance practices and share them with you.

 

 

 

 

 

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Board and Committee Membership

 

As reflected in our Corporate Governance Guidelines, our business, property and affairs are managed under the direction of our Board. Members of our Board stay informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them, by visiting our offices, by participating in meetings of the Board and its committees and through their own industry knowledge and inquiries.

Director Independence

Our Board has adopted standards to assist it in making determinations of independence and whether or not a director or director nominee has a material relationship with us. These standards are available on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents.” Our Board has determined that all of our directors and director nominees, other than Ms. Boudreaux and Mr. Swedish, meet these standards, have no material relationship with us and are “independent” as defined by the NYSE listing standards and the rules of the Securities and Exchange Commission (“SEC”).

Meetings and Committees of the Board

During 2017, the Board held 18 meetings. The non-employee directors met in executive session without management at all in-person meetings. Our Board committees also conduct executive sessions that are presided over by the Chair of the respective committee. Each current director attended at least 75% of the total meetings of the Board and each committee on which he or she served.

There are three standing committees of the Board. From time to time, the Board, in its discretion, may form other committees. The following table provides membership information for each of the Board standing committees as of April  1, 2018.

 

Audit

Compensation

Governance

Directors

Committee

Committee

Committee

Gail K. Boudreaux

 

 

 

R. Kerry Clark

 

 

Robert L. Dixon, Jr.

 

Lewis Hay, III

 

Chair

Julie A. Hill

 

 

Bahija Jallal

 

Antonio F. Neri

 

 

Ramiro G. Peru

Chair

 

 

George A. Schaefer, Jr.*

 

 

Joseph R. Swedish**

 

 

 

Elizabeth E. Tallett

 

Chair

 Committee Member        * Lead Director        ** Executive Chair

 

 

 

 

Set forth below are the primary responsibilities of each of the standing committees as described more fully in their charters, which are available on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents.”

Audit Committee

The Audit Committee represents and assists the Board in its oversight of our accounting, financial reporting and internal audit controls and procedures. In its oversight of our financial statements and the independent audit thereof, the Audit Committee is responsible for the selection, evaluation and, where deemed appropriate, replacement of the independent registered public accounting firm, and for the evaluation of the independence of the independent registered public accounting firm. The Audit Committee is also directly involved in the selection of the auditor’s lead engagement partner.

 

 

 

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The Audit Committee is also responsible for the oversight of our Compliance Program and Standards of Ethical Business Conduct, as well as assisting the Board in overseeing the processes by which we assess, monitor and manage our exposure to major risks. The Chief Compliance Officer facilitates our compliance program and reports independently to the Audit Committee. The Audit Committee regularly receives a detailed report from the Chief Compliance Officer regarding our compliance program activities. See “Audit Committee Matters — Audit Committee Report” and “Governance of the Company — Board Role in Risk Oversight.”

The Audit Committee met eight times during 2017. The Audit Committee met separately, generally at each in-person meeting during 2017, with executive management (including the General Counsel), the head of internal audit, the Chief Risk Officer, the Chief Compliance Officer and the independent registered public accounting firm. The Board has determined that each of the members of the Audit Committee is “independent” as defined by the rules of the SEC and the NYSE listing standards and that each of the members is an “audit committee financial expert” as defined by the SEC’s rules.

Compensation Committee

The Compensation Committee assists the Board in discharging its responsibilities relating to compensation and benefits provided to our executive officers (which are determined by the Compensation Committee in its sole discretion), including conducting an assessment of the risks related to our compensation policies and practices. See “Executive Compensation — Assessment of Compensation-Related Risks.” The Compensation Committee sets the compensation level of our CEO and other executive officers based on an evaluation of the executive’s performance in light of our goals and objectives. The Compensation Committee may take into consideration when setting the compensation levels of the executive officers (other than the CEO) any recommendations of the CEO with respect to the other executive officers.

In addition, the Compensation Committee has engaged directly an outside compensation consultant to assist in the evaluation of CEO and executive officer compensation, as authorized under its charter. The Compensation Committee has engaged Semler Brossy Consulting Group LLC (“Semler Brossy”) to provide executive compensation consulting services. Semler Brossy reports directly to the Compensation Committee, participates regularly in Committee meetings and advises the Committee with respect to compensation trends and best practices, plan design and the reasonableness of individual compensation awards. Semler Brossy does not provide any other services to the Company. The Compensation Committee assessed the independence of Semler Brossy pursuant to, and based on the factors set forth in, the SEC’s and NYSE’s rules and concluded that no conflict of interest exists that would prevent Semler Brossy from independently advising the Compensation Committee.

The Compensation Committee met nine times during 2017. All members of the Compensation Committee are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Tax Code”), “non-employee directors” within the meaning of Section 16b‑3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “independent” within the meaning of the NYSE listing standards.

Compensation Committee Interlocks and Insider Participation

None of the Compensation Committee members is or has been an officer or employee of the Company or was involved in a relationship requiring disclosure as an interlocking director or under Item 404 of Regulation S-K.

Governance Committee

The Governance Committee assists the Board in discharging its responsibilities relating to Board composition, director compensation and corporate governance by identifying and recommending individuals for nomination as members of the Board, recommending to the Board the overall director compensation policy and developing and recommending to the Board a set of corporate governance guidelines. The Governance Committee also is responsible for reviewing, at least annually, our political strategy, contributions and activities and overseeing compliance with our policies and procedures regarding political contributions and activities. In addition, the Governance Committee monitors the Company’s corporate social responsibility and environmental sustainability initiatives.

 

 

 

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Board and Committee Membership (continued)

 

The Governance Committee has engaged directly Compensation Advisory Partners LLC (“CAP”), an outside compensation consultant, to assist in the evaluation of director compensation, as authorized under its charter. CAP reports directly to the Governance Committee. During 2017, CAP advised the Committee with respect to director compensation trends and best practices, plan design and the reasonableness of director compensation, including the changes to compensation for non-employee directors approved in May 2017. CAP does not provide any other services to the Company. The Governance Committee assessed the independence of CAP pursuant to, and based on the factors set forth in, the SEC’s and NYSE’s rules and concluded that no conflict of interest exists that would prevent CAP from independently advising the Governance Committee.

The Governance Committee met five times during 2017. The Board has determined that each of the members of the Governance Committee is “independent” as defined by the NYSE listing standards.

Shareholder Recommendations

The Governance Committee considers and recommends candidates for the Board. It reviews all nominations submitted to the Company as described below under “Identifying and Evaluating Nominees for Directors,” including individuals nominated by shareholders to be included in our proxy statement. In evaluating such nominations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth under “Director Qualifications.” Any shareholder recommendations proposed for consideration by the Governance Committee must include the nominee’s name and qualifications for Board membership and must be addressed to our Secretary at Anthem, Inc., 120 Monument Circle, Mail No. IN0102‑B381, Indianapolis, Indiana 46204. Following verification that the persons recommending director candidates are shareholders, recommendations are aggregated and considered by the Governance Committee at a regularly scheduled meeting. If any materials are provided by shareholders in connection with the recommendation of a director candidate, such materials are forwarded to the Governance Committee.

In addition, any shareholder who wishes to nominate a director candidate at our annual meeting or for inclusion in our proxy statement may do so by following the procedures and providing the information set forth in “Shareholder Proposals and Nominations for Next Year’s Annual Meeting” beginning on page 78 and in Sections 1.5, 1.6 and 1.16 of our Bylaws. Our Bylaws are available on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents.” Any materials provided by shareholders in connection with the nomination of a director candidate are forwarded to the Governance Committee. Following verification that the persons recommending director candidates are shareholders, and verification that any other required information has been properly submitted by such persons, nominations are reviewed and discussed by the Governance Committee and the Board at a regularly scheduled meeting.

Identifying and Evaluating Nominees for Directors

The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Governance Committee assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Governance Committee considers, subject to the restrictions in our Bylaws, whether the vacancy should be filled and if so, various potential candidates for director. Candidates may come to the attention of the Governance Committee through current Board members, management, professional search firms, shareholders or other persons. These candidates are evaluated at regular or special meetings of the Governance Committee and may be considered at any point during the year.

Director Qualifications

The Governance Committee periodically evaluates the size and composition of the Board to assess the skills and qualifications of Board members, and compares them with those skills and qualifications that might prove valuable in the future, considering the circumstances of the Company and the then-current Board membership. This assessment enables the Board to consider whether the skills and qualifications described below continue to be appropriate as the Company’s needs evolve over time. On an ongoing basis, the Governance Committee, assisted by outside consultants, will evaluate candidates who possess qualifications that meet our strategic

 

 

 

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Board and Committee Membership (continued)

 

needs and have diverse experiences in key business, financial and other challenges that face a publicly-held health benefits company.

In general, all directors must exhibit integrity and accountability, informed judgment, financial literacy, mature confidence and high performance standards. Candidates should be committed to enhancing shareholder value, have sufficient time and energy to diligently perform their duties and be able to provide insight and practical wisdom based on experience to represent the interests of all shareholders. Candidates should also have the manifest ability to work in a collegial and constructive manner with the other members of the Board. Service by candidates on other public company boards should be limited to a number that permits candidates, given their individual circumstances, to perform all director duties responsibly, but in any event, should not exceed three other public company boards (or two for our CEO).

The foregoing qualifications will be applied by the Governance Committee to all candidates considered for nomination by the Board, including candidates submitted by shareholders.

Our Corporate Governance Guidelines provide that our Governance Committee is to take into account the overall diversity of the Board when identifying possible nominees for director, including gender, race, age and geographic location. The Committee implements that policy, and assesses its effectiveness, by examining the diversity of all of the directors on the Board when it selects nominees for directors. Currently, the Board has four women directors, one African-American director, one Hispanic director, one Latino director and one North African director. Our directors range in age from early 50s to early 70s and reside in nine different states. The diversity of directors is one of the factors that the Governance Committee considers, along with the other selection criteria described above.

Below we identify and describe important skills and experiences that the Governance Committee looks for in a director candidate.

 

 

Current or Retired CEO/COO

Directors who are current or former Chief Executive Officers or Chief Operating Officers provide practical understanding of how large organizations operate and have experience in strategic thinking, risk management and operations oversight. They also possess significant leadership qualities and are able to identify and develop such qualities in others.

Insurance Industry

Directors with experience in the insurance industry bring an understanding of the unique nature of the business, including an understanding and appreciation of the regulatory requirements and restrictions with which we must comply. They can provide effective oversight of our regulatory compliance and risk management efforts.

Finance

Directors with an understanding of finance and financial reporting processes, particularly as they relate to large, complex, highly-regulated businesses, provide an important oversight role of our financial measures and processes. We use several financial targets for measuring performance, and accurate financial reporting is critical to our success.

Health Care Industry

Directors with experience in the health care industry bring valuable insight into the activities and requirements of the providers of health care services and products that receive payments directly or indirectly from our insurance products. These directors bring knowledge of current system operations and experience with medical best practices that are valuable not only for current operations, but also for future strategic initiatives.

 

 

 

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Marketing and Public Relations

Directors with experience in these areas provide important skills and information to us as we deal with increased public disclosure requirements and media attention on health care and other public policy issues. They can assist us in focusing our communications to effectively present our positions. Also, directors with experience dealing with consumers, particularly in the areas of developing, marketing and selling products and services to consumers, assist us with identifying changing market conditions and consumer trends and buying habits, because they understand consumer needs.

Information Technology

Directors with an understanding of information technology can help us focus our efforts in this important area. They are able to provide oversight of our efforts to improve efficiency and productivity through the use of new technologies in providing our products and services.

Regulatory and Government

Directors with regulatory or government experience, whether as members of government or through extensive interactions with state or federal governmental agencies, are able to recognize, identify and understand the key issues facing us as a highly-regulated entity.

Environmental, Social and Governance (“ESG”)

Directors who have worked with non-profit entities or have led projects designed to benefit society bring to us an understanding of the need to conduct business without harm to society, which could in turn, harm our reputation and decrease our long-term sustainability. They are able to provide insights to assist us in achieving our purpose of transforming health care with trusted and caring solutions. Directors with governance experience can help us focus our efforts on maintaining strong corporate governance practices.

Diversity

Directors who are diverse in gender, race, age and geographic location bring different perspectives, backgrounds and life experiences that can foster innovative ideas to meet the needs of our customers, providers, shareholders and the communities we serve.

 

Each of our directors’ specific skills and experiences are included in the table below and described more fully in their individual biographies. However, the fact that we do not list a particular skill or experience for a director does not mean that the director does not possess that particular skill or experience.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing/

 

 

Environmental,

 

 

 

  Insurance  

 

  Health Care  

Public

  Information  

Regulatory/

Social &

 

Directors

  CEO/COO  

Industry

  Finance  

Industry

   Relations   

Technology

  Government  

  Governance (ESG)  

  Diversity  

Gail K. Boudreaux

 

 

R. Kerry Clark

 

 

 

 

 

Robert L. Dixon, Jr.

 

 

 

 

 

 

Lewis Hay, III

 

 

 

Julie A. Hill

 

 

 

Bahija Jallal

 

 

 

 

 

Antonio F. Neri

 

 

 

 

Ramiro G. Peru

 

 

 

 

 

 

George A. Schaefer, Jr.

 

 

 

 

Joseph R. Swedish

 

 

Elizabeth E. Tallett

 

 

 

 

 

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Board and Committee Membership (continued)

 

The Governance Committee, in recommending the nominees for election as directors and in concluding that the continuing directors should serve as directors, considered the items set forth above. The Governance Committee believes that each director and director nominee possesses the judgment and integrity necessary to make independent decisions and a willingness to devote adequate time to Board duties. In addition, the Governance Committee believes that each director and director nominee brings his or her own particular experiences and set of skills, giving the Board, as a whole, competence and experience in a wide variety of areas. Additional biographical and other information concerning the qualifications, skills and experience of the directors and nominees for director can be found under “Proposal No. 1 – Election of Directors - Nominees for Director” and “- Directors Continuing in Office.”

Communications with the Board

Individuals may communicate with the Board by submitting an e-mail to our Board at this address: boardofdirectors@anthem.com. Communications that are intended specifically for non-management directors or any individual director should be sent to the e-mail address above to the attention of the Lead Director. Individuals may also communicate with the Board by submitting a letter to our Secretary at Anthem, Inc., 120 Monument Circle, Mail No. IN0102‑B381, Indianapolis, Indiana 46204.

In addition, individuals may communicate with the Chair of the following committees by submitting an e-mail to:

·

Chair of the Audit Committee: auditchair@anthem.com

·

Chair of the Compensation Committee: compensationchair@anthem.com

·

Chair of the Governance Committee: governancechair@anthem.com

The process for collecting and organizing communications, as well as similar or related activities, has been approved by our independent directors. Communications are distributed to the Board, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Board has requested that certain items which are unrelated to the duties and responsibilities of the Board should be excluded, such as spam, junk mail and mass mailings, medical claims inquiries, new product suggestions, resumes and other forms of job inquiries, surveys, and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that any such unsuitable communication is made available to any director upon request.

Board Attendance at Annual Meeting of Shareholders

Our policy is that Board members are expected to attend each annual meeting of shareholders. With the exception of our three Board members who joined the Board after our 2017 annual meeting, all members of the Board attended our 2017 annual meeting of shareholders.

 

 

 

 

 

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Review and Approval of Transactions with Related Persons

 

Policy

The Board has adopted a written policy and procedures for review, approval and monitoring of transactions involving us and “related persons” (directors and executive officers, shareholders owning five percent or greater of our outstanding common stock, or their immediate family members). The policy covers any transaction in which we are a participant that involves amounts exceeding $120,000 in any calendar year and in which a related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than ten percent beneficial owner of another entity).

Related person transactions must be approved or ratified by the Governance Committee of the Board. In considering the transaction, the Governance Committee will take into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The policy includes several categories of standing pre-approved transactions, including, but not limited to, transactions involving competitive bids, certain banking-related services and certain transactions involving amounts not in excess of the greater of $1 million or 2% of the other company’s total annual gross revenues. The Governance Committee periodically reviews and assesses on-going transactions to confirm that the transactions comply with the Governance Committee’s guidelines and remain appropriate.

Current Transactions

Dr. William Long, the brother-in-law of R. Kerry Clark, one of our Directors, is the physician owner of a medical provider that serves our members in New York. Anthem and its subsidiaries paid this provider approximately $430,000 for services provided to individuals covered by Anthem for the year ended December 31, 2017. Mr. Clark has no ownership interest in this provider and is not involved with the provider-payer arrangement between Anthem and the provider. In addition, the amounts paid to this provider are pursuant to a standard fee schedule for all similarly situated providers in New York. The Governance Committee approved and continues to monitor this arrangement consistent with the above policy.

In the ordinary course of business, we may, from time to time, engage in transactions with other companies whose officers or directors are also our directors. Transactions with such companies are conducted on an arm’s length basis, and in 2017, all of these transactions came within the pre-approval procedures of the Governance Committee consistent with the above policy.

 

 

 

 

 

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Standards of Ethical Business Conduct

 

We have adopted Standards of Ethical Business Conduct (the “Code”) for our directors, executive officers and other associates. The purpose of the Code is to focus on areas of ethical risk, provide guidance in recognizing and dealing with ethical issues, provide mechanisms to report unethical conduct and help foster a culture of honesty and integrity. The Code is posted on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents.”

Everyone is required to act in accordance with the requirements of the Code. Waivers of the Code for any director, our Chair, our President and Chief Executive Officer, our Chief Financial Officer and our other executive officers may only be made by the Board or by a Board committee composed of independent directors. Any such waiver and any amendment to the Code will be posted on our website at www.antheminc.com under “Investors — Corporate Governance — Governance & Corporate Documents” and otherwise disclosed as required by law. During 2017, there were no waivers of the Code for any of our directors, our Chair, our President and Chief Executive Officer, our Chief Financial Officer or any of our other executive officers.

 

 

 

 

 

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Compensation of Non-Employee Directors

 

2017 Compensation of Non-Employee Directors

The compensation of our non-employee directors is paid in the form of annual retainers for Board members and Committee Chairs and annual stock awards. An annual retainer is also paid when the Chair of the Board is not an employee or there is an independent Lead Director.

In May 2017, the Governance Committee, based on the recommendations of CAP, approved the following changes to the compensation paid to our non-employee directors:

·

the annual cash retainer was increased from $95,000 to $125,000;

·

the annual cash retainer paid to the Chair of the Audit Committee was increased from $25,000 to $30,000;

·

the annual cash retainer paid to the Chairs of the Compensation and Governance Committees was increased from $15,000 to $20,000;

·

the annual cash retainers paid to members of the Audit, Compensation and Governance Committees were eliminated; and

·

the annual cash retainer paid to our Lead Director was increased from $30,000 to $35,000.

 

Commencing in May 2017, compensation for non-employee directors was as follows:

 

 

 

 

Compensation Element

    

2017

Annual Retainer (Cash Portion)

 

$

125,000

Annual Retainer (Company Stock Portion)

 

$

175,000

Annual Committee Chair Retainers

 

 

  

   Audit Committee

 

$

30,000

•   Compensation and Governance Committees

 

$

20,000

Annual Retainer for Non-Executive Chair of the Board, if any

 

$

225,000

Annual Retainer for Lead Director, if any

 

$

35,000

 

The compensation actually paid to our non-employee directors for service during 2017 was as follows(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Fees Earned or

 

Stock

    

All Other

    

 

Name

    

Paid in Cash ($) (2)

 

Awards ($)(3)

    

Compensation ($) (4)

    

Total ($)

R. Kerry Clark

 

$

123,182

(5)  

 

$
174,923

 

 

$
10,000

 

$

308,105

Robert L. Dixon, Jr.

 

$

121,286

 

 

$
174,923

 

 

$
26,441

 

$

322,650

Lewis Hay, III

 

$

139,390

 

 

$
174,923

 

 

$
1,850

 

$

316,163

Julie A. Hill

 

$

123,182

 

 

$
174,923

 

 

$
36,441

 

$

334,546

Ramiro G. Peru

 

$

151,286

 

 

$
174,923

 

 

$
26,441

 

$

352,650

William J. Ryan

 

$

43,600

 

 

 —

 

 

$
66,575

 

$

110,175

George A. Schaefer, Jr.

 

$

169,555

 

 

$
174,923

 

 

$
36,441

 

$

380,919

Elizabeth E. Tallett

 

$

143,181

 

 

$
174,923

 

 

$
6,500

 

$

324,604

 

(1)

Employee directors do not receive any compensation for their service as a director. Mr. Swedish’s and Ms. Boudreaux’s compensation for 2017 is shown in the Summary Compensation Table on page 51.  William J. Ryan retired from the Board in 2017.  Mr. Neri did not receive any compensation in 2017, as payment for his services as a non-employee director during December 2017 were paid in 2018. Ms. Jallal joined the Board in February 2018.

(2)

In addition to annual Board and committee retainer fees, amounts include $76.90 paid in cash to each non-employee director then serving or elected at the 2017 annual meeting of shareholders, which represents cash payments in lieu of issuing fractional shares in connection with the annual grant of phantom shares of our common stock received on the date of our annual meeting of shareholders.

(3)

The amounts in this column reflect the grant date fair value of stock awards issued to each non-employee director during the year ended December 31, 2017, in accordance with Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“ASC Topic 718”). Each non-employee director then serving received 990 deferred shares of our common stock for the annual retainer grant of shares of our common stock on the date of our annual meeting of shareholders (May 18, 2017). The deferred shares will be converted into common stock upon the lapse of the deferral period. See also “Compensation of Non-Employee Directors — Board Equity Compensation and Stock Ownership Guidelines.” The grant date fair value for the 2017 stock awards is calculated by multiplying the closing price of our common stock on the NYSE on the date of grant by the number of shares in the stock award. As of December 31, 2017, each non-employee director then serving had the following number of deferred shares under our Board of Directors’ Deferred Compensation Plan (“Board Deferred Compensation Plan”) for all years of service as a director:

 

 

 

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    Anthem, Inc. 2018 Proxy Statement

 


 

Table of Contents

Compensation of Non-Employee Directors (continued)

 

 

 

 

 

 

Deferred Shares

Director

    

(as of 12/31/17)

R. Kerry Clark

 

5,056

Robert L. Dixon, Jr.

 

7,304

Lewis Hay, III

 

6,923

Julie A. Hill

 

35,322

Antonio F. Neri

 

 —

Ramiro G. Peru

 

7,304

George A. Schaefer, Jr.

 

7,304

Elizabeth E. Tallett

 

6,308

 

No directors currently have any stock options outstanding. The deferred shares for each current director are included in the Security Ownership of Certain Beneficial Owners and Management — Stock Held by Directors, Nominees and Executive Officers table on page 16.

(4)

Includes: (i) matching charitable contributions made by the Anthem Foundation on behalf of Messrs. Clark, Hay and Schaefer, Mses. Hill and Tallett (see “— Matching Gift Program”) and (ii) dividend equivalents paid on directors’ deferred shares that vested in 2017 of $26,441 each to Messrs. Dixon, Peru and Schaefer and Ms. Hill, and of $66,575 to Mr. Ryan. This column does not include perquisites received by a director to the extent the amount of all such perquisites received by such director was less than $10,000.

(5)

All of Mr. Clark’s 2017 compensation was deferred by him pursuant to the Board Deferred Compensation Plan, other than the $76.90 paid in cash in lieu of a fractional share.

Anthem Board of Directors’ Deferred Compensation Plan

Cash fees paid to directors may be deferred under the Board Deferred Compensation Plan, which provides a method of deferring payment until a date selected by the director. Deferred cash fees accrue interest at a declared interest rate, which is determined on January 1 of each year and is the average of the 10‑year U.S. Treasury Note monthly average rates for the 12‑month period ending on September 30 of the previous year, plus 150 basis points, but not to exceed 120% of the applicable federal long-term rate, with compounding. Fees paid to non-employee directors in our common stock may also be deferred under the Board Deferred Compensation Plan for a period longer than the minimum deferral period discussed below, with the cash dividends accruing during the deferral period and paid in cash at the end of the deferral period. Fees paid in stock and deferred under the Board Deferred Compensation Plan are distributed in stock pursuant to their election under the plan.

Board Equity Compensation and Stock Ownership Guidelines

For 2017, each non-employee director then serving or elected at the annual meeting of shareholders received, subject to the deferral described below, an annual grant, on the date of our annual meeting of shareholders, of the number of shares of our common stock equal to $175,000 with the amount of any fractional share paid in cash. In 2017, each such non-employee director received 990 deferred shares based on the market price of $176.69 per share pursuant to this grant. Each annual grant of common stock is deferred for a minimum of five years from the date of grant (or in the case of grants made after the annual meeting of shareholders, five years from the date of the annual meeting of shareholders that immediately precedes the date of grant). The shares of common stock, along with the cash dividends accrued thereon, will not be distributed until the earlier of the expiration of such deferral period or the date on which a director ceases to be a member of the Board.

In addition, each non-employee director has an obligation to own at least $500,000 of our common stock by no later than the fifth anniversary of the date such director became a member of the Board. As of December 31, 2017, each non-employee director owned stock in excess of the stock ownership requirements except Mr. Neri and Ms. Jallal, who joined the Board in December 2017 and February 2018, respectively.

Matching Gift Program

Directors are eligible to participate in the Anthem Foundation matching gift program. Under this program, the foundation matches 100% of charitable donations to qualified entities up to a maximum of $10,000 per year for each director.

 

 

 

 

Anthem, Inc. 2018 Proxy Statement    

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Table of Contents

Security Ownership of Certain Beneficial Owners and Management

 

 

Stock Held by 5% or More Beneficial Owners 

The following table and notes provide information about each person known by us to own beneficially more than five percent of our common stock as of February 1, 2018, except as otherwise indicated.

 

 

 

 

 

 

 

 

Amount and Nature

 

Percent of

Name and Address of Beneficial Owner

    

of Beneficial Ownership

    

Class

BlackRock, Inc.(1)

 

22,743,378

 

8.8

%

T. Rowe Price Associates, Inc.(2)

 

16,869,167

 

6.5

%

The Vanguard Group(3)

 

17,803,582

 

6.9

%

 

(1)

The amount shown and the following information were provided by BlackRock, Inc. (“BlackRock”) pursuant to a Schedule 13G/A filed with the SEC on February 8, 2018, indicating beneficial ownership as of December 31, 2017. In such filing BlackRock lists its address as 55 East 52nd Street, New York, NY 10055. BlackRock is a parent holding company or control person and has (a) sole power to dispose of or direct the disposition of 22,743,378 shares of our common stock; and (b) sole power to vote or direct the vote of 19,742,339 shares of our common stock.

(2)

The amount shown and the following information were provided by T. Rowe Price Associates, Inc. (“T. Rowe”) pursuant to a Schedule 13G/A filed with the SEC on February 14, 2018, indicating beneficial ownership as of December 31, 2017. In such filing T. Rowe lists its address as 100 E. Pratt Street, Baltimore, MD 21202. T. Rowe is a registered investment advisor and has (a) sole power to dispose of or direct the disposition of 16,869,167 shares of our common stock; and (b) sole power to vote or direct the vote of 5,483,756 shares of our common stock.

(3)

The amount shown and the following information were provided by The Vanguard Group (“Vanguard”) pursuant to a Schedule 13G/A filed with the SEC on February 12, 2018, indicating beneficial ownership as of December 31, 2017. In such filing Vanguard lists its address as 100 Vanguard Boulevard, Malvem, PA 19355. Vanguard is a registered investment advisor and has (a) sole power to dispose of or direct the disposition of 17,389,389 shares of our common stock; (b) shared power to dispose of or direct the disposition of 414,193 shares of our common stock; (c) sole power to vote or direct the vote of 364,147 shares of our common stock; and (d) shared power to vote or direct the vote of 61,600 shares of our common stock.

Stock Held by Directors, Nominees and Executive Officers

Except as otherwise noted, the following table sets forth the number of shares of our common stock beneficially owned as of February 1, 2018, by:

·

each of our directors or nominees,

·

each of our CEO, CFO and the three other most highly compensated executive officers during 2017 and any former executive officers required to be disclosed by SEC rules (collectively, the “NEOs”), and

·

all current directors and executive officers as a group.

Except as otherwise indicated below, each individual directly owns such shares of common stock and has sole investment and sole voting power. In addition, unless otherwise indicated, the address for each person named below is c/o Anthem, Inc., 120 Monument Circle, Indianapolis, IN 46204. The table includes shares that may be purchased pursuant to stock options that are currently exercisable or exercisable within 60 days of February  1, 2018 (“exercisable options”) and shares of common stock underlying unvested restricted stock units and unvested performance stock units that will vest within 60 days of February  1, 2018 (“vested restricted stock units” and “vested performance stock units,” respectively). As of February 1, 2018, 267,726,991 shares of our common stock were issued and outstanding.  

 

 

 

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    Anthem, Inc. 2018 Proxy Statement

 


 

Table of Contents

Security Ownership of Certain Beneficial Owners and Management (continued)

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Number of

    

Total Number

    

 

 

 

Number of

 

Shares

 

of Shares

 

 

 

 

Shares

 

Supplementally

 

Beneficially

 

Percent of

Name

    

Owned (1)

    

Owned (2)

    

Owned

    

Class

R. Kerry Clark

 

 0

 

5,056

 

5,056

 

*

Robert L. Dixon, Jr.

 

2,681

 

7,304

 

9,985

 

*

Lewis Hay, III

 

 0

 

6,923

 

6,923

 

*

Julie A. Hill

 

 0

 

35,322

 

35,322

 

*

Bahija Jallal

 

 0

 

204

 

204

 

*

Antonio F. Neri

 

 0

 

341

 

341

 

*

Ramiro G. Peru

 

6,267

 

7,304

 

13,571

 

*

George A. Schaefer, Jr.

 

30,807

 

7,304

 

38,111

 

*

Elizabeth E. Tallett

 

 0

 

6,308

 

6,308

 

*

Gail K. Boudreaux(3)

 

60

 

 0

 

60

 

*

John E. Gallina

 

42,521

 

6,732

 

49,253

 

*

Brian T. Griffin(4)

 

97,573

 

9,551

 

107,124

 

*

Peter D. Haytaian

 

108,138

 

21,525

 

129,663

 

*

Gloria M. McCarthy

 

56,763

 

16,176

 

72,939

 

*

Joseph R. Swedish

 

193,847

 

75,853

 

269,700

 

*

Other Executive Officers

 

62,300

 

18,785

 

81,085

 

*

All current directors and executive officers as a group (18 persons) 

 

600,957

 

224,688

 

825,645

 

*

 

*     Less than 1%

(1)

Includes the following exercisable options to purchase shares of our common stock: Mr. Swedish — 166,001; Mr. Gallina — 30,782; Mr. Griffin — 59,421; Mr. Haytaian — 72,455; Ms. McCarthy — 35,530 and 415,159 for all current directors and executive officers as a group.

(2)

For directors, other than Mr. Swedish and Ms. Boudreaux, this number represents the number of deferred shares which will be converted into common stock upon the lapse of the deferral period, and are considered owned under our stock ownership guidelines for directors. For executive officers, this number represents the following vested restricted stock units: Ms. Boudreaux — 0; Mr. Swedish — 19,334; Mr. Gallina — 2,521; Mr. Griffin — 4,089; Mr. Haytaian — 5,221; Ms. McCarthy — 3,948; and 41,670 for all current executive officers as a group; and the following vested performance stock units: Ms. Boudreaux — 0; Mr. Swedish — 56,519; Mr. Gallina — 4,211; Mr. Griffin — 5,462; Mr. Haytaian — 16,304; Ms. McCarthy — 12,228; and 106,952 for all current executive officers as a group.

(3)

Represents shares held in a revocable trust of which Ms. Boudreaux’s spouse is the trustee.

(4)

Includes 20,012 shares held in a grantor retained annuity trust (“GRAT”) of which Mr. Griffin is sole trustee and 17,767 shares held in a GRAT of which Mr. Griffin’s spouse is sole trustee.

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than 10% of our common stock, to file reports of ownership with the SEC. Such persons also are required to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of copies of such forms received by us, or written representations from certain reporting persons, we believe that during 2017, our executive officers, directors, and greater than 10% shareholders complied with all applicable filing requirements relating to our common stock.

 

 

 

 

 

Anthem, Inc. 2018 Proxy Statement    

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Table of Contents

Proposal No. 1 — Election of Directors

 

The Board currently consists of eleven directors divided into three classes. This classified Board structure is one of the specific requirements imposed by the Blue Cross and Blue Shield Association (“BCBSA”) in license agreements with all Blue Cross Blue Shield licensees, including us. The term of one class of directors expires each year. Generally, each director serves until the annual meeting of shareholders held in the year that is three years after such director’s election and until such director’s successor is elected and has qualified. In addition, directors are no longer eligible for election after reaching 72 years of age.

Our Articles of Incorporation provide that the total number of directors should be divided into three classes with each class containing approximately one-third of the total directors. Currently, the classes of 2018 and 2019 contain four directors each, and the class of 2020 contains three directors.

It is the intention of the persons named in the accompanying form of proxy to vote such proxy for the election to the Board of Lewis Hay, III, Julie A. Hill, Antonio F. Neri, and Ramiro G. Peru. Each of the nominees for director is presently a director and each has consented to being named as a nominee in this proxy statement and has indicated a willingness to serve if elected. However, if any such person is unable or unwilling to accept nomination or election, it is the intention of the persons named in the accompanying form of proxy to nominate such other person as director as they may in their discretion determine, in which event the shares will be voted for such other person.

The election of directors will be determined by the vote of a majority of the votes cast on such election, which means that the number of shares voted “for” a director nominee must exceed the number of shares voted “against” such nominee.

Recommendation

The Board of Directors unanimously recommends a vote FOR Proposal No. 1, the election as directors of Lewis Hay, III, Julie A. Hill, Antonio F. Neri, and Ramiro G. Peru.

The biographies of each of the nominees and continuing directors contain information regarding the person’s service as a director, business experience, director positions at publicly-held corporations or investment companies registered under the Investment Company Act of 1940 held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused the Governance Committee and the Board to recommend each of the director nominees and to conclude that the continuing directors should serve as members of our Board. Unless otherwise indicated below, the principal occupation of each director or nominee has been the same for the last five years. There is no family relationship between any of our directors or executive officers. The ages listed below for each director or nominee are as of April 1, 2018.

 

 

 

 

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    Anthem, Inc. 2018 Proxy Statement

 


 

Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

Nominees for Director

Three-year Term to Expire at the 2021 Annual Meeting of Shareholders

 

  LEWIS HAY, III

 

Picture 15

  Age: 62
  Director since: 2013
  Independent

    

Lewis Hay, III has been a director of the Company since July 2013. Mr. Hay has served as an operating advisor at Clayton, Dubilier & Rice, LLC (private equity investment firm) since September 2013. Mr. Hay retired as Executive Chairman of NextEra Energy, Inc. (“NextEra Energy”) (electricity-related services and renewable energy generator) in December 2013, having served in that position since July 2012. At NextEra Energy, he served as Chief Executive Officer from June 2001 to July 2012, Chairman from January 2002 to July 2012, and President from June 2001 to December 2006. He also served as Chief Executive Officer of Florida Power & Light Company from January 2002 to July 2008. Mr. Hay is a director of Capital One Financial Corporation (financial services) and Harris Corporation (international communications and information technology). Mr. Hay was a director and chairman of both the Institute for Nuclear Power Operations and the Edison Electrical Institute until 2013. He also served on the Board of Business Advisors for the Tepper School of Business at Carnegie Mellon University, and on the Advisory Council of Carnegie Mellon University’s Scott Institute for Energy Innovation until May 2017.

 

Skills and Qualifications

 

Mr. Hay brings extensive CEO, finance and regulatory and government experience to the Board through his positions as CEO, Chairman and CFO of a large utility company which was subject to significant regulation and oversight. He also has environmental, social and governance experience with his management of the utility’s expansion of renewable energy sources. In addition, Mr. Hay has marketing and public relations experience from his service as an officer of a large utility company and a director of a financial services company, and technology experience from his service as a director of an information technology company.

 

 

  JULIE A. HILL

 

Picture 22

  Age: 71
  Director since: 2004
  Independent

    

Julie A. Hill has been a director of the Company since November 2004. Ms. Hill served on the former WellPoint Health Networks Inc. (“WHN”) board of directors from March 1994 until WHN’s merger with us in November 2004. Since 2002, she has been the owner of The Hill Company (real estate company). From 1998 to 2002, Ms. Hill was the President and owner of Hiram-Hill Development Company (residential real estate development firm). Prior thereto, she was the Chairman, President and Chief Executive Officer of Costain Homes, Inc. (home builders), the U.S. division of Costain Group Plc, a London-based company, from 1988 to 1997. Ms. Hill is also a director of the Lord Abbett Family of Mutual Funds (mutual funds) and UNYQ (provider of orthopedic devices). She is chair of the University of California at Irvine (“UCI”) Board of Trustees and chair emeritus of the UCI Paul Merage School of Business Dean’s Advisory Board, and serves as a member of the advisory boards of the Paul Merage School of Business Center for Real Estate, the UC Irvine School of Law Board of Visitors, the School of Social Ecology Dean’s Leadership Council, the Susan Samueli Center of Integrative Medicine, and the Paul Merage School of Business Center for Digital Transformation.

 

Skills and Qualifications

 

Ms. Hill brings extensive CEO and finance experience to the Board gained through her ownership and management of several companies. She also has significant marketing and public relations experience, having held several positions in sales, marketing, advertising and product development. In addition, Ms. Hill has health care industry and environmental, social and governance experience through her many medical school and other university board positions and service with groups promoting environmental, sustainability and other public policy issues. Further, Ms. Hill qualifies as an “audit committee financial expert” under the SEC’s rules.

 

 

 

 

 

Anthem, Inc. 2018 Proxy Statement    

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Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

 

  ANTONIO F. NERI

 

Picture 3

  Age: 50
  Director since: 2017
  Independent

    

Antonio F. Neri has been a director of the Company since December 2017. Mr. Neri has served as President and Chief Executive Officer of Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise”) (technology company) since February 2018. At Hewlett Packard Enterprise, he also served as President from June 2017 to February 2018 and Executive Vice President and General Manager, Enterprise Group from 2015 to June 2017. Prior to Hewlett Packard Enterprise’s spinoff from HP Inc. (technology company), Mr. Neri held a variety of leadership roles at HP Inc. since 1995, including Senior Vice President and General Manager, Enterprise Group from October 2014 to November 2015, Senior Vice President and General Manager, HP Servers from September 2013 to October 2014 and Senior Vice President and General Manager, HP Technology Services from August 2011 to September 2013. Mr. Neri has served as a director of Hewlett Packard Enterprise since February 2018. He was a director of H3C Technologies Co., LTD (information technology company), from May 2016 to July 2017. From March 2012 to February 2013, Mr. Neri was a director of Mphasis Limited (cloud technology company).

 

Skills and Qualifications

 

Mr. Neri has significant technology and marketing and public relations experience, having held several leadership positions at firms that provide technology solutions to the business and public sectors, including his current position of President and CEO of a large, multinational enterprise information technology company. In addition, Mr. Neri brings CEO and finance experience to the Board gained through his positions with Hewlett Packard Enterprise. Further, Mr. Neri qualifies as an “audit committee financial expert” under the SEC’s rules.

 

 

 

  RAMIRO G. PERU

 

Picture 4

  Age: 62
  Director since: 2004
  Independent

    

Ramiro G. Peru has been a director of the Company since November 2004. Mr. Peru served on the former WHN board of directors from May 2003 until WHN’s merger with us in November 2004. During the second half of 2007, Mr. Peru was Executive Vice President and Chief Financial Officer of Swift Corporation (transportation) and prior thereto was Executive Vice President and Chief Financial Officer of Phelps Dodge Corporation (mining and manufacturing) from 1999 to 2007 (“Phelps Dodge”). Mr.  Peru joined Phelps Dodge in 1979 and held various finance and accounting positions with Phelps Dodge and its affiliates. Mr. Peru is also a director of SM Energy Company (oil and gas exploration and production company) and UNS Energy Corporation (electric and gas utility holding company).

 

Skills and Qualifications

 

Mr. Peru brings significant finance experience to the Board as a former chief financial officer of two public companies. Mr. Peru’s positions also included technology experience as Senior Vice President at Phelps Dodge with responsibility for managing both information systems and technology and human resources. Further, Mr. Peru qualifies as an “audit committee financial expert” under the SEC’s rules.

 

 

 

 

 

 

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Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

Directors Continuing in Office

Terms expiring at the 2019 Annual Meeting of Shareholders

 

  BAHIJA JALLAL

 

Picture 15

  Age: 56
  Director since: 2018
  Independent

    

Bahija Jallal has been a director of the Company since February 2018. Ms. Jallal has served as Executive Vice President of AstraZeneca PLC (“AstraZeneca”) (pharmaceutical and biopharmaceutical business) and President of MedImmune (biotechnology business), a subsidiary of AstraZeneca, since January 2013. She joined MedImmune in 2006 and held various research and development positions, including Executive Vice President, Research and Development, from 2010 to 2013. She has been President of the Board of the Association for Women in Science since 2016 and a member of the Board of Trustees of Johns Hopkins University since 2014.

 

Skills and Qualifications

 

Ms. Jallal brings extensive health care industry experience to the Board gained through her several leadership positions at biopharmaceutical companies that provide new medicines to patients, including her current position of Executive Vice President at a multinational pharmaceutical and biopharmaceutical company. In addition, Ms. Jallal has CEO and finance experience through her position of President at a biologic research and development subsidiary of a large public company.

 

 

 

  GEORGE A. SCHAEFER, JR.

 

Picture 5

  Age: 72
  Director since: 2001
  Independent

    

George A. Schaefer, Jr. has been a director of the Company since 2001 and was a director of Anthem Insurance Companies, Inc. (“Anthem Insurance”) from 1995 to 2003. Mr. Schaefer served as Chair of the Board of the Company from May 2013 until December 2015, at which time he was elected to his current role of Lead Director. He served as President and Chief Executive Officer of Fifth Third Bancorp (banking) from 1990 to 2006, as Chairman of the Board and Chief Executive Officer until 2007, and as Chairman of the Board until 2008. He was also a director of Ashland Global Holdings, Inc. (petroleum and chemical business) from 2003 to January 2018. He is a board member of the University of Cincinnati Healthcare System and the University of Cincinnati Healthcare Foundation.

 

Skills and Qualifications

 

As the former President, CEO and Chairman of a large Midwest bank holding company, Mr. Schaefer brings extensive CEO and finance experience to the Board, as well as marketing and public relations and technology experience from his involvement in retail marketing and product development for the financial institution. Also, he has health care industry experience through his service on the boards of several hospital systems and medical schools. Further, Mr. Schaefer qualifies as an “audit committee financial expert” under the SEC’s rules.

 

 

 

 

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Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

 

 

  JOSEPH R. SWEDISH

 

Picture 14

  Age: 66
  Director since: 2013

    

Joseph R. Swedish will serve as the Chair of the Board until the annual meeting and has served in that role since December 2015. He has been a director since March 2013 when he was appointed our CEO. Mr. Swedish served as our President and CEO through November 2017. Prior to joining the Company, Mr. Swedish served as President and CEO of Trinity Health Corporation (“Trinity”) (multi-state integrated health care delivery system) from 2004 to 2013. Prior to his service at Trinity, Mr. Swedish was President and CEO of Centura Health (large health care provider) from 1999 to 2004. Mr. Swedish served as a director of Coventry Health Care, Inc. (health insurance company) from 2010 to February 2013. Mr. Swedish has served as a director of CDW Corporation (technology) since August 2015 and International Business Machines Corporation since October 2017. He also serves as a director of America’s Health Insurance Plans (Chairman effective January 2017), Proteus Digital Health, the Board of Visitors of Duke University’s Fuqua School of Business and the Duke Margolis External Advisory Board, and as a member of the Business Council. He served as director of the BCBSA, the National Institute for Health Care Management, and the Central Indiana Corporate Partnership, each through November 2017. He also previously served as chair of the Catholic Health Association and on the board of Loyola University Chicago.

 

Skills and Qualifications

 

Mr. Swedish brings significant CEO, health care industry, technology and insurance industry experience to the Board from his chief executive and board positions with several health care and insurance organizations and participation in numerous associations in the health care industry. Mr. Swedish’s positions also provided him with regulatory and government experience due to the highly-regulated nature of these organizations. He has finance experience through his service on the board of directors of a bank and technology experience through his service on the board of a technology company. Mr. Swedish also has environmental, social and governance experience, having served as chair of the Catholic Health Association.

 

 

 

 

  ELIZABETH E. TALLETT 

 

Picture 15

  Age: 68
  Director since: 2013
  Independent

    

Elizabeth E. Tallett has been a director of the Company since October 2013. She was a principal of Hunter Partners, LLC (health care consulting) from 2002 to 2015. Ms. Tallett continues to operate as a consultant to health care companies. Previously, Ms. Tallett was President and Chief Executive Officer of Transcell Technologies, Inc. (specialty pharmaceuticals), President of Centocor Pharmaceuticals (biotechnology), member of the Parke-Davis (pharmaceuticals) Executive Committee and Director of Worldwide Strategic Planning for Warner-Lambert Company (pharmaceuticals). Ms. Tallett has served as a director of Meredith Corporation (magazine publisher) since 2008, Principal Financial Group, Inc. (financial services) since 1992 (as lead director since 2007) and Qiagen, N.V. (biotechnology research equipment manufacturing) since 2011. She previously served as a director of Coventry Health Care, Inc. (health insurance) from 1998 to 2013 (including serving as lead director).

 

Skills and Qualifications

 

Ms. Tallett brings significant CEO, finance, health care industry, insurance industry and marketing and public relations experience to the Board from her chief executive, other management and board positions in several health care, insurance and pharmaceutical organizations. These positions also provided her with regulatory and governmental experience due to the highly-regulated nature of these organizations. She also has environmental, social and governance experience, having served as a lead director and as a member of the governance committees of several public companies.

 

 

 

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Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

Terms expiring at the 2020 Annual Meeting of Shareholders

 

  GAIL K. BOUDREAUX 

 

Picture 15

  Age: 57
  Director since: 2017

    

Gail K. Boudreaux has been a director of the Company since November 2017 when she was appointed our President and Chief Executive Officer. Prior to joining the Company, she served as Chief Executive Officer of GKB Global Health, LLC (health care strategy and business advisory firm) from July 2015 to November 2017. Prior thereto, Ms. Boudreaux was Executive Vice President of UnitedHealth Group Incorporated (diversified health care company) from May 2008 to February 2015, President of United HealthCare (managed health care company), a subsidiary of UnitedHealth Group Incorporated, from May 2008 to January 2011 and Chief Executive Officer of United HealthCare from January 2011 to November 2014. Before joining United HealthCare, she worked at Health Care Services Corporation (“HCSC”) (health insurance company) as Executive Vice President of External Operations from December 2005 to April 2008 and as President of Blue Cross Blue Shield of Illinois from 2002 to May 2005. Before joining HCSC, Ms. Boudreaux held various positions at Aetna Inc. (managed health care company), including Senior Vice President, Group Insurance. Ms. Boudreaux has served as a director of Zimmer Biomet Holdings, Inc. (medical device company) since 2012. She also serves as a director of the BCBSA, the National Institute for Health Care Management, Health Services Foundation, Dartmouth College Board of Trustees, and the Central Indiana Corporate Partnership, and as a member of the Business Roundtable. She previously served as a director of Xcel Energy, Inc. (utility holding company) from May 2012 to December 2017, Novavax, Inc. (biotechnology company) from June 2015 to November 2017 and Genzyme Corporation (biotechnology company) from 2004 to 2011.

 

Skills and Qualifications

 

Ms. Boudreaux brings significant CEO, health care industry, insurance, finance and information technology experience to the Board from her chief executive and other executive positions with several health care and insurance organizations and participation in numerous associations in the health care industry. Ms. Boudreaux’s positions also provided her with regulatory and government experience due to the highly-regulated nature of these organizations. She also gained financial and information technology experience through her service as a director and as a member of the audit committee and technology operations committee of several public companies including a medical device company and a biotechnology company.

 

 

 

 

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Table of Contents

Proposal No. 1 — Election of Directors (continued)

 

 

 

  R. KERRY CLARK

 

Picture 15

  Age: 65
  Director since: 2014
  Independent

    

R. Kerry Clark has been a director of the Company since May 2014. Mr. Clark served as Chairman and Chief Executive Officer of Cardinal Health, Inc. (health care products and services), until his retirement in 2009. Mr. Clark joined Cardinal Health (“Cardinal Health”) in 2006 as President and Chief Executive Officer and became Chairman in 2007. Prior to joining Cardinal Health, he held various positions at The Procter & Gamble Company (consumer products), including President of P&G Asia; President, Global Market Development and Business Operations; and Vice Chairman of the Board, President Global Family Health. He is a director of Avnet, Inc. (industrial distributors of electronic components, enterprise computer and storage products), General Mills, Inc. (consumer food products) and Textron, Inc. (aircraft, defense, and industrial products). He is also a director of Hauser Private Equity LLC (investment firm) and The Christ Hospital in Cincinnati, Ohio (hospital).

 

Skills and Qualifications

 

Mr. Clark brings to the Board extensive CEO, health care industry, marketing and public relations, and finance experience through his positions as Chairman and CEO of a major health care services organization, and as a senior executive at an international consumer products company, where he served in several positions involving marketing, advertising and product development of health care and other consumer products. Also, he has health care experience through his service on a hospital’s board of directors. Mr. Clark qualifies as an “audit committee financial expert” under the SEC’s rules.

 

 

 

 

  ROBERT L. DIXON, JR 

 

Picture 15

  Age: 62
  Director since: 2011
  Independent

    

Robert L. Dixon, Jr. has been a director of the Company since July 2011. Mr. Dixon also has been the owner of The RD Factor, Inc., a digital and information technology consulting business, since 2016. Mr. Dixon served as Global Chief Information Officer and Senior Vice President of PepsiCo, Inc. (“PepsiCo”) (food and beverages) from 2007 until April 2016 and as Senior Vice President until December 2016. Prior to joining PepsiCo, Mr. Dixon held various positions with The Procter & Gamble Company (consumer household products) since 1977, including Vice President of Global Business Services from 2005 until 2007. He is a director of Build-A-Bear Workshop, Inc. (specialty retailer) since February 2018. At the Georgia Institute of Technology, Mr. Dixon serves on the Engineering Advisory Board, the President’s Advisory Board, and the Foundation. He previously served on the CIO Advisory Board for International Business Machines Corporation.

 

Skills and Qualifications

 

Mr. Dixon has extensive technology experience through his position as Global Chief Information Officer of a large public company and his service on the CIO advisory board for another large public company. He also has significant marketing experiences through his senior positions at two large public companies, both of which have global retail consumer product focus.

 

 

 

 

 

 

 

 

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Table of Contents

Proposal No. 2 — Ratification of the Appointment of Independent Registered Public Accounting Firm

 

Appointment

 

The firm of Ernst & Young LLP (“EY”) served as our independent registered public accounting firm for the year ended December 31, 2017. The Audit Committee is responsible for the appointment, compensation and oversight of the Company’s external auditor, and has reviewed the quality of the services and the sufficiency of the resources provided by EY during their tenure as our independent registered public accounting firm.

In evaluating the performance and considering the engagement of the Company’s external auditor, including whether to rotate audit firms, the Audit Committee considers various factors, including the auditor’s capability and expertise in handling the scope and complexity of the audit of our business operations, auditor independence and the appropriateness of fees, together with EY’s tenure as the Company’s auditor, the current level of service and quality provided by EY and the potential impact of changing auditors. Based on these factors, the Audit Committee believes that the continuance of EY as our independent registered public accounting firm is in the best interests of the Company and the shareholders. As a result, the Audit Committee has selected EY to continue in that capacity for 2018 and is submitting this matter to shareholders for their ratification as a matter of good corporate governance. EY has served as our independent registered public accounting firm since our initial public offering in 2001. In the event this proposal is not approved, the Audit Committee will consider whether to select another independent registered public accounting firm.

A representative of EY is expected to be present at the annual meeting, will be given an opportunity to make a statement if he or she desires and is expected to be available to respond to appropriate questions. Notwithstanding ratification by the shareholders, the Audit Committee reserves the right to replace our independent registered public accounting firm at any time.

The ratification of the appointment of our independent registered public accounting firm will be determined by the vote of a majority of the votes cast on the proposal (excluding abstentions), which means that the number of shares voted “for” the proposal must exceed the number of shares voted “against” the proposal for ratification of the appointment.

Recommendation

The Board of Directors unanimously recommends a vote FOR Proposal No. 2, the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2018.

 

 

 

 

 

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Table of Contents

Audit Committee Matters

 

Independent Registered Public Accounting Firm’s Fees

The Audit Committee oversees the negotiation of fees associated with our retention of EY. The following table presents fees billed for all professional services provided by EY for the audit of our consolidated financial statements for the years ended December 31, 2017 and 2016, and fees billed for other services rendered by EY during those periods.

 

 

 

 

 

 

 

 

 

Fiscal Year

Fee Category

 

2017

 

2016

Audit fees(1)

    

$

12,033,000

    

$

12,338,000

Audit-related fees(2)

  

 

1,606,000

 

 

1,803,000

Tax fees(3)

  

 

327,000

 

 

315,000

All other fees(4)

  

 

17,000

 

 

20,000

Total:

  

$

13,983,000

 

$

14,476,000

 

(1)

Audit fees consisted principally of fees for audit work performed on our consolidated financial statements, the audit of the effectiveness of our internal control over financial reporting as of each respective year-end, review of the quarterly financial statements, insurance statutory audits, other required audits, comfort letter procedures, review of registration statements and periodic reports filed with the SEC and other accounting and reporting consultation.

(2)

Audit-related fees consisted principally of fees for review of service organization controls, regulatory examinations, employee benefit plan audits, due diligence and other audit-related services.

(3)

Tax fees consisted principally of fees for tax compliance and tax advice.

(4)

All other fees represent fees for advisory services related to certain corporate functions and accounting research tools.

The Audit Committee’s Consideration of Independence of Independent Registered Public Accounting Firm

The Audit Committee has reviewed the nature of the non-audit services provided by EY and has concluded that these services are compatible with maintaining the firm’s ability to serve as our independent registered public accounting firm. Additionally, as part of the Audit Committee’s overall review of EY, it is directly involved in the selection of the auditor’s lead engagement partner in conjunction with the periodic, mandated rotation of the lead partner.

Audit Committee Pre-Approval Policy

The Audit Committee of the Board has adopted a policy concerning the pre-approval of audit and non-audit services. Pursuant to this policy, unless a type of service to be provided by the independent registered public accounting firm was approved in connection with the audit engagement letter, such service must be pre-approved by the Audit Committee. In addition, the Audit Committee has delegated its authority to pre-approve to the Chair of the Audit Committee for engagements of up to $500,000. The Chair reports any pre-approval decisions to the Audit Committee at the next regularly scheduled meeting of the Audit Committee. Procedures have been established which require that all requests for pre-approval be submitted to the Audit Committee or Chair by the President and Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or other designated executive. All services performed by EY were approved by the Audit Committee and/or pursuant to the Audit Committee pre-approval policy.

Audit Committee Report

The Audit Committee of the Board is composed of the five members set forth below. The Board has determined that each current member of the Audit Committee is an “independent director” and an “audit committee financial expert” as defined by the SEC’s rules. The Audit Committee operates under a written charter adopted by the Board which details the responsibilities of the Audit Committee.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. The Company’s management is responsible for the Company’s financial statements and reporting process, including the system of internal controls, and has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with U.S. generally accepted accounting

 

 

 

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Audit Committee Matters (continued)

 

principles. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s annual consolidated financial statements and expressing an opinion on the conformity of those audited consolidated financial statements with U.S. generally accepted accounting principles, as well as expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited consolidated financial statements with the Company’s management and the independent registered public accounting firm. This review included a discussion of the quality and acceptability of the Company’s financial reporting and controls, including the clarity of disclosures in the consolidated financial statements. The Audit Committee reviewed, and discussed with management and the independent registered public accounting firm, management’s report and the independent registered public accounting firm’s report and audit of the Company’s internal control over financial reporting.

The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable rules of the Public Company Accounting Oversight Board (“PCAOB”), including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm its independence from the Company and its management.

The Audit Committee further discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets periodically with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of the Company’s internal control over financial reporting and the overall quality of the Company’s financial reporting.

Based on the reviews and discussions referred to above, the Audit Committee recommended, and the Board approved, the inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2017 as filed with the SEC.

 

Audit Committee

 

 

 

Ramiro G. Peru, Chair

 

R. Kerry Clark

 

Julie A. Hill

 

Antonio F. Neri

 

George A. Schaefer, Jr.

 

 

 

 

 

 

 

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Table of Contents

Executive Officers of the Company

 

Executive Officers

The following is biographical information and ages for our executive officers and Chief Accounting Officer as of April 1, 2018:

Name and Position

    Age    

 

Gail K. Boudreaux
President and Chief Executive Officer

57

See the biographical information under “Directors Continuing in Office — Terms Expiring at the 2020 Annual Meeting of Shareholders” on page 23.

Joseph R. Swedish
Executive Chair

66

See the biographical information under “Directors Continuing in Office — Terms Expiring at the 2019 Annual Meeting of Shareholders” on page 22.

John E. Gallina
EVP and Chief Financial Officer

58

Mr. Gallina has served as our Executive Vice President and Chief Financial Officer since June 2016. Mr. Gallina joined Anthem in 1994 and has held a variety of leadership roles across the organization. Prior to his current role, Mr. Gallina served as Anthem’s Chief Financial Officer for the Commercial and Specialty Business Division from December 2015 to June 2016, and as Senior Vice President and Chief Accounting Officer from December 2013 to December 2015. Other leadership positions held during his tenure include Senior Vice President, Chief Accounting Officer and Chief Risk Officer from May 2011 to December 2013, while also holding the title of Controller from May 2011 to August 2013. Before joining the Company, Mr. Gallina spent 12 years with Coopers & Lybrand in various positions, including as an Audit Senior Manager.

Brian T. Griffin
EVP and Chief Executive Officer of IngenioRx

59

Mr. Griffin has served as our Executive Vice President and Chief Executive Officer of IngenioRx, our pharmacy benefits manager, since March 2018.  From September 2015 until March 2018, Mr. Griffin served as our Executive Vice President and President of Commercial and Specialty Business Division. From January 2013 until September 2015, Mr. Griffin served as President and Chief Executive Officer of our Empire health plans based in New York. Before joining us, Mr. Griffin served from 1987 until August 2012 in positions of increasing responsibility with Medco Health Solutions, Inc., including as President, International and Subsidiaries of Express Scripts Holding Company, Inc. from April 2012 to August 2012, Chief Executive Officer of Medco International B.V. from October 2011 to April 2012 and Chief Executive Officer of Medco Celesio, B.V. from December 2010 to October 2011.

Peter D. Haytaian
EVP and President of Commercial and Specialty Business Division

48

Mr. Haytaian has served as our Executive Vice President and President of the Commercial and Specialty Business Division since March 2018. From June 2014 until March 2018, Mr. Haytaian served as our Executive Vice President and President of the Government Business Division. Mr. Haytaian joined the Company in December 2012 with our acquisition of Amerigroup Corporation (“Amerigroup”) and served as President of our Medicaid business from August 2013 until June 2014. From 2005 to 2013, Mr. Haytaian held several leadership positions with Amerigroup, including serving as Chief Executive Officer of the North Region for Amerigroup’s Medicaid business from December 2012 until August 2013. Mr. Haytaian has extensive experience leading Medicare and Medicaid programs with Amerigroup and, prior thereto, with Oxford Health Plans, Inc. (health insurance).

Gloria M. McCarthy
EVP, Chief Administrative
and Transformation Officer

65

Ms. McCarthy has served as our Executive Vice President and Chief Administrative Officer since 2013 and Chief Transformation Officer since March 2017 and served as our Chief of Staff from August 2016 to December 2017. In addition, Ms. McCarthy assumed oversight for our Medicaid business effective March 2018. She was Executive Vice President of Enterprise Execution and Efficiency from 2012 to 2013. Prior to that appointment, she served as Executive Vice President, Office of the CEO from February 2012 to October 2012, as Senior Vice President for Operational Excellence from 2008 to February 2012, as Senior Vice President of Service Operations from 2006 to 2008 and as Senior Vice President and Chief Operating Officer of our East Region from 2005 to 2006. Prior to our acquisition of WellChoice, Inc. (“WellChoice”) in 2005, Ms. McCarthy served as Executive Vice President and Chief Operating Officer of WellChoice.

 

 

 

 

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Table of Contents

Executive Officers of the Company (continued)

 

 

 

 

 

Name and Position

    Age    

 

Craig E. Samitt, M.D.
EVP, Chief Clinical Officer and President of Diversified Business Group

53

Dr. Samitt has served as our Executive Vice President and Chief Clinical Officer since September 2015, and effective March 2018, Dr. Samitt also serves as President of the Diversified Business Group. Prior to joining us, Dr. Samitt was a Partner and Global Practice Leader, Health & Life Sciences, for the Oliver Wyman Consulting firm from January 2015 to September 2015; the Executive Vice President and then President and CEO, HealthCare Partners, for Davita Healthcare Partners from 2013 to 2014; and President and CEO of Dean Health Systems, Inc. from 2006 to 2013. Dr. Samitt has been a member of the Board of Directors of the National Committee for Quality Assurance since February 2016.

Jacquelyn H. Wolf
EVP and Chief Human
Resources Officer

56

Ms. Wolf has served as Executive Vice President and Chief Human Resources Officer since August 2017. From 2012 until February 2017, Ms. Wolf was Senior Vice President and Chief Human Resources Officer at LyondellBasell Industries (chemical company). Prior to joining LyondellBasell Industries in 2012, Ms. Wolf was Senior Vice President, Chief Human Resources Officer at Celanese Corporation (technology and specialty materials) from 2009 until 2012.  Ms. Wolf is a member of the Society for Human Resource Management and the HR Policy Association.

Thomas C. Zielinski
EVP and General Counsel

67

Mr. Zielinski has served as our Executive Vice President and General Counsel since June 2014, and as Interim General Counsel from February 2014 to June 2014. In addition, Mr. Zielinski assumed oversight for our Medicare and Federal Government Solutions businesses effective March 2018. Prior to joining us, Mr. Zielinski was a partner in the law firm of Morgan Lewis & Bockius, LLP since 2013. He served as Executive Vice President and General Counsel of Coventry Health Care, Inc. (health insurance) from 2007 to 2013 and as Senior Vice President and General Counsel from 2001 to 2007. Prior to joining Coventry, Mr. Zielinski spent 19 years at the law firm of Cozen & O’Connor, P.C.

Ronald W. Penczek
SVP and Chief Accounting Officer

53

Mr. Penczek has served as our Senior Vice President and Controller since November 2015 and as our Chief Accounting Officer since December 2015. He served as our Vice President and Controller from August 2013 to November 2015. Prior to that appointment, Mr. Penczek served as Vice President and Assistant Controller from January 2008 to August 2013 and in various other roles in our finance department from February 2006 until January 2008. Before joining us, Mr. Penczek was a Staff Vice President with CNA Insurance from 2000 to 2005 and had various positions with PricewaterhouseCoopers LLP from 1992 to 2000, including as a Manager.

 

 

 

 

 

 

 

 

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Proposal No. 3 — Advisory Vote to Approve the Compensation of Our Named Executive Officers

 

Section 14A of the Exchange Act enables our shareholders to vote to approve, on an advisory (nonbinding) basis, the compensation of our NEOs (“Say-on-Pay”) as disclosed in this proxy statement in accordance with the SEC’s compensation disclosure rules. At our annual meetings of shareholders held in May 2015, May 2016 and May 2017, approximately 97%, 97%, and 94%, respectively, of the votes cast for or against the Say-on-Pay proposal at those meetings were voted in favor of the proposal. The Compensation Committee believes this affirms our shareholders’ support of our approach to executive compensation, and no significant changes were made to this approach for 2017 as a result of the vote.

Our executive compensation program (the “Total Rewards” program) is designed to attract, engage, motivate and retain a talented team of executive officers and to appropriately reward those executive officers for their contribution to our business, our members and our shareholders. Our Total Rewards program emphasizes performance-based compensation in the form of our Annual Incentive Plan (“AIP”) and equity grant programs under our shareholder approved Incentive Plan. In 2017, fixed compensation (salary and benefits) made up a small percentage of target total compensation for our executives, with 9% for Mr. Swedish and an average of approximately 18% for the other NEOs. The majority of the CEO’s and other NEOs’ compensation is variable based on both individual and overall Company performance. Our Total Rewards program contains financial and strategic goals, and the value of equity based awards will depend on our long-term stock price performance. Please read the “Compensation Discussion and Analysis,” along with the tables and narrative discussion, beginning on page 31 for additional details about our executive compensation program, including information about the fiscal year 2017 compensation of our NEOs.

We are asking our shareholders to indicate their support for our NEOs’ compensation as described in this proxy statement. This proposal gives our shareholders the opportunity to express their views on our NEOs’ compensation. The Say-on-Pay vote is not intended to approve any specific item of compensation but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement. Accordingly, we recommend that our shareholders vote “for” the following resolution at the annual meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosures.”

The Say-on-Pay vote is advisory, and therefore not binding on the Company, our Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our shareholders and to the extent that there is any significant vote against the NEOs’ compensation as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

The approval or disapproval of the Say-on-Pay proposal will be determined by the vote of a majority of the votes cast on such proposal (excluding abstentions), which means that the number of shares voted “for” the proposal must exceed the number of shares voted “against” the proposal for approval of the Say-on-Pay proposal.

Recommendation

The Board of Directors unanimously recommends a vote FOR Proposal No. 3, the advisory vote to approve the compensation of our Named Executive Officers.

 

 

 

 

 

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Table of Contents

Executive Compensation

 

 

Compensation Discussion and Analysis

Executive Summary

Notable highlights for 2017 include strong financial and operational performance, as evidenced by the following performance highlights in 2017, and a CEO succession in November 2017 as discussed more fully below.

 

Picture 18

 

*Please refer to the GAAP Reconciliation table on page B-1 for information on Adjusted Net Income and Adjusted Net Income Per Diluted Share (“Adjusted EPS”).

Other highlights include:

·

Operating cash flow was approximately $4.2 billion, or 1.1 times net income, for 2017, as compared to approximately $3.2 billion for 2016.

·

Our closing stock price increased by 56.5% from $143.77 on December 30, 2016 to $225.01 on December 29, 2017, the last trading day of 2017. Additionally, the Company paid cash dividends totaling $2.70 per share in 2017.

·

Medical membership grew to over 40 million members.

·

Our strong performance is reflected in the compensation that our Named Executive Officers earned for 2017.

 

Pay and Performance Outcomes and Alignment for 2017

·

Based on our performance against predefined goals, the Annual Incentive Plan paid out at 152.6% of target for all named executive officers (“NEOs”), other than Ms. McCarthy, which is reflective of our strong performance against our Adjusted EPS (80% weighting), Consumer Centricity (10%), Provider Collaboration (5%), and Quality of Care (5%) objectives. Ms. McCarthy received a payout of 175.0% of target reflecting a discretionary upward adjustment by the Compensation Committee in recognition of her personal contribution and performance in 2017.

 

 

 

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Executive Compensation (continued)

 

·

Based on our performance against predefined goals, the 2015 – 2017 Performance Stock Unit (“PSU”) cycle (our first fully completed three-year PSU cycle) paid out at 159.7% of target for all NEOs, which is reflective of our strong performance against three-year cumulative Adjusted EPS (75% weighting) and three-year cumulative operating revenue (25% weighting) measures.

CEO Transition Details

·

On November 20, 2017, Gail Boudreaux was appointed Anthem’s President and Chief Executive Officer and was appointed to the Board.

·

Ms. Boudreaux has a base salary of $1,400,000, a target annual incentive of 175% of base beginning in 2018, and aggregate target long-term incentive awards valued at $10,250,000 for 2018 to be granted in the form consistent with all NEOs, which remains primarily performance-based (50% PSUs, 25% Stock Options, and 25% restricted stock units (“RSUs”)).

·

In connection with her appointment, Ms. Boudreaux also received a sign-on PSU grant with a target value of approximately $2,000,000 that vests based on the level of achievement of our performance from 2017 through 2019 in accordance with the terms of the PSUs granted to our executives in 2017.  This at-risk award provided an initial inducement while immediately aligning Ms. Boudreaux’s performance-incentives with that of our broader leadership team.

·

After Ms. Boudreaux’s appointment, Mr. Swedish continued to serve as our Executive Chair of the Board and will serve in such role until the annual meeting.  More detail on the CEO succession and the compensation to be paid to Ms. Boudreaux and Mr. Swedish is discussed below under “Elements of Total Rewards – Employment Agreement with Ms. Boudreaux” and “– Transition Agreement with Mr. Swedish.”

This Compensation Discussion & Analysis (“CD&A”) highlights our company’s executive compensation philosophy and strategy, provides details around the structure of the pay program, and provides an overview of the specific pay actions and outcomes that occurred during the 2017 performance year.

Executive Compensation Philosophy and Program Objectives

Our compensation program, which we refer to as our Total Rewards program, is designed to attract, engage, motivate and retain a talented team of executives and to appropriately reward those executives for their contributions to our business, our members and our shareholders. We seek to accomplish this goal in a way that is closely aligned with the long-term interests of our shareholders and the expectations of our members.

In order to achieve these objectives, we structure our compensation program in a manner that emphasizes the long-term performance of the Company by focusing on our purpose, vision and strategies, while delivering compensation that is commensurate with Company performance and the individual performance of our executives within the context of the external market.

The Compensation Committee of our Board of Directors (the “Committee”) oversees our Total Rewards compensation program for our executives, including the persons identified in the Summary Compensation Table as NEOs, and determines their compensation.

Further, these objectives are extended beyond the executive ranks to include all associates and are intended to promote our culture and enhance teamwork and equitable treatment. To achieve these objectives, the Total Rewards program is designed to reward our associates when they create long-term value for our shareholders through sustained growth in our stock price and meeting or exceeding our annual financial plan, and to achieve our purpose, vision and strategies while operating within our values and behaviors.

 

 

 

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Executive Compensation (continued)

 

LOGO

Historical Say-on-Pay Results and Shareholder Feedback

Over the past five years, between 94% and 97% of our shareholders voted in favor of the advisory vote on the compensation of our NEOs, commonly referred to as the “Say-on-Pay” vote. As part of our shareholder outreach process, we regularly speak with investors and invite comments on our pay programs. The Committee considers comments and input provided by shareholders when determining the compensation of our NEOs.

In September 2016 the Committee reviewed a presentation from our independent compensation consultant on our Total Rewards program, shareholder Say-on-Pay voting results, and trends in executive compensation.  The Committee determined that our Total Rewards program is fundamentally sound, supports the needs of our business, is aligned with the trends in the market and, as demonstrated by our Say-on-Pay voting results, is strongly supported by our shareholders. As a result, at its December 2016 meeting, the Committee decided to retain our 2016 executive compensation philosophy, components, component mix, competitive positioning targets and many of our 2016 performance metrics for 2017 compensation. The shareholder vote in 2017 approving our 2016 compensation by a significant amount was further support for our decision not to make significant changes to executive compensation for 2017.

When determining how often to hold a Say-on-Pay vote, the Board took into account the strong preference for an annual vote expressed by our shareholders at our 2017 annual meeting.  Accordingly, the Board determined that we will hold annual Say-on-Pay votes until the next say-on-pay frequency vote, which will be held at our 2023 annual meeting.

Pay-for-Performance Philosophy and Pay Mix

To align NEO interests and rewards with the long-term interests of our shareholders and to drive the achievement of our purpose and vision, our Total Rewards program emphasizes performance-based compensation in the form of our Annual Incentive Plan (“AIP”) and equity grant programs under the shareholder approved incentive compensation plan (our “Incentive Plan”).

Over 90% of Mr. Swedish’s 2017 target compensation and over 80% of the other NEOs’ 2017 target compensation was delivered through performance-based programs. These performance-based programs are tied to our business results and stock performance.

 

 

 

 

 

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Executive Compensation (continued)

 

Primary Compensation Elements

The following chart shows the primary compensation elements for our NEOs. Additional detail on these compensation elements can be found in “Elements of Total Rewards” in this CD&A.

Picture 32

 

Impact of Business Results, Stock Price and Shareholder Returns on Executive Compensation

As indicated in the chart above, the compensation value received by our executives is highly dependent on share price performance and relies on meeting predetermined financial and operational goals approved by the Committee. Consistent with our pay-for-performance philosophy, and based on our financial and operational results in relation to our annual business plan, performance-based variable compensation has fluctuated over the years and was paid below target in 2015 and above target in 2017, 2016, 2014 and 2013.

Our long-term compensation, comprised of PSUs, stock options and time-based RSUs, represented 74% and an average of 64% of the 2017 target compensation for Mr. Swedish and other NEOs, respectively. PSUs and RSUs more closely replicate shareholder return, as they gain or lose value as our stock price changes, and earn dividend-equivalents equal to the cash dividend per share amount, which are paid to participants without interest upon vesting and to the extent underlying shares are earned. Stock options gain value when our stock price rises over the grant price.

 

 

 

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Table of Contents

Executive Compensation (continued)

 

Elements of Total Rewards

Overview

Our 2017 Total Rewards program for our business leaders, including the NEOs, is comprised of the following financial elements:

·

base salary;

·

annual performance-based incentive awards under the AIP;

·

equity awards in the form of PSUs, time-based RSUs and stock options under the Incentive Plan;

·

broad-based employee benefits; and

·

executive benefits and perquisites.

Each year management sets the broad-based employee salary and benefits programs and budgets, and the Committee reviews and approves the executive merit salary increase budget, broad-based AIP design, measures and scales, equity awards plan, executive perquisites and executive stock ownership guidelines. The Committee bases these decisions on our business needs, best practice information, competitive market data and operating budget constraints.

The Committee reviews the business and individual performance of each executive officer and sets:

·

the AIP award payouts for the prior year pursuant to the formulas previously established;

·

prospective base salary adjustments;

·

prospective adjustments to target AIP award percentages of base salary; and

·

the size and type of equity awards granted to each executive officer.

Independent directors engage in a formal review process annually to evaluate the CEO’s individual performance on numerous factors, including: leadership, strategic planning, getting results, external and internal relations and interaction with the Board. Directors are invited to speak directly with the Lead Director and the Chair of the Compensation Committee to provide individual feedback, and executive sessions are held at Board meetings throughout the year in which performance input from Board members is sought. The Committee’s 2017 compensation decisions were based on its evaluation of each executive’s performance (including performance assessments by the CEO for the other executive officers), as well as our 2016 and 2017 achievements, all of which reflect the NEOs’ individual performance. Such determinations are based on the Committee’s assessments after consideration of management recommendations, market-based compensation information and advice of the Committee’s independent compensation consultant. The assessments represent the Committee’s view of how the NEO’s performance contributed to our performance and achievements, as well as other leadership accomplishments.

These decisions are made as part of a unified process so that all components of pay are reviewed in concert with each other, and, as appropriate, decisions about one component can affect decisions regarding the other components of pay. This is intended to ensure that the Total Rewards package for the NEOs fits with our compensation objectives as described above. Additionally, individual performance is rewarded by providing executives with career growth through challenging assignments and, as positions become available, promotional opportunities.

The Committee does not have a specific target for allocating the amount of compensation among the pay elements (base salary, annual incentive and equity grants), but seeks to apply a higher weighting to perf