DEF 14A 1 d536932ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.        )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under § 240.14a-12

Cigna Corporation

(Name of Registrant as Specified In Its Charter)

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

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20 1 8 PROXY STATEMENT 913017_Proxy_Statement_cover_v7-Single pgs.indd 1 People Purpose performance 2/28/18    10:38 AM


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LOGO

March 16, 2018

900 Cottage Grove Road

Bloomfield, Connecticut 06002

Dear Cigna Shareholder:

On behalf of the Cigna Corporation Board of Directors, our Enterprise Leadership Team and our colleagues around the globe, we are pleased to cordially invite you to attend our 2018 Annual Meeting of Shareholders to be held on April 25, 2018. The attached Notice of 2018 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Annual Meeting.

2017 marked another consecutive year of delivering strong, differentiated results, while generating considerable momentum for 2018 and the years ahead. This exceptional performance reflects the efforts of an exceptionally talented Cigna team – individuals who are proud to serve as champions on behalf of our customers and communities around the world.

In support of Cigna’s belief that our communities play an essential role in meeting the health and wellness needs of individuals, we continue to take leadership roles to confront a number of societal challenges. Cigna is addressing the needs of our friends, families and neighbors through efforts such as combatting the opioid crisis in partnership with providers, empowering veterans to address difficult health and life circumstances and establishing a multi-city health improvement tour to bring free health screenings nationwide.

We continue to be led by our Go strategy, which we adopted in 2009 and evolved in mid-2017 to Go Deeper, Go Local and Go Beyond to further accelerate our ability to drive significant value creation for our customers, clients, partners, communities and shareholders. By consistently and effectively executing on our Go strategy over this extended period of time, we have proven that we can actively align Cigna with the needs of our diverse stakeholders and succeed in an evolving, highly dynamic and disruptive global marketplace.

Enhancing this strategy is our continued commitment to innovation, a relentless focus on serving our customers, and a drive to be a convener for both organizations and individuals across an increasingly complex landscape. Taken together with our unwavering mission to improve the health, well-being and sense of security of those we are privileged to serve, we are solidifying Cigna’s role as a partner of choice, and are creating value for stakeholders across the markets where we compete.

Our ability to create and deliver this value is clearly reflected in our financial performance and in our ability to deliver competitively attractive top and bottom line growth, as well as earning the right to serve more than 95 million customer relationships around the world.

As we enter 2018, Cigna’s strong capital position and flexibility further enable our organization to drive attractive earnings and customer growth both in 2018 and over the long-term.

To position us for continued strong performance, this year we named five tenured and proven leaders to our enterprise leadership, allowing us to further emphasize our focus on customer engagement, local markets and value-based partnerships.

Our Board of Directors, comprised of individuals with diverse experiences and skills, remains committed to strong corporate governance as a framework for financial integrity, shareholder transparency and competitively attractive performance. In consideration of the vote on the shareholder proposal regarding proxy access at the last annual meeting and following outreach to shareholders, in December 2017 the Board adopted proxy access, representing a significant enhancement of shareholder rights.

Your vote is very important. Whether or not you plan to attend the 2018 Annual Meeting, we hope that you will cast your vote as soon as possible.

As always, thank you for your continued support of Cigna.

Sincerely,

 

/s/ David M. Cordani    /s/ Isaiah Harris, Jr.

David M. Cordani

 

President and Chief Executive Officer

  

Isaiah Harris, Jr.

 

Chairman of the Board


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 NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

LOGO

 

DATE AND TIME:   

Wednesday, April 25, 2018 at 8:00 a.m.

 

PLACE:   

Delamar Hotel, Ballroom

1 Memorial Road

West Hartford, Connecticut 06107

 

ITEMS OF BUSINESS:   

Proposal 1: Election of nine director nominees named in this Proxy Statement for one-year terms to expire at the next annual meeting of shareholders.

 

Proposal 2: Advisory approval of executive compensation.

 

Proposal 3: Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018.

 

Proposal 4: Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement.

 

Consideration of any other business properly brought before the meeting.

 

RECORD DATE:   

You may vote on the matters presented at the Annual Meeting if you were a shareholder of record at the close of business on February 26, 2018.

 

PROXY VOTING:    Your vote is very important, regardless of the number of shares you own. We urge you to promptly vote by telephone, by using the Internet, or, if you received a proxy card or instruction form, by completing, dating, signing and returning it by mail.

 

March 16, 2018     By order of the Board of Directors,
   

/s/ Neil Boyden Tanner

Neil Boyden Tanner

    Corporate Secretary

 

 

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting of Shareholders To Be Held on April 25, 2018

 

The Notice of Annual Meeting, Proxy Statement and Annual Report for

the fiscal year ended December 31, 2017 are available at www.envisionreports.com/ci.

 

 

 


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TABLE OF CONTENTS 

 

 

 

PROXY STATEMENT SUMMARY      1  
CORPORATE GOVERNANCE MATTERS      7  

ELECTION OF DIRECTORS (PROPOSAL 1)

     7  

PROCESS FOR DIRECTOR ELECTIONS

     7  

PROCESS FOR SELECTING AND NOMINATING DIRECTORS

     7  

BOARD OF DIRECTORS’ NOMINEES

     10  

CORPORATE GOVERNANCE POLICIES AND PRACTICES

     16  

PROXY ACCESS

     16  

DIRECTOR INDEPENDENCE

     17  

BOARD LEADERSHIP STRUCTURE

     17  

BOARD EVALUATIONS AND BOARD EFFECTIVENESS

     18  

RESPONSIBILITIES OF THE BOARD

     19  

BOARD MEETINGS AND COMMITTEES

     21  

CODES OF ETHICS

     23  

CORPORATE RESPONSIBILITY

     23  

ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT

     24  

CERTAIN TRANSACTIONS

     24  

NON-EMPLOYEE DIRECTOR COMPENSATION

     25  

OVERVIEW

     25  

DIRECTOR COMPENSATION PROGRAM

     25  

DIRECTOR COMPENSATION TABLE FOR 2017

     27  

DIRECTOR OWNERSHIP

     28  
COMPENSATION MATTERS      29  

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION (PROPOSAL 2)

     29  

COMPENSATION DISCUSSION AND ANALYSIS

     30  

EXECUTIVE SUMMARY

     31  

EXECUTIVE COMPENSATION POLICIES AND PRACTICES

     33  

ELEMENTS OF COMPENSATION

     37  

EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS

     48  

PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION

     49  

OTHER PRACTICES

     51  

REPORT OF THE PEOPLE RESOURCES COMMITTEE

     53  

EXECUTIVE COMPENSATION TABLES

     54  

2017 SUMMARY COMPENSATION TABLE

     54  

GRANTS OF PLAN-BASED AWARDS IN 2017

     57  

OUTSTANDING EQUITY AWARDS AT YEAR-END 2017

     59  

OPTION EXERCISES AND STOCK VESTED IN 2017

     61  

PENSION BENEFITS FOR 2017

     62  

NONQUALIFIED DEFERRED COMPENSATION FOR 2017

     65  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

     66  
AUDIT MATTERS      71  

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 3)

     71  

REPORT OF THE AUDIT COMMITTEE

     74  
PROPOSAL TO AMEND RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT (PROPOSAL 4)      75  
OWNERSHIP OF CIGNA COMMON STOCK      76  

STOCK HELD BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS

     76  

STOCK HELD BY CERTAIN BENEFICIAL OWNERS

     78  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     78  
ANNUAL MEETING INFORMATION      79  
ANNEX A – NON-GAAP MEASURES      A-1  
ANNEX B – SURVEY DATA FOR PRESIDENT – INTERNATIONAL MARKETS      B-1  
ANNEX C – GENERAL INDUSTRY PEER GROUP      C-1  
APPENDIX A – RESTATED CERTIFICATE OF INCORPORATION      Appendix-A  


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PROXY STATEMENT SUMMARY 

 

 

 

We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and 2017 Annual Report before you vote.

Mission and Strategy

 

Cigna’s mission is dedicated to improving the health, well-being and sense of security of the individuals we serve through our more than 95 million customer relationships around the globe. Since 2009, our strategic focus in support of our mission has been to Go Deep, Go Global and Go Individual.

To further accelerate the differentiated value we deliver for our customers, clients, partners and communities, we have evolved this strategy to Go Deeper, Go Local and Go Beyond in order to expand avenues for growth and performance. Creating value for our customers, clients, partners, communities and in turn, our shareholders, is a direct result of the continued, effective execution of this proven strategy.

 

Our Mission

 

To improve the health, well-being and sense of security of the people we serve

 

Our Strategy
            Go Deeper:   To expand and deepen our customer, client and partner relationships; depth in targeted sub-segments, geographies
            Go Local:   To ensure our solution suite and services meet customer, client and partner needs at a local market level
            Go Beyond:  

To innovate and further differentiate our businesses, the experiences we deliver, and overall social impact

 

How We Will Win
LOGO

Cigna is a growth company with a proven track record of strong top-line and bottom-line growth and a clear, focused strategy. We create value by delivering differentiated and innovative solutions to our customers, clients and partners. We have an attractive, long-term outlook, enabled by the significant opportunity in our existing businesses, our strong talent, capabilities and capital position.

We also believe that our corporation has a social responsibility, and that we can work to actively address gaps in health and well-being to help individuals in the markets where we operate around the world. Our perspective is that companies like Cigna can partner more with communities to contribute and make a difference.

On March 8, 2018, Cigna and Express Scripts Holding Company entered into a definitive agreement whereby Cigna will acquire Express Scripts.


 

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   PROXY STATEMENT SUMMARY

 

 

Business Performance

 

In 2017, consolidated revenue increased 5% to $41.6 billion, as we continued to focus on our mission to improve the health, well-being and sense of security of the people we serve. Shareholders’ net income for 2017 was $2.2 billion, compared to $1.9 billion for 2016. Consolidated adjusted income from operations* for 2017 was $2.7 billion, compared to $2.1 billion in 2016, reflecting increased earnings contributions from each of our business segments. Our results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life. These results provide us with momentum for continued growth in 2018.

 

LOGO    LOGO

 

 

  * We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2017 for more complete financial information. Consolidated adjusted income from operations is a measure of profitability used by Cigna’s management because it presents the underlying results of operations of Cigna’s businesses and permits analysis of trends in underlying revenue, expenses and shareholders’ net income. This consolidated measure is not determined in accordance with accounting principles generally accepted in the United States (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders’ net income. Shareholders’ net income was $1.5 billion, $2.1 billion, $2.1 billion, $1.9 billion and $2.2 billion for the years ended December 31, 2013, 2014, 2015, 2016 and 2017, respectively. For a reconciliation of consolidated adjusted income from operations to shareholders’ net income, see Annex A.

Total Shareholder Return

 

 

The following chart shows our cumulative Total Shareholder Return (TSR) as of December 31, 2017, on a one-, three- and five-year basis. Cigna’s three-year annual compounded TSR was 25.5%, placing Cigna at the 78th percentile of its Strategic Performance Share (SPS) performance peer group for the 2015–2017 performance period. For more information regarding our SPS program, see “Long-Term Incentives – Strategic Performance Share Program” in the Compensation Discussion & Analysis (CD&A).

 

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PROXY STATEMENT SUMMARY

 

 

Board of Directors

 

 

 

CURRENT

DIRECTORS

 

 

 AGE 

 

 

OCCUPATION

 

 

 

COMMITTEE

MEMBERSHIPS

 

     

David M. Cordani

 

  52

 

 

President and Chief Executive Officer of Cigna

 

 

Executive

 

     

Eric J. Foss

 

  59

 

 

Chairman, President and Chief Executive Officer of ARAMARK Corporation

 

 

 

Corporate Governance

People Resources

 

     

Isaiah Harris, Jr.

 

  65

 

 

Former President and Chief Executive Officer of AT&T Advertising & Publishing — East

 

 

 

Chairman of the Board Executive (Chair)

 

     

Jane E. Henney, M.D.(1)

 

  70

 

 

Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine

 

 

Corporate Governance (Chair) Audit

Executive

 

     

Roman Martinez IV

 

  70

 

 

Private Investor

 

 

Audit (Chair)

Executive

Finance

 

     

John M. Partridge

 

  68

 

 

Former President of Visa, Inc.

 

 

Finance (Chair)

Executive

People Resources

 

     

James E. Rogers

 

  70

 

 

Former Chairman, President and Chief Executive Officer of Duke Energy Corporation

 

 

 

Audit

Finance

 

     

Eric C. Wiseman

 

  62

 

 

Former Executive Chairman, President and Chief Executive Officer of VF Corporation

 

 

 

Finance

People Resources

 

     

Donna F. Zarcone

 

  60

 

 

President and Chief Executive Officer of The Economic Club of Chicago

 

 

 

Audit

Corporate Governance

 

     

William D. Zollars

 

  70

 

 

Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc.

 

 

People Resources (Chair) Executive

Corporate Governance

 

 

(1) On March 12, 2018, Dr. Henney informed the Company of her intention to not seek re-election as a Director in light of her role as Lead Independent Director of AmerisourceBergen Corporation and Cigna’s announcement regarding the proposed acquisition of Express Scripts Holding Company.

 

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   PROXY STATEMENT SUMMARY

 

 

Corporate Governance

 

Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance provides the foundation for financial integrity and shareholder confidence. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively.

In 2017, the Board, after a full evaluation that included outreach to Cigna’s largest shareholders and consideration of the vote on the shareholder proposal regarding proxy access at the 2017 annual meeting of shareholders, implemented proxy access. As a result, a shareholder or a group of up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of 20% of the Board or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in the By-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback we received as part of our shareholder engagement.

In February 2018, the Board approved an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority vote provision, subject to shareholder approval at this Annual Meeting. Following shareholder approval, the Board will amend the By-Laws to eliminate a similar supermajority voting requirement in our By-Laws. Thereafter, all supermajority voting provisions will have been removed and shareholders may amend all provisions of the Restated Certificate and the By-Laws by the affirmative vote of a majority of the Company’s outstanding common stock.

At the 2016 annual meeting of shareholders, the phased implementation of the Board’s declassified structure began and, beginning with this Annual Meeting, all directors are elected to one-year terms and the classified structure is fully eliminated.

 

KEY GOVERNANCE PRACTICES

 

    

•    Independent board of directors with diversity in composition, skills and experience

 

•    Independent Chairman of the Board

 

•    Regular executive sessions of the Board and its committees, without management present

 

•    Directors elected by majority voting

 

•    Annual election of all directors

 

•    Proxy access right for shareholders

    

•    Separate Code of Business Conduct and Ethics for the Board

 

•    Independent Audit, Corporate Governance, Finance and People Resources Committees

 

•    Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments

 

•    Majority of director compensation delivered in Cigna common stock

 

•    Meaningful stock ownership guidelines for directors

    

 

 

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PROXY STATEMENT SUMMARY

 

 

Executive Compensation

 

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.

In 2017, our shareholders cast advisory votes in favor of our executive compensation program, with approximately 93% of votes cast in favor.

 

      COMPENSATION GOVERNANCE AND CONTROLS           
     

 

•    “Double trigger” requirement for change of control benefits

 

•    No tax gross-up of severance pay upon a change of control

 

•    Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies

 

•    Robust stock ownership guidelines and holding requirements for equity awards to align executives’ interests with shareholders

 

•    Prohibition of hedging of Cigna stock by all directors, executive officers and employees, and restrictions on pledging of Cigna stock by directors and Section 16 officers

 

•    A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley

    

•    Management of Long-Term Incentive Plan annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan

 

•    No excessive perquisites

 

•    Oversight by the People Resources Committee of people development, policies and processes, including consideration of assessments of executive officers and key senior management

 

•    CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the People Resources Committee

 

•    An annual assessment by the People Resources Committee of any potential risks and associated internal controls in our incentive compensation programs and policies

     
                

The target pay mix for the Chief Executive Officer and the other named executive officers during 2017 reflects our executive compensation philosophy that emphasizes performance-based compensation over fixed compensation. The percentages shown below are targets only and will not match the percentages calculable from the actual compensation paid as reflected in the Summary Compensation Table.

 

CEO TARGET

PAY MIX

    

OTHER NEO AVERAGE

TARGET PAY MIX

 

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 PROXY STATEMENT SUMMARY

 

 

Voting Matters and Board Recommendations

 

PROPOSALS

 

 

 

BOARD
    RECOMMENDATION    

 

Proposal 1. Election of Directors.

 

The Board and the Corporate Governance Committee believe that the nine director nominees named in this Proxy Statement bring a combination of diverse qualifications, skills and experiences that contribute to a well-rounded Board. As determined by the Board and Corporate Governance Committee as part of the most recent Board evaluation, each director nominee has proven leadership ability, good judgment and has been an active and valued participant on the Board during his or her tenure.

 

FOR

each of the nominees

Proposal 2. Advisory Approval of Executive Compensation.

 

The Board believes that Cigna’s executive compensation program design effectively aligns the interests of our executive officers with those of our shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s shareholders. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.

  FOR

Proposal 3. Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2018.

 

The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 2018. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment.

  FOR

Proposal 4. Approval of an Amendment to the Company’s Restated Certificate of Incorporation to Eliminate the Supermajority Voting Requirement.

 

The Board recognizes that the elimination of the supermajority vote required to amend Section 2 of Article III of the Company’s By-Laws, which relates to the number, qualifications, election and term of office of the Board of Directors, aligns with best practices in corporate governance.

  FOR

 

2018 Annual Meeting of Shareholders

Wednesday, April 25, 2018

8:00 a.m.

Delamar Hotel, Ballroom

1 Memorial Drive

West Hartford, Connecticut 06107

 

 

 

 

 

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CORPORATE GOVERNANCE MATTERS 

 

 

Election of Directors (Proposal 1)

 

 

Beginning with this Annual Meeting, the entire Board of Directors is elected annually by Cigna’s shareholders. Based on input from shareholders, we began the phased implementation of the Board’s declassified structure at the 2016 annual meeting. The classified structure is now fully eliminated. At this Annual Meeting, the Board is nominating the nine directors named in this Proxy Statement for one-year terms to expire at the next annual meeting of shareholders. The role of the Board, its leadership structure and governance practices are described in “Corporate Governance Policies and Practices.” This section describes the process for director elections and director nominations, identifies the director expectations and qualifications considered by the Board and the Corporate Governance Committee in selecting and nominating directors, discusses our board refreshment activities and presents the biographies, skills and qualifications of the director nominees.

PROCESS FOR DIRECTOR ELECTIONS

Cigna has adopted a majority voting standard for the election of directors in uncontested elections. Under this standard, each director must receive a majority of the votes cast for him or her. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee for the director to be elected. Each director has agreed to tender, and not withdraw, his or her resignation if he or she does not receive a majority of the votes cast at the Annual Meeting. The Corporate Governance Committee will make a recommendation to the Board on whether to accept the resignation. The Board has discretion to accept or reject the resignation. A director whose resignation is under consideration will not participate in the decisions of the Corporate Governance Committee or the Board concerning his or her resignation. In a contested election, where the number of director nominees exceeds the number of directors to be elected, the voting standard is a plurality of votes cast.

PROCESS FOR SELECTING AND NOMINATING DIRECTORS

Director Selection and Nomination Process

The Corporate Governance Committee assesses the Board’s composition as part of the annual self-evaluation

of the Board (described in “Corporate Governance Policies and Practices — Board Evaluations and Board Effectiveness”). When considering whether to nominate current directors for re-election, the Corporate Governance Committee and the Board review the individual director’s performance against the expectations for Board membership (identified below under “Director Expectations and Qualifications”). The Board considers its composition as part of its annual evaluation. The Board may nominate for election, and appoint to fill vacant or new Board positions, only those persons who agree to adhere to the Company’s majority voting standard (described above).

From time to time, the Corporate Governance Committee retains a third-party search firm to assist in identifying and evaluating candidates for Board membership. In 2017, the Corporate Governance Committee retained an outside firm to assist the Committee and the Board with its board refreshment plan, as further described on page 9. The Corporate Governance Committee also considers suggestions for Board nominees submitted by shareholders, which are evaluated using the same criteria as new director candidates and current director nominees.

Once a potential candidate has been identified, the Corporate Governance Committee reviews the background of the new director candidate and presents him or her to the Board for consideration. When considering director candidates and the current and future composition of the Board, the Corporate Governance Committee and the Board consider how each candidate’s background, experiences, skills and/or prior board and committee service will contribute to the diversity of the Board. In addition, the Corporate Governance Committee and the Board consider the Company’s business strategy and how each director candidate’s background complements that strategy. Candidates interview with the Chief Executive Officer, the Chair of the Corporate Governance Committee and the Chairman of the Board, as well as other members of the Board, as appropriate.

Shareholders that want to nominate directors for inclusion in our proxy statement or directly at an annual meeting in accordance with our By-Laws should follow the instructions described in “Annual Meeting Information.”

 

 

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 CORPORATE GOVERNANCE MATTERS

 

 

Director Expectations and Qualifications

The Corporate Governance Committee, in consultation with the Board, has identified individual director expectations and qualifications, characteristics, skills and experience that it believes every member of the Board should have. In addition, the Corporate Governance Committee has identified areas of expertise that it believes support Cigna’s business strategy in the short- and long-term, enable the Board to exercise its oversight function and contribute to a well-rounded Board. These expectations and qualifications, as well as the identified areas of expertise, are considered and reviewed as part of the Board’s annual evaluation and as part of each individual Director’s evaluation. In developing these areas of expertise, the Board also considered the skills necessary to support the business strategy and the skills and experiences reflected on the boards of companies within Cigna’s peer group, as well as best practices among other large companies. The Board regularly reviews the identified areas to ensure they support changes in the Company’s strategy and the Board’s needs. The Corporate Governance Committee and the Board take into consideration these criteria and the mix of skills and experience as part of the director recruitment, selection, evaluation and nomination process.

 

 

 

Expectations of Every Director

 

       
 

•   Understand Cigna’s businesses and the importance of the creation of shareholder value

 

•   Participate in an active, constructive and objective way at Board and committee meetings

 

•   Review and understand advance briefing materials

 

•   Contribute effectively to the Board’s evaluation of executive talent, compensation and succession
planning

     

•   Contribute effectively to the Board’s assessment of strategy and risk

 

•   Share expertise, experience, knowledge and insights on matters before the Board

 

•   Advance Cigna’s business objectives and reputation

 

•   Demonstrate an ongoing commitment to consult and engage with the CEO and senior management outside of Board and committee meetings on matters impacting Cigna

 
         

 

 

 

Qualifications, Characteristics, Skills and Experience of Every Director

 

 
 

•   Good judgment and strong commitment to ethics and integrity

 

•   Ability to analyze complex business and public policy issues and provide relevant input concerning the Company’s business strategy

 

•   Free from conflicts of interest

     

•   Ability to assess different risks and impact on shareholder value

 

•   Contribution to the Board’s overall diversity of thought

 

•   High degree of achievement in their respective fields

 
         

While the Board does not have a formal policy with regard to diversity, the Board remains committed to diversity and the Corporate Governance Committee works to ensure that the Board is comprised of individuals with expertise in fields relevant to Cigna’s business, experience from different professions and industries, a diversity of age, ethnicity, gender and global experience and a range of tenures. The Board believes that a range of tenure allows both new perspective and continuity. This continuity has proven beneficial given the complexities of, and the significant change and uncertainty in, the health care industry over the past several years.

 

LOGO   LOGO   LOGO

The above tables show the diversity of our nine independent board members.

 

 

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AREAS OF EXPERTISE REFLECTED ON CIGNA’S

BOARD OF DIRECTORS

Business Leader

Directors who have served as a chief executive officer, a CEO-equivalent or a business unit leader of a large company bring a practical understanding of large organizations, processes, strategy and risk management.

Finance

An understanding of finance, capital markets and financial reporting processes is necessary for a well-rounded Board because of the importance we place on accurate financial reporting and robust financial controls and compliance. In addition, Cigna’s business involves complex financial transactions.

Healthcare and Delivery Systems

As we work to create a sustainable health care ecosystem, the Board values directors with experience on issues related to improving access to care and reducing health costs to patients through the provision of care management and the use of innovative delivery system solutions.

Information Technology

Effective information systems and the integrity and timeliness of data we use to serve our customers and health care professionals are integral to the operation of our business. For this reason, the Board benefits from directors with leadership experience related to the development, installation, implementation, security or maintenance of computer systems, applications and digital informatics.

International/Global

The Board values directors with leadership experience overseeing non-U.S. operations and working in diverse cultures around the globe.

Marketing and Consumer Insights

Our customer-focused strategy benefits from inclusion of directors with leadership experience in marketing, advertising and consumer insight functions. These directors also have experience with product development and brand building, particularly as it focuses on end-user consumers.

Regulated Industry/Public Policy

Our business is highly regulated at the federal, state, local and international levels. For this reason, the Board benefits from directors with experience in regulated industries and public policy to help us identify, assess and respond to new trends in the legislative and regulatory environment.

Board Refreshment and Succession Planning

The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the composition of the Board and its committees and for making recommendations to the full Board on these matters. On an ongoing basis, the Corporate Governance Committee engages in Board succession planning, taking into account input from Board discussions and from the Board and committee evaluation process regarding the specific backgrounds, skills and experience that would contribute to overall Board and committee effectiveness.

In 2017, the Corporate Governance Committee began a long-term board refreshment plan. The Corporate Governance Guidelines require that directors retire no later than the annual meeting of shareholders coinciding with or following his or her 72nd birthday. As a result, within the next five years, four of the directors nominated for election are expected to retire from the Board. To assist with board refreshment planning, the Corporate Governance Committee engaged Russell Reynolds Associates, Inc. to provide advisory services related to board succession planning and to assist with the recruitment of director candidates. The plan includes a needs assessment and an interview with each director to understand his or her perspective on Cigna’s strategy, the culture of the Board and the Board’s relationship with management, and to seek the Board’s views on the skills that may be relevant in the coming years and in light of upcoming retirements. The Corporate Governance Committee is focused on identifying candidates that possess skills and qualifications that will support the Company’s short- and long-term strategy, while being mindful of the skills that the retiring directors bring to the Board and the ongoing significant complexity and uncertainty within the health care industry. The goal of the refreshment plan is to balance the knowledge that results from long-term service on the Board with the new skills and experience that results from adding new directors to the Board, at a pace that allows the Board to maintain its high-performing and diverse culture.

 

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Other Practices and Policies Related to Director Service

In addition to working to ensure that the Board is comprised of diverse and qualified individuals, the Board has adopted the following governance policies and practices that contribute to a well-functioning Board.

 

Limits on Public Company

Directorships

 

 

To ensure each director is able to devote sufficient time and attention to his or her responsibilities as a board member, the Board has established the following limits on outside directorships:

 

•   Each director who also is a chief executive officer of a public company may not serve on more than one other public company board in addition to Cigna’s Board and the board of his or her employer (for a total of three public company directorships); and

 

•   Each director who is not a chief executive officer of a public company may serve on no more than four boards of other public companies (for a total of five such directorships).

 

All of our directors are in compliance with these limits on outside directorships.

 

Change in Director’s Principal Position

 

 

If a director changes his or her principal employment position, that director is required to tender his or her resignation from the Board to the Corporate Governance Committee. The Committee will then recommend to the Board whether to accept or decline the resignation.

 

Mandatory Retirement Age

 

 

A director is required to retire no later than the annual meeting of shareholders coinciding with or following his or her 72nd birthday.

 

Continuing Education for Directors

 

 

The Board is regularly updated on Cigna’s businesses, strategies, customers, operations and employee matters, as well as external trends and issues that affect the Company. Directors also are encouraged to attend continuing education courses relevant to their service on Cigna’s Board at Cigna’s expense. Cigna regularly makes the Board aware of continuing education opportunities that may be of interest. The Corporate Governance Committee oversees the continuing education practices, and the Company is kept apprised of director participation.

 

BOARD OF DIRECTORS’ NOMINEES

Upon the recommendation of the Corporate Governance Committee, the Board is nominating the nine directors listed below for re-election to one-year terms to expire at the next annual meeting of shareholders. All nominees have consented to serve, and the Board does not know of any reason why any nominee would be unable to serve. If a nominee becomes unavailable or unable to serve before the Annual Meeting, the Board may either reduce its size or designate another nominee. If the Board designates a nominee, your proxy will be voted for the substitute nominee.

On March 12, 2018, Dr. Henney informed the Company of her intention to not seek re-election as a Director in light of her role as Lead Independent Director of AmerisourceBergen Corporation and Cigna’s announcement regarding the proposed acquisition of Express Scripts Holding Company. Dr. Henney will leave the Board at the expiration of her current term on April 25, 2018. The Board and Cigna’s management thank Dr. Henney for her many years of service.

Below are biographies, skills and qualifications for each of the nominees. Each of the director nominees currently serves on the Board. The Board believes that the combination of the various experiences, skills and qualifications represented contributes to an effective and well-functioning Board and that the nominees possess the qualifications, based on the criteria described above, to provide meaningful oversight of Cigna’s business and strategy.

 

           
   

 

The Board of Directors unanimously recommends that shareholders vote FOR the nominees listed below.

 
   
     
           

 

 

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  LOGO    

DAVID M. CORDANI

President, Chief Executive Officer
and Director of Cigna

 

AGE: 52

 

DIRECTOR SINCE: 2009

 

COMMITTEES: Executive


Mr. Cordani has served as Cigna’s Chief Executive Officer since December 2009 and as President since June 2008. He served as Chief Operating Officer from June 2008 until December 2009; President, Cigna HealthCare from 2005 until 2008; and Senior Vice President, Customer Segments & Marketing, Cigna HealthCare from 2004 until 2005. He has been employed by Cigna since 1991. He is a member of the Business Roundtable and serves on the U.S.-India Business Council Board of Directors. In 2017, he was also named Chairman of the U.S. Chamber of Commerce’s U.S.-Korea Business Council. In 2016, Mr. Cordani received the Leadership in the Nation’s Interest award from the Committee for Economic Development, a nonprofit, nonpartisan, business-led public policy organization. Mr. Cordani was named one of Fortune Magazine’s Top Business Persons of the Year in 2015. Mr. Cordani received his Bachelor of Business Administration from Texas A&M University and his MBA from the University of Hartford.

Other Public Company Directorships: General Mills, Inc. (2014-Present)

Business Leader. Mr. Cordani has extensive executive leadership and management experience, including through his current role as President and Chief Executive Officer of Cigna. Mr. Cordani has spearheaded Cigna’s transformation into a leading global health service company, more than doubling the size of the business since 2009. His prior role as Chief Operating Officer also encompassed broad responsibility for Cigna’s global business and corporate functions.

Finance. Mr. Cordani served as Business Financial Officer for Cigna’s healthcare division and in senior roles in corporate accounting and planning. He was formerly a CPA with public accounting experience at Coopers & Lybrand.

Healthcare and Delivery Systems. Mr. Cordani’s long tenure with Cigna, as President and Chief Executive Officer and previously as President of the Cigna HealthCare business segment provides him with unique perspective of the evolution of the healthcare service sector and the innovation of health delivery models.

Information Technology. Mr. Cordani manages Cigna’s information technology investments in support of business and strategic objectives.

Marketing and Consumer Insights. As Chief Executive Officer, he leads the development and execution of Cigna’s Go strategy to deliver value in more than 95 million customer relationships around the world.

Regulated Industry/Public Policy. Mr. Cordani is actively engaged in public policy related to the highly regulated healthcare industry and other global business markets.

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ERIC J. FOSS

Chairman, President and Chief
Executive Officer of ARAMARK
Corporation

 

AGE: 59

 

DIRECTOR SINCE: 2011

 

COMMITTEES: Corporate
Governance, People Resources

Mr. Foss has been Chairman of the Board of ARAMARK Corporation, a publicly traded provider of food services, facilities management and uniform services, since February 2015, and President and Chief Executive Officer since May 2012. He served as Chief Executive Officer of Pepsi Beverages Company, a beverage manufacturer, seller and distributor and a division of PepsiCo, Inc., from 2010 until December 2011. He was the Chairman and Chief Executive Officer of The Pepsi Bottling Group, Inc. from 2008 until 2010; President and Chief Executive Officer from 2006 until 2008; and Chief Operating Officer from 2005 until 2006. Mr. Foss received his Bachelor of Science degree from Ball State University.

Other Public Company Directorships: ARAMARK Corporation (2012-Present), UDR, Inc. (2003-2015), The Pepsi Bottling Company (2006-2010)

Business Leader. Mr. Foss has extensive leadership experience through his roles as Chairman, President and CEO of ARAMARK Corporation, combined with his 30-year career at Pepsi Beverages Company and The Pepsi Bottling Group, including his role as Chairman and CEO.

Finance. As Chairman, President and CEO of ARAMARK and as CEO of Pepsi Beverages Company and The Pepsi Bottling Group, his experience includes oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. He led ARAMARK’s initial public offering in 2013 and was instrumental in The Pepsi Bottling Group’s initial public offering and oversaw its acquisition by PepsiCo.

International/Global. Mr. Foss’ responsibilities at ARAMARK, Pepsi Beverages Company and The Pepsi Bottling Group included international business leadership, managing the challenges of operating a global business and strategic planning. At ARAMARK, he has oversight of operations in 20 countries, and throughout his tenure at Pepsi Beverage Company and The Pepsi Bottling Group, had responsibilities for global operations including international assignments.

Marketing and Consumer Insights. Mr. Foss’ service as CEO of Pepsi Beverages Company and The Pepsi Bottling Group provided him experience as an executive officer of a consumer oriented company.

 

 

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ISAIAH HARRIS, JR.

Former President and Chief
Executive Officer of AT&T
Advertising & Publishing — East

 

AGE: 65

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Executive (Chair)


Mr. Harris has served as Cigna’s Chairman of the Board since December 2009 and served as Vice-Chairman of the Board from July 2009 through December 2009. Mr. Harris served as President and Chief Executive Officer of AT&T Advertising & Publishing — East (formerly BellSouth Advertising & Publishing Group), a communications services company, from 2005 until his retirement in 2007; as President, BellSouth Enterprises, Inc. from 2004 until 2005 and as President, Consumer Services, BellSouth Corporation from 2000 until 2004. Mr. Harris has served as an Independent Trustee of Wells Fargo Advantage Funds, a provider of mutual funds, since 2008. Mr. Harris was nominated as NYSE 2014 Chairman of the Year. Mr. Harris received his Bachelor of Science degree from Iowa State University and his MBA from the University of Minnesota.

Other Public Company Directorships: Deluxe Corporation (2004-2011)

Business Leader. In his executive business leadership roles, including as CEO of AT&T Advertising and Publishing, Mr. Harris managed large organizations, developed and executed business strategies and led transformational change initiatives in both domestic and international operations.

Finance. Mr. Harris’ extensive finance experience includes 19 years of corporate finance and operational experience in multi-national organizations, including as Vice President of Finance, BellSouth Corporation, preceded by 13 years as a CPA with KPMG LLP. Through service on the board of directors of Deluxe Corporation, a provider of customized products and services including financial services and direct checks, and as a trustee of Wells Fargo Advantage Funds, he has insight into financial services-related issues.

Marketing and Consumer Insights. As President, Consumer Services, BellSouth Corporation, Mr. Harris focused on marketing communication services to end-user consumers.

Regulated Industry/Public Policy. Throughout his career at AT&T Advertising & Publishing, Mr. Harris navigated a heavily regulated and dynamic legal environment.

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ROMAN MARTINEZ IV

Private Investor

 

AGE: 70

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Audit (Chair),
Executive, Finance

Mr. Martinez has been a private investor since 2003. In 2003, he retired as Managing Director of Lehman Brothers, an investment banking firm, following a 31-year career with the firm. He has served on the Board of Trustees of New York Presbyterian Hospital since 1996. Mr. Martinez received his Bachelor of Science degree from Boston College and his MBA from the Wharton School of the University of Pennsylvania.

Other Public Company Directorships: Orbital ATK, Inc. (2015-Present), Alliant Techsystems, Inc. (2004-2015)

Finance. Mr. Martinez has over ten years of experience as a private investor and serves on the Investment Committees of several non-profit organizations. He previously served on the Investment Advisory Council of the State of Florida, which provides independent oversight of the Florida Retirement System funds and other state funds, which aggregated in excess of $150 billion. He has extensive experience in investment banking through his 31-year tenure with Lehman Brothers where he was involved in a broad spectrum of U.S. and international investment banking activities covering financing, mergers and acquisitions and restructuring advisory assignments as well as financing transactions for governments and corporations.

Healthcare and Delivery Systems. Through his over 20 years serving on the Board of Trustees of New York Presbyterian Hospital, Mr. Martinez developed insights into the issues facing health care systems in a rapidly changing environment, including the provision of care management and delivery systems.

 

 

 

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  LOGO    

JOHN M. PARTRIDGE

Former President of Visa, Inc.

 

AGE: 68

 

DIRECTOR SINCE: 2009

 

COMMITTEES: Finance (Chair),
Executive, People Resources

Mr. Partridge served as President of Visa, Inc., a publicly traded consumer credit company, from 2009 until 2013 and as Chief Operating Officer from 2007 to 2009. He joined Visa USA in October 1999 and served as President and Chief Executive Officer of Inovant (a Visa subsidiary) from 2000 to 2007 and as Interim President of Visa USA in 2007. From 1998 until joining Visa USA, Mr. Partridge served as Senior Vice President and Chief Information Officer of Unum Provident Corp., a publicly traded disability insurance company. From 1989 to 1998, Mr. Partridge was Executive Vice President for Credicorp Inc., a commercial banking, insurance and investment banking company, where he was responsible for consumer banking, technology and operations. Prior to joining Credicorp Inc., Mr. Partridge held various management positions with Wells Fargo Bank. Mr. Partridge has served as Chairman and Chief Executive Officer of Velo Payments, a global smart data network for business disbursements, since March 2017 and as an operating partner of Corsair Capital, a private equity firm focused on the financial services industry, since October 2015. Mr. Partridge received his Bachelor of Science degree from the University of California.

Other Public Company Directorships: Global Payments, Inc. (2013-Present)

Business Leader. Mr. Partridge has extensive senior leadership experience through his positions with Visa, Inc., Visa USA, Inovant, Unum and Credicorp.

Finance. As President and CEO of Inovant, he had direct oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As President of Visa, he was involved with financial oversight and reporting and strategic transactions. His responsibilities at Credicorp provided significant financial services experience.

Information Technology. Mr. Partridge has experience managing and overseeing information technology investments in support of business objectives which he gained through each of his executive leadership positions, including as Chief Information Officer of Unum and as a director of Global Payments, a provider of electronic transaction processing services. As President of Inovant, he oversaw Visa’s electronic payment processing service.

International/Global. As President of Visa, Mr. Partridge’s responsibilities included international business leadership. He also serves as a director of a large public company with extensive international operations. His responsibilities with Credicorp included international assignments.

Marketing and Consumer Insights. Through his tenure with Visa, Mr. Partridge focused heavily on consumer credit and oversaw marketing, product, client service, support and processing services. As Executive Vice President of Credicorp, his responsibilities included consumer banking.

  LOGO    

JAMES E. ROGERS

Former Chairman, President and
Chief Executive Officer of Duke
Energy Corporation

 

AGE: 70

 

DIRECTOR SINCE: 2007

 

COMMITTEES: Audit, Finance

 

Mr. Rogers served as Chairman of Duke Energy Corporation, a publicly traded electric power company, from 2007 until 2013 and as the President and Chief Executive Officer from 2006 until 2013. He was formerly the Chairman, President and Chief Executive Officer of CINERGY Corp. (which merged with Duke Energy Corporation in 2006) from 1994 until 2006. Mr. Rogers has served as a senior operating partner of Stonepeak Infrastructure Partners, a private equity firm focused on infrastructure investments since October 2016. He co-founded and has served as Chairman of Brightlight Foundation, a non-profit provider of globally accessible and affordable energy solutions, since 2011. He has served as Chairman and Chief Executive Officer of Intrepid Energy Partners LLC, an advisory business that specializes in energy sector transactions, since 2014. Mr. Rogers received his Bachelor of Business Administration and his juris doctor from the University of Kentucky.

Other Public Company Directorships: Duke Energy Corporation (2007-2013), Applied Materials, Inc. (2008-2015), CINERGY Corp. (1994-2005), Fifth Third Bancorp (1995-2009)

Business Leader. Mr. Rogers has extensive senior leadership experience through his positions with Duke Energy and in the utility industry for 25 years. Over the course of his career, he served on the boards of eight Fortune 500 companies.

Finance. As President and CEO of Duke Energy, he had oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As a director of Fifth Third Bancorp, a regional banking corporation, Mr. Rogers developed a deeper understanding of several facets of commercial and consumer financial services.

Regulated Industry/Public Policy. Throughout his career at Duke Energy and CINERGY, Mr. Rogers operated in a heavily regulated environment and oversaw and implemented strategic policy initiatives. Before his corporate career, he served as the Deputy General Counsel for the Federal Energy Regulatory Commission and as a partner in the law firm of Akin Gump Strauss Hauer & Feld in Washington, D.C.

 

 

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  LOGO    

ERIC C. WISEMAN

Former Executive Chairman,
President and Chief Executive
Officer of VF Corporation

 

AGE: 62

 

DIRECTOR SINCE: 2007

 

COMMITTEES: Finance, People
Resources

Mr. Wiseman served as Executive Chairman of VF Corporation, a publicly traded apparel and footwear company, from August 2008 until October 2017. He served as Chief Executive Officer from January 2008 until December 2016 and President from 2006 until June 2015. He served as Chief Operating Officer of VF Corporation from 2006 to 2008; Executive Vice President, Global Brands from 2005 to 2006; and Vice President and Chairman, Sportswear and Outdoor Coalitions from 2004 until 2005. Mr. Wiseman received his Bachelor of Science degree and MBA from Wake Forest University.

Other Public Company Directorships: VF Corporation (2006-2017), Lowe’s Companies, Inc. (2011-Present)

Business Leader. Mr. Wiseman has extensive senior leadership experience through his positions with VF Corporation.

Finance. As Chairman and CEO of VF Corporation, he has had oversight of financial operations, merger and acquisition activities and corporate restructurings.

International/Global. Through leadership positions at VF Corporation, Mr. Wiseman oversaw operations and product sales in over 150 countries. Prior to joining VF Corporation, he held executive leadership roles at Sara Lee Corporation that included international business leadership and international assignments.

Marketing and Consumer Insights. Through leadership roles at VF Corporation, Mr. Wiseman oversaw marketing of a variety of brands through all channels of distribution, both domestically and internationally. As a director of Lowe’s, a retail home improvement and appliances company, he focuses on end-user consumer-related issues.

  LOGO    

DONNA F. ZARCONE

President and Chief Executive Officer of The Economic Club of Chicago

 

AGE: 60

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Audit, Corporate Governance

Ms. Zarcone has been the President and Chief Executive Officer of The Economic Club of Chicago, a civic and business leadership organization, since February 2012. She served as Interim President of The Economic Club of Chicago from October 2011 until February 2012 and as President and Chief Executive Officer of D. F. Zarcone & Associates LLC, a strategic advisory firm, from 2007 until February 2012. Ms. Zarcone served as the President and Chief Operating Officer of Harley-Davidson Financial Services, Inc., a provider of wholesale and retail financing, insurance and credit card programs and a wholly owned subsidiary of Harley-Davidson, Inc., from 1998 until 2006. She also served as Chairman of the Board of Eaglemark Savings Bank, a financial services provider, from 2002 to 2006. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Ms. Zarcone is also an NACD Board Leadership Fellow. Ms. Zarcone received her Bachelor of Science degree from Illinois State University and her MBA from the University of Chicago Booth School of Business.

Other Public Company Directorships: CDW Corporation (2011-Present), The Jones Group (2007-2012)

Finance. As an executive at Harley-Davidson Financial Services and as the Chairman of the Board of Eaglemark Savings Bank, an FDIC-regulated entity, Ms. Zarcone oversaw end-user consumer financial services matters. She is also a certified public accountant. As President and CEO of The Economic Club of Chicago, she monitors social and economic issues facing the U.S. and global markets.

Information Technology. As a director of CDW, a leading provider of integrated information technology solutions, Ms. Zarcone oversees issues facing the information technology industry.

Marketing and Consumer Insights. As President of Harley-Davidson Financial Services, Ms. Zarcone oversaw direct marketing initiatives to end-user consumers for a portfolio of financial products. As head of Enthusiast Services at Harley-Davidson, she oversaw brand loyalty initiatives. As a director of The Jones Group, a designer, marketer and wholesaler of branded clothing, she gained further insight into end-user consumer-related issues.

 

 

 

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WILLIAM D. ZOLLARS

Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc.

 

AGE: 70

 

DIRECTOR SINCE: 2005

 

COMMITTEES: People Resources (Chair), Executive, Corporate Governance

Mr. Zollars served from 1999 to 2011 as Chairman, President and Chief Executive Officer of YRC Worldwide, Inc., a holding company whose subsidiaries provide regional, national and international transportation and related services. Prior to that, Mr. Zollars was President of Yellow Transportation, Inc., from September 1996 through November 1999. From 1994 to 1996, he was Senior Vice President of Ryder Integrated Logistics. He also held various executive positions with Eastman Kodak. Mr. Zollars received his Bachelor of Arts degree from the University of Minnesota.

Other Public Company Directorships: Cerner Corporation (2005-Present), ProLogis Trust (2001-2010; 2011-Present), YRC Worldwide, Inc. (1999-2011)

Business Leader. Mr. Zollars’ role as Chairman, President and Chief Executive Officer of YRC Worldwide and various executive leadership positions with Yellow Transportation, Ryder Integrated Logistics and Eastman Kodak provided him extensive senior leadership experience.

Finance. As Chairman, President and CEO of YRC Worldwide, Mr. Zollars had oversight of financial operations, merger and acquisition activities and corporate restructurings and led YRC’s comprehensive recovery plan to reduce cost structure and improve operating results, cash flow from operations, liquidity and financial condition.

Healthcare and Delivery Systems. As a director of Cerner, a supplier of health care information technology, he oversees issues facing the healthcare industry, particularly health information technology.

International/Global. As President and CEO of YRC, Mr. Zollars oversaw global operations and strategic planning, and he undertook international assignments at Kodak.

 

 

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Corporate Governance Policies and Practices

 

Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance and an independent Board provide the foundation for financial integrity and shareholder confidence. The Corporate Governance Committee annually reviews Cigna’s governance program based on, among other things, developments in corporate governance, feedback received during shareholder engagement, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and New York Stock Exchange (NYSE) requirements. The Board and the Corporate Governance Committee developed the Board Corporate Governance Guidelines (the Guidelines) which set forth the key governance principles that guide the Board. The Guidelines, together with the charters of the Audit, Corporate Governance, Finance, People Resources and Executive Committees, provide a framework of policies and practices for our effective governance.

The Board and the Corporate Governance Committee review the Guidelines, and the committees review their respective charters, at least annually and update these governing documents as necessary to reflect changes in the regulatory environment, evolving practices and input from shareholders. The full text of the Guidelines and committee charters are available on our website at www.cigna.com/about-us/corporate-governance/ and are available to any shareholder who requests a copy.(1)

 

 

Corporate Governance Highlights

 

      
 

    Independent board of directors with diversity in composition, skills  and experience

 

    Independent Chairman of the Board

 

    Regular executive sessions of the Board and its committees  without management present

 

    Director elections by majority voting

 

    Annual election of all directors

 

    Proxy access right for shareholders

    

    Separate Code of Business Conduct and Ethics for the Board

 

    Independent Audit, Corporate Governance, Finance and People  Resources Committees

 

    Annual self-evaluations of the Board, its committees and individual  directors, including periodic independent third party assessments

 

    Majority of director compensation delivered in Cigna common stock

 

    Meaningful stock ownership guidelines for directors

 
        

 

PROXY ACCESS

At our 2017 Annual Meeting, shareholders voted on a non-binding shareholder proposal regarding shareholder proxy access. As we described in our 2017 proxy statement, the Cigna Board was not opposed to proxy access, but at that time, due to the merger agreement with Anthem, Inc. (Anthem), we were restricted in our ability to amend our bylaws or propose or commit to any bylaw amendment. The Board strongly believed that any proxy access framework should be thoughtfully and carefully considered. The Board committed to conducting a full evaluation of proxy access in 2017, with a goal of implementing a proxy access bylaw amendment on terms that reflected input from our shareholders and that the Board believed were in Cigna’s shareholders’ best interests in advance of the 2018 Annual Meeting.

In advance of the 2017 Annual Meeting, at the direction of the Board, Cigna’s Office of the Corporate Secretary reached out to discuss the shareholder proposal with our 50 largest shareholders (representing approximately 65%

of outstanding shares) and engaged with holders of approximately 40% of shares outstanding. During this engagement, shareholders provided feedback on their views of the shareholder proposal and proxy access generally. At the 2017 Annual Meeting, just over 50% of the votes cast supported the proxy access shareholder proposal.

Following the 2017 Annual Meeting and after the Company was no longer subject to the restrictions of the merger agreement with Anthem, the Board resumed its evaluation of proxy access. As part of this review, the Corporate Governance Committee evaluated and considered the terms of the bylaw proposed by the shareholder proponent as compared to current market practice, other bylaw features not specified by the shareholder proponent that are necessary to provide for a balanced and effective proxy access framework, the views of proxy advisory firms and the input of Cigna’s shareholders received in connection with Cigna’s outreach efforts. In the fall of 2017, at the direction of the Board, the Office of the Corporate Secretary engaged again with our largest shareholders to

 

 

(1) Throughout this Proxy Statement, we reference information available on our website. The information on our website is not, and shall not be deemed to be, part of this Proxy Statement or incorporated herein or into any of our other filings with the SEC.

 

 

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further discuss proxy access and potential terms for a proxy access bylaw, as well as other areas of interest, such as board refreshment and corporate responsibility. The Office of the Corporate Secretary reached out to our top 20 shareholders (representing approximately 50% of outstanding shares) as well as the shareholders we had engaged with in the spring of 2017 that had requested further discussions in connection with the Board’s consideration of the implementation of a proxy access bylaw. Holders of approximately 33% of shares outstanding engaged with the Office of the Corporate Secretary as part of this shareholder outreach effort.

Shareholders indicated their support for a proposed proxy access bylaw incorporating a 3% ownership requirement, a three-year holding requirement, a cap of 20 shareholders that may form a group to meet the ownership requirement, and a right to nominate directors in an amount equal to the greater of two or 20% of the Board — terms that are consistent with current market practice. Several of the shareholders that had voted for the shareholder proposal at the 2017 Annual Meeting indicated that their vote was not intended as a vote on the specific terms proposed, but rather a vote in favor of the Company’s adoption of proxy access generally. Many shareholders also provided input regarding other terms of proxy access.

The Corporate Governance Committee discussed and carefully considered all feedback when constructing the proxy access bylaw and, following this review, the Corporate Governance Committee recommended and the Board approved amendments to our By-Laws to implement proxy access in December 2017. As a result, a shareholder or a group of up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of 20% of the Board or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in the By-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback received as part of our shareholder engagement.

DIRECTOR INDEPENDENCE

Cigna believes in the importance of a board comprised largely of independent, non-employee directors. The current Board includes nine non-employee directors. On an annual basis, the Board, through its Corporate Governance Committee, reviews relevant relationships between directors, their immediate family members and the Company, consistent with Cigna’s independence standards. Cigna’s independence standards, which are detailed in the Guidelines, are consistent with the independence requirements set forth in the NYSE’s listing standards.

To be independent under Cigna and NYSE standards, the Board must affirmatively determine that a director has no material relationships with the Company directly or as an officer, shareholder or partner of an organization that has a relationship with the Company. In making its assessment, the Board considers all relevant facts and circumstances, including the nature of transactions with such organizations and/or the amount of such transactions (in aggregate or as a percentage of the organization’s revenues or assets). The Board also considers that, in the ordinary course of business, the Company may sell products and services to, and/or purchase products and services from, organizations affiliated with our directors and may hold investments (generally, debt securities) in organizations affiliated with our directors.

Based on its review of director relationships, the Board has affirmatively determined that there are no material relationships between the non-employee directors and the Company and all non-employee directors (Dr. Henney, Ms. Zarcone and Messrs. Foss, Harris, Martinez, Partridge, Rogers, Wiseman and Zollars) are independent as defined in both Cigna’s Guidelines and the NYSE listing standards. In addition, at the committee level, all members of the Audit, Corporate Governance, Finance and People Resources Committees are independent and the members of the Audit Committee and the People Resources Committee meet the NYSE’s heightened independence requirements for service on those committees.

BOARD LEADERSHIP STRUCTURE

The Board is committed to the long-term growth of the business and the successful execution of our mission to improve the health, well-being and sense of security of the people Cigna serves around the globe. To fulfill its responsibilities to our shareholders, Cigna’s Board, both directly and through its committees, regularly engages with management, ensures management accountability and reviews the most critical issues that face Cigna. The Board is committed to meeting the dynamic needs of the Company and focusing on the interests of its shareholders and, as a result, regularly evaluates and adapts its composition, role and relationship with management.

Independent Chairman of the Board

We currently separate the roles of the Chairman of the Board and CEO. Our CEO sets the strategic direction for the Company, working with the Board, and provides day-to-day leadership, while our Chairman leads the Board in the performance of its duties and serves as the principal liaison between the independent directors and the CEO. We believe that having an independent Chairman assists the Board in ensuring independent oversight of the Company and the management team. The Board regularly assesses the appropriateness of this leadership structure and has concluded that this structure best suits Cigna’s needs at this time.

 

 

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In February 2018, the Board re-elected Isaiah Harris, Jr. to serve as our independent Chairman. The Board elects the Chairman to a three-year term, expiring at the annual meeting occurring at the end of the third year. Mr. Harris’ current term as Chairman will expire in April 2021, subject to his annual election to the Board by shareholders. The full Board evaluates the Chairman’s performance on an annual basis as part of the annual Board evaluation.

 

 

Chairman Responsibilities

 

   
 

•    Serve as principal representative of the Board

 

•    Facilitate discussion among independent directors on key issues

 

•    Advise the CEO on issues of concern for the Board

 

•    Develop agenda for Board meetings, in consultation with the CEO  and other directors

     

•    Act as liaison between Board and management

 

•    Lead the Board in CEO succession planning

 

•    Preside over Board and shareholder meetings

 

•    Engage in the director recruitment process

 

•    Represent the Company in interactions with external stakeholders,  as appropriate

 
         

 

Access to Management and Advisors

A member of senior management is assigned to each committee to act as a staff officer. The Chief Financial Officer serves as the staff officer for the Audit and Finance Committees; the General Counsel serves as the staff officer for the Corporate Governance Committee; and the Executive Vice President — Human Resources and Services serves as the staff officer for the People Resources Committee. These executive officers work with their respective committee chair to assist in setting and developing meeting agendas and materials and attend meetings as appropriate. Committee chairs communicate frequently with staff officers, the other executive officers and other members of management between scheduled Board meetings with respect to committee issues and management is expected to update the Board on any significant Company matters or competitive developments between Board meetings.

The Board and its committees are able to access and retain independent advisors as, and to the extent, they deem necessary or appropriate.

BOARD EVALUATIONS AND BOARD EFFECTIVENESS

Evaluation Process

A meaningfully designed director evaluation process allows the Board to gain insights into the effectiveness of and challenges facing the Board, its committees and its individual members, with the goal of enhancing Board performance and, as a result, increasing shareholder value. Cigna’s Board is committed to ongoing improvement and the evaluation process is an important vehicle that fosters and supports effectiveness. Our board evaluations are designed to solicit input and perspective on various matters, including:

 

    board leadership structure;
    board configuration, including size, diversity and skillset;

 

    board dynamics, including individual director preparation and participation;

 

    governance policies and practices;

 

    strategy and risk oversight;

 

    interaction with management; and

 

    progress achieved against prior year evaluation initiatives.

As set forth in its charter, the Corporate Governance Committee oversees the Board, committee and individual director evaluation process. Annually, the Corporate Governance Committee and the Chairman of the Board determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2017, each director was interviewed by either the Chair of the Corporate Governance Committee or the Chairman of the Board. In response to feedback provided from directors regarding the Board evaluation process, the Chairman of the Board and the Chair of the Corporate Governance Committee also interviewed various members of management to better understand management’s perspective on the Board. In addition, each member of the Board was able to submit anonymous written feedback to the Corporate Secretary.

The Chair of the Corporate Governance Committee summarized the feedback from the individual director interviews in a report for the Chairman of the Board and each of the Committee Chairs. The Chair of the Corporate Governance Committee and the Chairman of the Board then presented the report to the full Board for review, discussion and determination of action items. The chairs of each committee led a similar self-assessment discussion for their particular committee.

From time to time, the Board has engaged an independent third party to conduct the Board evaluation, most recently

 

 

 

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in 2014. The Corporate Governance Committee and Board have agreed to use an independent third party to facilitate the Board evaluation process approximately every three to five years, or on an as needed basis.

The results of the evaluation process support the Board’s belief that the Board and committees are operating effectively.

Board Refreshment and Succession Planning

The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the composition of the Board and its committees and for making recommendations to the full Board on these matters. As further described on page 9, in 2017, the Corporate Governance Committee began a long-term board refreshment plan and engaged an outside firm to provide advisory services related to succession planning and to assist with the recruitment of director candidates.

RESPONSIBILITIES OF THE BOARD

Board Oversight of Risk and Enterprise Risk Management

The Board of Directors has the ultimate responsibility for risk oversight under Cigna’s risk management framework. The Board executes its duty both directly and through its Audit, Corporate Governance, Finance and People

Resources Committees. The Audit Committee oversees Cigna’s enterprise risk management (ERM) framework. ERM is a Company-wide initiative that involves the Board, Cigna’s management, Cigna’s Chief Risk Officer and General Auditor (CRO) and internal audit function in an integrated effort to (1) identify, assess, prioritize and monitor a broad range of risks and (2) formulate and execute plans to monitor and, to the extent possible, mitigate the effect of those risks. The CRO meets with the Audit Committee regularly during its executive sessions and reports to the Board at least annually.

Cigna has implemented practices so that the Board and its committees are regularly briefed on issues related to the Company’s risk profile. These briefings are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These briefings address strategic, operational, financial reporting, succession and compensation, cyber-security, compliance, reputational, governance and other risks, as appropriate.

The Board, including its committees, oversees risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session without management present and with key management personnel and representatives of outside advisors as necessary.

 

 

 

BOARD/COMMITTEE

 

 

 

PRIMARY AREAS OF RISK OVERSIGHT

 

 

Full Board

 

 

Strategic, financial and execution risks and exposures associated with Cigna’s business strategy, including impact of changes to laws and regulations, significant litigation and regulatory exposures and other current matters that may present material risk to financial performance, operations, infrastructure, plans, prospects, reputation, acquisitions and divestitures.

 

     
 

Audit
Committee

 

 

In addition to overseeing Cigna’s ERM framework, oversees risks related to the Company’s financial statements, the financial reporting process, accounting, cyber-security and certain legal and compliance matters. The Audit Committee also oversees the internal audit function and the Company’s ethics and compliance program.

 

     
 

Corporate
Governance Committee

 

 

Oversees risks and exposures associated with director succession and refreshment planning, corporate governance and overall Board effectiveness. Also oversees the Company’s risks related to political and charitable contributions. In exercising this oversight, the Corporate Governance Committee reviews and discusses financial contributions to such organizations.

 

     
 

Finance
Committee

 

 

Oversees the Company’s deployment of capital, technology and investment-related initiatives. In exercising this oversight, the Finance Committee regularly reviews and discusses the technology, financial market and capital management risks that are monitored through the Company’s ERM process.

 

     
 

People Resources Committee

 

 

Oversees compensation related-risks and management succession planning. For additional information regarding the People Resources Committee’s role in evaluating the impact of risk on executive compensation, see “Processes and Procedures for Determining Executive Compensation — Risk Oversight” in the Compensation Discussion & Analysis (CD&A).

 

     

 

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Oversight of Business Strategy

Our directors provide unique insights into the strategic issues facing the Company, including changes in the regulatory environment, changing market dynamics and the competitive landscape. As part of its oversight of business strategy, the Board:

 

    Formally reviews Cigna’s annual and longer-term strategic plan, financial targets and strategies for achieving those targets;

 

    Regularly reviews and assesses Cigna’s results of operations, financial performance, prospects and competitive position;

 

    Regularly discusses external factors that affect the Company, such as regulatory developments and trends impacting the health care industry generally;

 

    Regularly reviews our performance compared to our competitors; and

 

    Regularly evaluates potential strategic alternatives relating to Cigna and our business, including possible acquisitions, divestitures and business combinations.

Management Succession Planning

At the direction of the Chairman, the Board oversees management succession planning, including for the CEO role. With the assistance of the People Resources Committee, the Board reviews and approves regular and emergency succession plans. The People Resources Committee is responsible for overseeing the Company’s policies and processes for people development in general. The People Resources Committee also ensures that management succession planning meets the Board’s expectations. Annually, the CEO presents to the Board a review of executive officers and key senior management, including a discussion of those employees who are considered to be potential successors to executive and senior level positions with regard to their readiness and development opportunities. In 2017, succession planning related to the promotions of Brian C. Evanko, Christopher J. Hocevar, Alan M. Muney, Eric P. Palmer and Michael W. Triplett to executive officer roles, and the retirements of Thomas A. McCarthy and Matthew G. Manders.

Shareholder Interests

The Board and the Corporate Governance Committee oversee the Company’s shareholder engagement practice. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively.

Senior management and the Investor Relations team regularly meet with shareholders and respond to their questions and feedback throughout the year. In June 2017, Cigna hosted an Investor Day. During Investor Day, Cigna’s management discussed our track record of delivering value and our growth path moving forward. Investor Day was a highly interactive event, providing the investment community with many formal and informal opportunities to further understand Cigna’s strategy to Go Deeper, Go Local and Go Beyond, as well as the depth and breadth of Cigna’s management team.

In addition, the Board has adopted a number of practices that align the interests of the directors with those of the shareholders, including:

 

    a director compensation program whereby a majority of compensation is delivered in common stock;

 

    robust stock ownership requirements for directors; and

 

    no shareholder rights plan and, at this time, the Board has no intention of adopting such a plan.

Information regarding how our executive compensation policies and practices align with the interests of shareholders can be found in the CD&A.

 

 

 

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BOARD MEETINGS AND COMMITTEES

In 2017, the Board held 11 meetings and the committees of the Board held a total of 33 meetings. At all regular meetings held in 2017, the independent members of the Board met in executive session without management present. As part of all regularly scheduled Board meetings, the Chairman presides over all executive sessions of the Board. Each committee also met in executive session without management on a regular basis in connection with their respective meetings.

Each director attended more than 75% of the aggregate of all meetings of the Board and committees on which he or she served during 2017. During 2017, Board and committee attendance averaged 93% for the Board as a whole. In addition to formal Board meetings, the Board engages with management regularly throughout the year.

The Board expects directors to attend the annual meeting of shareholders. All directors attended the 2017 annual meeting and Mr. Harris chaired the meeting. All directors are expected to attend the Annual Meeting in 2018.

The Board has five committees: Executive, Audit, Corporate Governance, Finance and People Resources. Complete copies of the committee charters are available on Cigna’s website at www.cigna.com/about-us/company-profile/corporate-governance/.

The composition of the Audit, Corporate Governance, Finance and People Resources Committees is set forth below.

 

   

Audit*

 

 

 

Corporate 

Governance 

 

 

Finance

 

 

 

People

Resources

 

       

Eric J. Foss

 

   

 

   

 

       

Jane E. Henney, M.D.

 

 

 

 

Chair

 

   
       

Roman Martinez IV

 

 

Chair #

 

   

 

 
       

John M. Partridge

 

     

Chair

 

 

 

       

James E. Rogers

 

 

 #

 

   

 

 
       

Eric C. Wiseman

 

     

 

 

 

       

Donna F. Zarcone

 

 

 #

 

 

 

   
       

William D. Zollars

 

   

 

   

Chair

 

       

Meetings in 2017

 

 

9

 

 

8

 

 

8

 

 

8

 

                 

 

Committee member

 

# Designated “audit committee financial expert” as defined in the SEC rules.

 

* All members of the Audit Committee are financially literate within the meaning of the NYSE listing standards.

The Executive Committee may exercise the power and authority of the Board as specifically delegated by the Board when convening a meeting of the full Board of Directors is impracticable. Mr. Harris is Chairman of the Executive Committee and Dr. Henney and Messrs. Cordani, Martinez, Partridge and Zollars serve on the Executive Committee. In 2017, the Board of Directors did not delegate any actions to the Executive Committee and, therefore, the Executive Committee did not meet in 2017.

 

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Committee

 

  

 

Responsibilities

 

   
   

Audit Committee

 

  

•   Assesses the qualification and independence of, appoints, compensates, oversees the work of and removes, if appropriate, Cigna’s independent registered public accounting firm.

 

•   Represents and assists the Board in fulfilling its oversight responsibilities regarding the adequacy and effectiveness of internal controls and the integrity of financial statements.

 

•   Reviews annual and quarterly financial statements, earnings releases, earnings guidance and significant accounting policies with management and, if appropriate, the independent registered public accounting firm.

 

•   Oversees compliance with material legal and regulatory requirements, including those that apply to federal and state health care programs.

 

•   Oversees the Company’s enterprise risk management program and internal audit function and advises the Board on financial and enterprise risks, including risks related to the security of information technology systems.

 

•   Maintains procedures for and reviews the receipt, retention and treatment of complaints and concerns regarding accounting, controls, auditing, reporting and disclosure matters.

 

          
    
     
   

Corporate Governance

Committee

 

  

•   Reviews, advises and reports to the Board on the Board’s membership, structure, organization, governance practices and performance, as well as shareholder engagement activities.

 

•   Assists the Board in board refreshment planning.

 

•   Reviews committee assignments and director independence.

 

•   Oversees director nomination and compensation and develops specific director recruitment criteria.

 

•   Oversees communications with external stakeholders, including shareholders.

 

•   Oversees corporate political and charitable contributions and the Company’s corporate responsibility and sustainability efforts.

 

    
          
   
   

Finance Committee

 

  

•   Oversees the structure and use of Cigna’s capital.

 

•   Oversees Cigna’s long-term financial objectives and progress against those objectives.

 

•   Reviews Cigna’s strategic operating plan and budget.

 

•   Oversees Cigna’s investment strategy and sets investment policies and guidelines.

 

•   Oversees information technology strategy and execution.

 

          
    
     
   

People Resources

Committee

 

  

•   Oversees the policies and processes for people development and assists the Board in reviewing executive officer succession plans.

 

•   Establishes company goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance in light of those established goals and objectives, and based on this evaluation, recommends the CEO’s compensation to the independent members of the Board for approval.

 

•   Reviews and approves compensation targets, base salaries, cash and equity-based incentive compensation payments and arrangements, severance, and other compensation and benefits arrangements for any current or prospective executive officers other than the CEO, subject to required Board or shareholder approvals.

 

•   Establishes performance measures and goals and assesses whether these goals are met for awards under short-term and long-term cash-based and equity-based compensation plans.

 

•   Reviews and monitors the Company’s diversity program.

 

 

 

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CODES OF ETHICS

Cigna is committed to conducting business in accordance with the highest standards of integrity, legal compliance and ethical conduct. In 2015, at the recommendation of the Corporate Governance Committee, the Board adopted a Director Code of Business Conduct and Ethics, available on Cigna’s website at www.cigna.com/about-us/corporate-governance/. The Board believes that having a separate code of conduct for the Board meaningfully enhances Cigna’s governance framework by making Board-specific policies clearer, while also addressing general shareholder concerns over transparency of company and board practices.

All directors and employees, including executive officers, must comply with the Company’s Code of Ethics, available on Cigna’s website at www.cigna.com/about-us/corporate-governance/. Both the Director Code of Business Conduct and Ethics and the Company Code of Ethics, together with Cigna’s related policies and procedures, address major areas of professional conduct, including, among others, conflicts of interest, protection of private, sensitive or confidential information, insider trading and adherence to laws and regulations affecting the conduct of Cigna’s business. Directors and employees affirm their adherence to the Code of Ethics and the Director Code of Business Conduct and Ethics, as applicable, annually.

CORPORATE RESPONSIBILITY

As a global health service company with the mission of helping improve the health, well-being and sense of security of the people we serve, Cigna believes that its success depends on earning trust through responsible business practices, corporate citizenship and providing superior services that meet our customers’ individual needs. Inspired by our mission, Cigna works to positively impact the health of people, communities and the environment.

As evidence of this, in 2015, Cigna was the first U.S. health insurance company to sign on to the United Nations Global Compact (UNGC), a policy initiative for companies committed to areas such as human rights, labor standards, environmental responsibility and business integrity in business operations. In 2017, Cigna became a member of the UNGC Health is Everyone’s Business action platform, which is a coalition working to develop a global business agenda to address goals related to good health and well-being.

In 2017, Cigna was named to the Dow Jones Sustainability Index, a benchmark for investors who integrate sustainability considerations into their portfolios. We achieved the leading spot among the Health Care Providers & Services industry sector. Cigna was recognized in both the Dow Jones Sustainability World Index and the Dow Jones Sustainability North America Index. Our

inclusion on the index was driven by our responsible business practices.

The Corporate Governance Committee is responsible for overseeing Cigna’s positions on, and policies with respect to, Cigna’s corporate responsibility efforts around the globe. To support the Corporate Governance Committee’s responsibility, Cigna has established the Cigna Connects Corporate Responsibility Governance Council to provide input on Cigna’s policies, initiatives and reporting relative to corporate responsibility. Led by Cigna’s Director of Corporate Responsibility & Civic Affairs, this Council is a cross-functional team of leaders from various areas of the Company, including ethics and compliance, global real estate, risk management, supply chain, human resources and the Cigna Foundation.

Cigna annually publishes a corporate responsibility report, Cigna Connects, highlighting our corporate responsibility goals and initiatives. Cigna Connects covers areas such as Cigna’s practices around ethics and governance, diversity, environmental sustainability, and our Cigna Foundation. It also provides more information about our recent recognitions, including being named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens List, our listing on the MSCI Sustainability Index, and our “Innovation in Advancing Health Equity” award from the National Business Group on Health. Cigna Connects is presented to the Corporate Governance Committee, which reviews the report with the Board. We encourage our shareholders to review our most current report, which is available on Cigna’s website at www.cigna.com/about-us/corporate-responsibility/report/.

Cigna’s corporate responsibility efforts are focused on the following areas:

Health and Well-Being. Cigna’s goal is to make health care better for all, by striving to build a sustainable health care system that lowers health risks, fosters health equality, improves health status and promotes preventative health interventions. For example, Cigna is committed to being a national leader on modernizing the approach to the prevention, treatment and communication of substance use disorders, and pledged to reduce opioid usage among our customers by 25% by 2019. Cigna is addressing the needs of our communities through efforts such as empowering veterans to address difficult health and life circumstances and establishing the free Cigna Health Improvement Tour. In 2017, we provided more than 10,000 free Cigna Health Improvement Tour biometric screenings (blood pressure, cholesterol, blood sugar and body-mass index) and health coaching to participants in 100 locations.

Environment. As a health service company, Cigna takes a precautionary approach to its environmental sustainability efforts, recognizing that environmental stewardship can have a health impact and also make sound business sense. We currently have 16 LEED certified buildings and 25 sites

 

 

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are enrolled in the U.S. Environmental Protection Agency’s ENERGY STAR® program. In 2017, Cigna’s greenhouse gas emissions data was verified by an independent third party expert. Cigna considers managing the risks and opportunities associated with climate change and resource scarcity as a significant aspect of our corporate responsibility platform. Our Environmental Policy Statement, which is described in greater detail in the Corporate Responsibility section of www.cigna.com, outlines our environmental sustainability policies and practices.

Ethical and Inclusive Business Practices. We strive to foster relationships with various stakeholders to help us better understand their priorities and to further Cigna’s goal of bringing positive changes in areas such as human capital, diversity and inclusion, supply chain management, stakeholder engagement and human rights. Cigna seeks to partner with organizations that are guided by similar principles. Our Supplier Code of Ethics, with which all of our suppliers are expected to comply, explicitly prohibits the use of child or forced labor, and requests that our suppliers demonstrate ethics, compliance and integrity in human rights, business conduct and the environment. The Supplier Code of Ethics is an important part of the internal control structure and helps promote ethical business practices. As an example of our focus on inclusive business practices, in 2017, we welcomed the inaugural class of our diverse supplier Mentor Protégé Program. This program, consisting of certified minority, veteran and LGBT business enterprises, provides one-on-one mentoring with Cigna management, and insights into growth strategies and best practices to help grow their businesses.

The Cigna Foundation

The Cigna Foundation, established more than 50 years ago, carries out our corporate philanthropy goals of bringing Cigna’s mission and brand promise to life for individuals and communities around the globe. The Cigna Foundation accomplishes these goals through strategically focused charitable grants to nonprofit organizations whose work enhances the health of individuals and families and the well-being of their communities. Cigna’s World of Difference grants center around collaborations with nonprofits pursuing projects that help people overcome barriers to their health and well-being related to factors such as ethnicity, race, gender, age, education, economic status or place of residence. In 2017, we added a focus on community health workers. Cigna funded 27 Cigna Foundation Grants to address health disparities and advance community health navigation in 2017.

ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT

Cigna is committed to transparency and strives to provide clarity about our goals and positions related to the Company’s federal and state lobbying and advocacy efforts as well as why we believe active engagement in the public

policy arena is important to our mission, business and customers. Cigna has engaged with shareholders to gain feedback regarding desired political contribution disclosure and published its first annual political contributions and lobbying activity report in 2011. The initial report provided information about Cigna’s political contributions, lobbying activities, trade association affiliations and related matters. Since then, we have significantly enhanced this report to incorporate subsequent input from shareholders and to provide greater clarity on our overall lobbying framework, including the areas in which we focus our advocacy efforts and why we believe active engagement in the public policy arena is necessary to support the achievement of our mission, the success of our business and the well-being of our customers. The report also provides information about: (1) direct political contributions that Cigna makes at a corporate level; (2) contributions that Cigna makes through the Cigna Political Action Committee; and (3) the total amount of dues paid to any industry trade association to which Cigna pays $50,000 or more in annual dues, as well as the portion of any such dues that such trade associations inform us are allocable to any non-deductible lobbying expenses. The Corporate Governance Committee oversees Cigna’s political and lobbying activities. The Company updates the report annually and we encourage you to review our 2017 report which is available on Cigna’s website at www.cigna.com/about-us/corporate-governance/.

CERTAIN TRANSACTIONS

Transactions with Related Persons

Cigna has not adopted a written policy concerning review, approval or ratification of related person transactions. Cigna compiles information about transactions between Cigna and Cigna’s directors, director nominees, executive officers and any immediate family members and affiliated entities identified by directors, director nominees and executive officers as having any form of relationship with Cigna, as well as shareholders that identified themselves during 2017 as holding 5% of Cigna’s common stock. Cigna’s Office of the Corporate Secretary analyzes the nature of any transaction to determine whether the transaction may require disclosure under SEC rules as a related person transaction. On an annual basis, the Corporate Governance Committee reviews the analysis prepared by the Company, and presents its assessment to the full Board of Directors.

Based on this review, there are no related person transactions requiring disclosure under SEC rules.

Compensation Committee Interlocks and Insider Participation

The People Resources Committee is comprised of four independent directors: William D. Zollars (Chair), Eric J. Foss, John M. Partridge and Eric C. Wiseman. There are no compensation committee interlocks.

 

 

 

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Non-Employee Director Compensation

 

OVERVIEW

Cigna’s director compensation program is designed to attract and retain highly qualified independent directors, by addressing the time, effort, expertise and accountability required of active board membership. The Board believes that the current director compensation program:

 

    aligns with shareholder interests because it includes a significant equity-based compensation component, the value of which is tied to Cigna’s stock price; and

 

    is competitive based on the work required of directors serving on the board of an entity of the Company’s size, complexity and scope.

The Corporate Governance Committee’s charter provides that it will periodically review director compensation and assist the Board in the administration of director compensation plans. The Board approves the amount and form of director compensation. The Corporate Governance Committee may from time to time engage an independent compensation consultant to assist in its review of director compensation.

DIRECTOR COMPENSATION PROGRAM

The Corporate Governance Committee reviews Cigna’s non-employee director compensation program on an annual basis. The Corporate Governance Committee last engaged an independent compensation consultant in 2011 to assist in the Committee’s review of director compensation amount and pay mix. As a result of that review, the Board, upon recommendation from the Corporate Governance Committee, approved the current director compensation program, effective January 2012. The Board has not increased compensation since that time.

In 2017, the Board and the Corporate Governance Committee reviewed the director compensation program and did not make any changes. As part of this review, the Corporate Governance Committee reviewed benchmarking data from the Company’s compensation peer group (as described in “Executive Compensation Policies and Practices — 2017 Peer Groups” in the CD&A), as well as the top 200 companies of the S&P 500, to ensure that our pay practices were competitive and aligned with those companies.

The following chart summarizes the retainer compensation provided to directors for their service on Cigna’s Board and its committees. A director who also is an employee of the Company does not receive payment for service as a director. The CEO is the only employee who currently serves as a director. There is no retainer for service on the Executive Committee. All retainer payments are made in equal, quarterly installments.

 

 

RETAINER TYPE

 

 

 

ANNUAL AMOUNT      

 

 

 

METHOD OF PAYMENT

 

   

Board

 

  $275,000      

 

 

Cigna common stock ($180,000)

 

Cash ($95,000)

 

   

Chairman of the Board

 

  $225,000      

 

 

Cash

 

   

Committee chair

 

  $  15,000      

 

 

Cash

 

   

Committee member

 

  $  10,000      

 

 

Cash

 

         

Deferral of Payments

Under the Deferred Compensation Plan of 2005 for Directors of Cigna Corporation (Deferral Plan), directors may elect to defer the payment of the cash and/or common stock portion of their annual retainers. Deferred common stock compensation is credited to a director’s deferred compensation account as a number of shares of hypothetical common stock and ultimately paid in shares. Deferred cash compensation is ultimately paid in cash, and directors have a choice of hypothetical investment funds whose rates of return are credited to that account. These funds include a Cigna stock fund and several other funds selected from those offered to all Cigna employees under the Cigna 401(k) Plan. Directors may elect to receive payments under the Deferral Plan in a lump sum or installments. Lump sum payments are made, or payment installments begin, in January of the year following a director’s separation from service.

 

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 CORPORATE GOVERNANCE MATTERS

 

 

Stock Ownership Guidelines

Cigna requires directors to maintain a stock ownership level of at least $500,000 in value of Cigna common stock, which is more than five times the annual Board cash retainer. Under the guidelines, directors have five years from their election to the Board to satisfy this ownership obligation. Common stock, deferred common stock, restricted stock units and hypothetical shares of Cigna common stock held by a director count toward the stock ownership guidelines for directors whose service started before February 2014. Directors whose service started after February 2014 may only count common stock and deferred common stock for compliance with stock ownership guidelines. As of December 31, 2017, all of the directors are in compliance with the stock ownership guidelines and met or exceeded their ownership requirement.

Financial Planning and Matching Charitable Gift Programs

Directors may participate in the same financial planning and tax preparation program available to Cigna executive officers. Under this program, Cigna will make direct payments or reimburse directors for financial planning services that are provided by firms designated by Cigna and for tax preparation services in the amount of up to $6,500 annually. Each director whose service started before 2006 and has at least nine years of board service upon separation from service also is eligible for direct payments or reimbursement in the amount of up to $5,000 for financial planning and tax preparation services during the one-year period following separation from service.

Directors also may participate in the matching charitable gift program available to Cigna employees, under which

Cigna will make a matching charitable gift of up to $5,000 annually. In addition, upon a director’s retirement, in recognition of the retiring director’s service, the Board may make a donation in the amount of $10,000 to a charitable organization of the director’s choice.

Insurance Coverage

Cigna provides each director, on the same basis as employees and at no cost to the director, group term life insurance coverage equal to the annual Board retainer ($275,000 during 2017), and business travel accident insurance coverage equal to three times the annual Board retainer ($825,000 during 2017).

Directors also may purchase or participate in, by paying premiums on an after-tax basis, additional life insurance, medical care, long-term care, property/casualty personal lines and various other insurance programs available on a broad basis to Cigna employees. Directors also may elect to purchase worldwide emergency assistance coverage. This program, which provides international emergency medical, personal, travel and security assistance, also is available to Cigna executive officers and certain other Cigna employees who frequently travel abroad for business.

Cigna provides each retired director whose service started before 2006 and who has at least nine years of Board service upon separation from service with $10,000 of group term life insurance coverage, with premiums paid by Cigna. In addition, these directors may also participate for two years following separation from service in the medical care programs currently offered by Cigna to retired employees, with premiums paid by the director on an after-tax basis.

 

 

 

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CORPORATE GOVERNANCE MATTERS 

 

 

DIRECTOR COMPENSATION TABLE FOR 2017

The table below includes information about the compensation paid to non-employee directors in 2017. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service.

 

NAME  

 

FEES EARNED            

OR PAID IN CASH            

($)            

 

STOCK AWARDS         

($)         

 

 

ALL OTHER       
COMPENSATION
       

($)       

 

 

TOTAL       
COMPENSATION
       

($)       

(a)

 

 

(b)            

 

 

(c)         

 

 

(d)       

 

 

(e)       

 

       

Eric J. Foss

 

     

 

115,000            

 

 

     

 

180,000          

 

 

     

 

365       

 

 

     

 

295,365       

 

 

       

Michelle D. Gass(1)

 

     

 

28,750            

 

 

     

 

45,000          

 

 

     

 

61       

 

 

     

 

73,811       

 

 

       

Isaiah Harris, Jr.

 

     

 

320,000            

 

 

     

 

180,000          

 

 

     

 

918       

 

 

     

 

500,918       

 

 

       

Jane E. Henney, M.D.

 

     

 

120,000            

 

 

     

 

180,000          

 

 

     

 

6,157       

 

 

     

 

306,157       

 

 

       

Roman Martinez IV

 

     

 

120,000            

 

 

     

 

180,000          

 

 

     

 

1,373       

 

 

     

 

301,373       

 

 

       

John M. Partridge

 

     

 

120,000            

 

 

     

 

180,000          

 

 

     

 

5,365       

 

 

     

 

305,365       

 

 

       

James E. Rogers

 

     

 

115,000            

 

 

     

 

180,000          

 

 

     

 

820       

 

 

     

 

295,820       

 

 

       

Eric C. Wiseman

 

     

 

115,000            

 

 

     

 

180,000          

 

 

     

 

820       

 

 

     

 

295,820       

 

 

       

Donna F. Zarcone

 

     

 

115,000            

 

 

     

 

180,000          

 

 

     

 

6,316       

 

 

     

 

301,316       

 

 

       

William D. Zollars

 

     

 

120,000            

 

 

     

 

180,000          

 

 

     

 

1,017       

 

 

     

 

301,017       

 

 

                                         

(1) Ms. Gass resigned from the Board of Directors on February 21, 2017.

Fees Earned or Paid in Cash (Column (b))

 

    In addition to the annual cash retainer for Board service received by each director:

 

    Dr. Henney and Messrs. Martinez, Partridge and Zollars each served as a committee chair and as a member of another committee.

 

    Ms. Zarcone and Messrs. Foss, Rogers and Wiseman each served as a member of two committees.

 

    Mr. Harris served as Chairman of the Board.

 

    Director fees listed in this column may be deferred by directors under the Deferral Plan (see “Deferral of Payments” above).

Stock Awards (Column (c))

Column (c) lists the aggregate grant date fair value of Cigna common stock awarded to directors as part of their Board retainer, computed in accordance with FASB Accounting Standards Codification (ASC) Topic 718, applying the same model and assumptions that Cigna applies for financial statement reporting purposes as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (disregarding any estimates for forfeitures). Common stock awards listed in this column may be deferred by directors under the Deferral Plan. See “Director Ownership” below for amounts and a description of equity-based awards outstanding as of December 31, 2017.

All Other Compensation (Column (d))

Column (d) includes:

 

    reinvested dividends on certain share equivalent awards and on deferred Cigna common stock, and dividends paid in cash on restricted stock units, as described below under “Director Ownership;”

 

    matching charitable awards made by Cigna as part of its matching gift program (also available on a broad basis to Cigna employees) in the amount of $5,000 each for Dr. Henney, Ms. Zarcone and Mr. Partridge; and

 

    the dollar value of Company-paid life insurance premiums for all directors.

There were no perquisites or personal benefits provided to non-employee directors that exceeded $10,000, as permitted by SEC rules.

 

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 CORPORATE GOVERNANCE MATTERS

 

 

DIRECTOR OWNERSHIP

The table shows Cigna securities held by each non-employee director as of December 31, 2017. The value of these securities was calculated using $203.09, which was Cigna’s closing stock price on December 29, 2017, the last business day of the year.

 

NAME

 

COMMON

STOCK

(a)

 

DEFERRED

COMMON

STOCK

(b)

 

RESTRICTED

STOCK

UNITS

(c)

 

 

HYPOTHETICAL

SHARES OF

COMMON

STOCK

(d)

 

TOTAL

OWNERSHIP

(e)

 

TOTAL

OWNERSHIP

VALUE

(f)

 

           

Eric J. Foss

 

 

 

13,413

 

     

 

 

 

 

      

 

 

 

 

      

 

 

 

 

         

 

 

 

13,413

 

       

 

$

 

2,724,046

 

      

 

           

Isaiah Harris, Jr.

 

 

 

1,937

 

 

 

 

 

 

 

 

13,500

 

 

 

 

23,255

 

 

 

 

38,692

 

 

$

 

7,857,958

 

 

           

Jane E. Henney, M.D.

 

 

 

1,836

 

 

 

 

 

 

 

 

13,500

 

 

 

 

19,024

 

 

 

 

34,360

 

 

$

 

6,978,172

 

 

           

Roman Martinez IV

 

 

 

9,496

 

 

 

 

22,780

 

 

 

 

13,500

 

 

 

 

15,423

 

 

 

 

61,199

 

 

$

 

12,428,905

 

 

           

John M. Partridge

 

 

 

33,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,267

 

 

$

 

6,756,195

 

 

           

James E. Rogers

 

 

 

 

 

 

 

37,520

 

 

 

 

 

 

 

 

11,299

 

 

 

 

48,819

 

 

$

 

9,914,651

 

 

           

Eric C. Wiseman

 

 

 

4,200

 

 

 

 

12,117

 

 

 

 

 

 

 

 

3,652

 

 

 

 

19,969

 

 

$

 

4,055,504

 

 

           

Donna F. Zarcone

 

 

 

5,971

 

 

 

 

8,230

 

 

 

 

13,500

 

 

 

 

2,797

 

 

 

 

30,498

 

 

$

 

6,193,839

 

 

           

William D. Zollars

 

 

 

212

 

 

 

 

 

 

 

 

13,500

 

 

 

 

9,784

 

 

 

 

23,496

 

 

$

 

4,771,803

 

 

Deferred Common Stock (Column (b))

Column (b) includes the equity portion of the 2017 and any previous year’s Board retainer granted in Cigna common stock or deferred stock units that have been deferred under the Deferral Plan.

Restricted Stock Units (Column (c))

Column (c) includes restricted stock units that were issued in April 2014 upon the cancellation and exchange of 13,500 restricted share equivalents held by each of Dr. Henney, Ms. Zarcone and Messrs. Harris, Martinez and Zollars. The restricted share equivalents were originally granted pursuant to the terms of the compensation program in place at the times of the directors’ election to the Board between 2004 and 2006. The restricted share equivalents and the restricted stock units have the same terms and conditions, except that, upon separation of service, the restricted share equivalents would have settled in cash and the restricted stock units will settle in shares of Cigna common stock. The restricted stock units vest after nine years of service or upon reaching age 65. All of these restricted stock units are vested.

Hypothetical Shares of Common Stock (Column (d))

Column (d) includes (1) share equivalents resulting from voluntary deferrals of cash compensation hypothetically invested in the Cigna stock fund; (2) hypothetical shares of Cigna common stock credited to directors’ restricted deferred compensation accounts under the terms of the retirement plan in effect between 1997 and 2005; and (3) hypothetical shares of Cigna common stock acquired pursuant to a pre-2006 requirement that directors invest or defer a portion of their Board retainer in shares of hypothetical Cigna common stock. Although these securities are not common stock, the value of the hypothetical shares of Cigna common stock credited to a director’s deferred compensation account is tied directly to the value of Cigna common stock.

 

 

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COMPENSATION MATTERS 

 

 

Advisory Approval of Executive Compensation (Proposal 2)

 

Our Board is committed to strong governance and recognizes that Cigna shareholders have an interest in our executive compensation policies and practices. Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires that we provide our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers (NEOs). In recognition of the preference of shareholders expressed at our 2011 annual meeting and reaffirmed at our 2017 annual meeting, the Board has held “say on pay” advisory votes on an annual basis. Consistent with this practice and SEC rules, we are asking you to approve the following advisory resolution:

Resolved, that the shareholders approve, on an advisory basis, the compensation of the Company’s 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, Executive Compensation Tables and accompanying narrative disclosure.

We believe that our executive compensation program design effectively aligns the interests of our executive officers with those of our shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term shareholder value. In considering your vote, we encourage you to review the Proxy Statement Summary, the Compensation Discussion and Analysis and the Executive Compensation Tables.

This advisory vote is intended to address our overall compensation policies and practices related to the NEOs rather than any specific element of compensation. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.

 

           
   

 

The Board of Directors unanimously recommends that shareholders vote FOR the advisory approval of the Company’s executive compensation.

 
   
     
           

 

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 COMPENSATION MATTERS

 

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (CD&A) describes the compensation policies, programs and decisions regarding our named executive officers (NEOs) for 2017, who include our Chief Executive Officer, Chief Financial Officer, the three most highly-compensated executive officers as of the end of 2017, as well as our former Chief Financial Officer and one other executive officer who retired during 2017. The People Resources Committee (the Committee) is charged with oversight of the Company’s executive compensation policy and plans and makes all compensation decisions for our executive officers with the exception of our CEO, for whom the Committee makes recommendations to the Board of Directors. This section also describes why the Committee has chosen each element of compensation and how it made compensation decisions. For 2017, our NEOs are:

 

 

 

NAME

 

  

 

TITLE

 

 

David M. Cordani

 

  

President and Chief Executive Officer

 

 

Eric P. Palmer(1)

 

  

Executive Vice President and Chief Financial Officer

 

 

Christopher J. Hocevar(2)

 

  

President, Strategy, Segments and Solutions

 

 

Nicole S. Jones

 

  

Executive Vice President and General Counsel

 

 

Jason D. Sadler(3)

 

  

President, International Markets

 

 

Thomas A. McCarthy(4)

 

  

Retired Executive Vice President and Chief Financial Officer

 

 

Matthew G. Manders(5)

 

  

Retired President, Government & Individual Programs and Group Insurance

 

      

 

  (1) Mr. Palmer was appointed Executive Vice President and Chief Financial Officer effective June 16, 2017.

 

  (2) Mr. Hocevar was appointed President, Strategy, Segments and Solutions effective February 23, 2017.

 

  (3) Mr. Sadler is based in Hong Kong. His base salary and annual incentive award are paid in Hong Kong dollars and, throughout this CD&A, have been converted to U.S. dollars using an exchange rate of $1 Hong Kong dollar = $0.12799676 U.S. dollar, the average of the daily mid-points between the bid and the ask prices for each trading day in the month of December 2017.

 

  (4) Mr. McCarthy retired from the Company effective June 16, 2017.

 

  (5) Mr. Manders retired from the Company effective November 3, 2017.

This CD&A is organized as follows:

 

   

Executive Summary provides an overview of our compensation philosophy and our pay-for-performance alignment.

 

    

 

Pages 31 — 33

 

 

 

  
   

Executive Compensation Policies and Practices describes our compensation objectives and practices, as well as how we set target total direct compensation and target pay mix.

 

    

 

Pages 33 — 36

 

 

 

  
   

Elements of Compensation describes each form of compensation we pay and how our executive compensation program is tied strongly to performance.

 

    

 

Pages 37 — 47

 

 

 

  
   

Employment Arrangements and Post-Termination Payments summarizes any employment agreements, our severance and other post-termination arrangements as well as our change of control arrangements.

 

    

 

Pages 48 — 49

 

 

 

  
   

Processes and Procedures for Determining Executive Compensation provides an overview of the Committee’s role in executive compensation, the process for determining executive officer compensation and the compensation consultant’s role.

 

    

 

Pages 49 — 50

 

 

 

  
   

Other Practices describes our stock ownership guidelines, our hedging and pledging restrictions, our clawback policy and the impact of tax and accounting treatment on our executive compensation program.

 

    

 

Pages 51 — 53

 

 

 

 

 

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COMPENSATION MATTERS 

 

 

EXECUTIVE SUMMARY

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.

The primary principles underlying our compensation philosophy are to:

 

       

 

Motivate superior
enterprise results
with appropriate
consideration of risk
while maintaining a
commitment to the
Company’s ethics and
values.

 

 

Align the interests of
the Company’s
executives with
those of its
shareholders and
reward the creation
of long-term value
for Cigna
shareholders.

 

 

 

Emphasize
performance-based
short-term and
long-term
compensation over
fixed
compensation.

 

 

Reward the
achievement of
favorable long-
term financial
results more
heavily than the
achievement of
short-term results.

 

 

Provide market-
competitive
compensation
opportunities
designed to attract
and retain highly
qualified
executives.

       

Pay-for-Performance Alignment

Cigna’s compensation program is heavily weighted to emphasize performance-based pay over fixed compensation. Our Management Incentive Plan (MIP) is a cash-based program designed to reward the achievement of annual enterprise results. Long-term performance is rewarded through annual long-term incentive (LTI) awards, including Strategic Performance Shares (SPSs), the payout of which is based upon performance over a three-year period. Financial measures within the MIP and SPS program, such as adjusted income from operations,(1) revenue and operating expense ratio improvement, are tied to the performance of Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. Our MIP and SPS plans are designed to reward our NEOs for the Company’s performance relative to pre-established enterprise goals.

Short- and Long-Term Performance

For 2017, adjusted income from operations(1) for Cigna’s ongoing business segments was $2.8 billion, compared to $2.3 billion in 2016, reflecting significantly increased earnings contributions across each of Global Health Care, Global Supplemental Benefits and Group Disability and Life. Revenue for the three ongoing business segments grew to $40.9 billion, reflecting continued growth in Cigna’s targeted customer segments. Our results included strong performance across each of our priority growth platforms — Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life. These results provide us with momentum for continued growth in 2018.

 

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 COMPENSATION MATTERS

 

 

2017 Management Incentive Plan

Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflecting pay-for-performance alignment. MIP awards reward the achievement of annual enterprise results relative to pre-established goals, as well as individual performance, accomplishments and contributions.

 

 

Measure

 

 

 

Result

 

 

 

Award

 

 

Adjusted income from operations(1)(2)

 

 

24.5% growth was above target range

 

  Individual payouts ranged from 130% to 155% of target for each of the NEOs serving as executive officers at the end of 2017.

 

Revenue(2)

 

 

 

4.9% growth was within target range

 

 

 

 

Operating expense ratio improvement(2)

 

 

2.3% improvement was within target range

 

 

 

Strategic Priorities

 

Above target performance reflects:

 

•   Strong progress in community health and client retention

 

•   A higher NPS score relative to 2016

 

•   Strong employee engagement results

 

•   Advancement of enterprise compliance initiatives

 

 

 

2015—2017 Strategic Performance Share Program

Long-term performance was rewarded through the payout of our 2015—2017 SPSs. Our TSR over this three-year period, which accounts for 50% of the SPS payout, was 25.5%, placing Cigna at the 78th percentile relative to the SPS performance peer group for the period. Over the three-year performance period, adjusted income from operations,(1)(2) which accounts for 50% of the SPS payout, grew as described above.

 

 

Measure

 

 

 

Result ($ in million)

 

 

 

Award

 

 

Relative TSR(3)

 

 

78th percentile (183% of target)

 

 

2015—2017 SPSs were paid out at 139.8% of target.

 

 

Adjusted income from operations(1)( 2)

 

 

 

$7,532 (97.1% of target)

 

 

 

  (1) We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2017 for more complete financial information. Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets.

 

  (2) Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life.

 

  (3) The peer group used to measure relative TSR is the SPS performance peer group which, at the time of the 2015—2017 SPS payout, included: Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group.

2017 Long-Term Incentive Award

In February 2017, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) approved the annual LTI award for each NEO, 50% of which was awarded in stock options and 50% of which was awarded in an SPS award with a 2017—2019 performance period. The exercise price of the stock options awarded was $149.135, which means our stock must trade above that price for the NEOs to realize value from these awards. The payout of the 2017—2019 SPS award will be based on the Company’s performance over the three-year period ending December 31, 2019. In determining the annual LTI award, the Committee primarily evaluates individual contributions, but also may consider the other factors described in “Elements of Compensation — Long-Term Incentives.”

 

 

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COMPENSATION MATTERS 

 

 

Shareholders Continue to Support our Executive Compensation Program

 

The Committee and the Board consider the results of the annual shareholder executive compensation “say-on-pay” vote, as well as other compensation-related shareholder votes, in determining the ongoing design and administration of the Company’s executive compensation programs. Shareholders have expressed their strong support for our executive compensation program, with approximately 93% of votes cast at the 2017 annual meeting in favor of the advisory vote on executive compensation.

Also, in 2017, shareholders recommended that Cigna hold an annual advisory vote on executive compensation. In light of and consistent with the vote of Cigna shareholders, the Board determined that Cigna will continue to hold future “say-on-pay” votes on an annual basis until the next required vote on the frequency of shareholder votes for this purpose (which will occur no later than 2023).

The Committee also considers feedback on our executive compensation program received as part of our ongoing communications with shareholders.

 

 

EXECUTIVE COMPENSATION POLICIES AND PRACTICES

Compensation Objectives and Practices

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. By emphasizing performance-based awards over fixed compensation, we strive to motivate superior enterprise results that we believe will result in the creation of meaningful and sustained long-term value for our shareholders and exceptional service for our customers.

To further our compensation philosophy, the Committee uses the following compensation practices, processes and instruments:

 

    A regular and rigorous analysis of relevant market compensation data for each executive officer position. The analysis includes market data for competitors and the broad-based general industry based on companies of similar size and scope;

 

    Annual pay-for-performance assessment of the degree of achievement of the Company’s short-term and long-term goals and an evaluation of each executive officer’s contribution to the Company’s performance;

 

    A MIP designed to motivate executive officers to achieve the Company’s annual performance goals. No MIP awards are made unless the Company achieves a pre-defined minimum level of adjusted income from operations for the ongoing businesses;

 

    An equity-based incentive plan (the Cigna Long-Term Incentive Plan or LTIP) focused on long-term shareholder value creation. We grant SPS awards and stock options to executives under the LTIP. SPS awards reward executives for relative TSR performance as compared to our competitors and the achievement of financial goals over a three-year performance period. Through stock options, executives have the potential to realize value as a result of stock price appreciation;

 

    The retention of an independent compensation consultant to assist the Committee in its design and implementation of the Company’s executive compensation programs; and

 

    Ongoing monitoring of compensation best practices and investors’ views on compensation and the modification of our compensation programs as appropriate to align with good governance standards.

For information on the oversight of the executive compensation program, see “Processes and Procedures for Determining Executive Compensation” in this CD&A.

 

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Strong Compensation Governance and Controls

 

What We Do    

  

 

•    Strong alignment between pay and performance.

 

•    “Double trigger” requirement for change of control benefits.

 

•    Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies.

 

•     Robust stock ownership guidelines and shareholding requirements for equity awards to align executives’ interests with shareholders.

 

•    A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley.

 

•    Management of LTIP annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan.

 

•    Oversight of people development policies and processes, including consideration of assessments of executive officers and key senior management.

 

•    CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the Committee.

 

•    An annual assessment by the Committee of any potential risks and associated internal controls in our incentive compensation programs and policies.

 

•    Minimum acceptable level of financial performance required in order for any payments under the MIP to be made.

 

•    Approximately 90% of our CEO’s target total direct compensation is performance based.

 

 

 

What We Don’t  

Do  

  

 

•    No tax gross-up of severance pay upon a change of control.

 

•    No excessive perquisites.

 

•    No hedging of Cigna stock by any directors, executive officers or employees, and no pledging of Cigna stock by directors or Section 16 officers unless approved in limited circumstances.

 

•    No discounting, reloading or repricing of stock options without shareholder approval.

 

•    No payment of dividends on unvested shares.

 

 

Compensation Data

The Committee establishes target compensation levels based on a variety of factors, including a rigorous analysis of relevant published market compensation data of the Company’s compensation peer group and a general industry peer group.

2017 Peer Groups

Compensation Peer Group. The Committee periodically requests that its independent compensation consultant conduct a review of the composition of the Company’s compensation peer group and offer suggested modifications for benchmarking future executive pay decisions. The Committee’s consultant utilizes multiple sources to develop and recommend potential peer companies for the Committee to consider. Sources for possible peers include companies screened by industry and business focus, peer groups developed by proxy advisory firms, peers identified in various analyst reports, and peers of companies in Cigna’s compensation peer group.

 

 

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The table below lists the companies included in the 2017 compensation peer group.

 

 

2017 Compensation Peer Group

 

 

Aetna, Inc.

 

  The Hartford Financial Services Group, Inc.

 

 

Aflac Incorporated

 

  Humana, Inc.

 

 

American International Group, Inc.

 

  Manulife Financial Corporation

 

 

Anthem, Inc.

 

  MetLife, Inc.

 

 

Centene Corp.

 

  Prudential Financial, Inc.

 

 

Chubb Limited

 

  Unum Group

 

     

A broader cut of survey data, representing size-adjusted health and life insurance companies, was used to benchmark Mr. Sadler’s compensation because peer group data were insufficient or unavailable for his specific role. A list of the companies used to determine Mr. Sadler’s 2017 target total direct compensation and target total pay mix is included on Annex B.

General Industry Peer Group. The Committee also recognizes that Cigna often competes for talent from companies beyond that of its compensation peer group. As an additional reference to provide a broader perspective on market practices, particularly for those executive officers with job functions that could apply to a variety of industries, the Committee utilizes a general industry peer group. For 2017, the Committee, with the assistance of its independent compensation consultant, reviewed the companies included in its general industry peer group by screening publicly traded, U.S.-based companies within certain industry classifications, including insurance, banking and financial services, healthcare equipment and services, pharmaceutical, biotechnology and life sciences, household and personal products, software services and telecommunications. The list was then narrowed to companies whose revenues were within the range of 0.4 to 2.5 times that of Cigna and whose market capitalization was within the range of 0.25 to 4 times that of Cigna. The screening process resulted in a group of 35 companies, which are listed on Annex C.

SPS Performance Peer Group. Before 2015, Cigna’s compensation peer group was used to track relative TSR for our long-term incentive program. In consultation with its compensation consultant, the Committee created a performance peer group to be used exclusively to track relative TSR within the SPS program, effective beginning with the 2015—2017 performance period. The Committee recognized that certain of our competitors were not included in the compensation peer group due to their size. While size is a relevant factor in determining a compensation peer group, it is less relevant when measuring relative performance. Other companies were included in the compensation peer group because Cigna competes with them for talent; however, because of significant differences in business focus, these companies do not make optimal comparators for performance purposes. For these reasons, the Committee created an SPS performance peer group comprising the same companies in its compensation peer group, but adding UnitedHealth Group Incorporated and removing Chubb Limited and Prudential Financial, Inc. Beginning with the 2017—2019 performance period, the Committee added Centene, Inc. to the SPS performance peer group.

Updates to Peer Groups for 2018. The Committee removed MetLife, Inc. from the SPS performance peer group beginning in 2018. The Committee determined that, due to a major divestiture and changes in the business focus at MetLife, Inc., it was no longer an optimal comparator for performance purposes given industry differences and differences in business models. In order to keep the SPS performance peer group robust, the Committee added Prudential Financial Inc., which has overlap with the Company’s businesses and is of similar scope and complexity. The Committee did not make changes to the compensation peer group or general industry peer group for 2018.

Tally Sheets

The Committee reviews tally sheets for all of its executive officers as part of its annual compensation award determination process. The tally sheets summarize historical actual compensation and current target compensation for each officer. The Committee believes that tally sheets are a useful reference tool when considering whether compensation decisions reflect Cigna’s compensation philosophy and performance, but are not a determining factor when making executive compensation decisions.

 

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Target Total Direct Compensation and Target Pay Mix Emphasizes Performance-Based Compensation

The Committee’s decisions regarding target total direct compensation and target pay mix are consistent with its principles that (1) performance-based compensation should be emphasized over fixed compensation; and (2) long-term incentives should be more heavily weighted than annual incentives.

Target total direct compensation consists of base salary, the annual incentive target and the long-term incentive target. The Committee approves each of these amounts for each NEO on an annual basis, seeking to target an executive officer’s total direct compensation in a “competitive range” of within 15% of the 50th percentile of the relevant market data for the compensation peer group and the general industry peer group. When setting total target direct compensation, the Committee evaluates survey data and other public information, such as proxy data, available for both peer groups.

While the Committee targets total direct compensation in the competitive range, there may be variation in the target pay mix such that target amounts for individual compensation elements may be above or below the competitive range for the individual element. Target total direct compensation for a NEO also may vary outside of the competitive range of the 50th percentile of the survey data for the compensation peer group or general industry peer group due to factors such as performance, tenure in role, range of data available and market and economic conditions. In general, compensation levels for an executive officer who is newer to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance are typically positioned at the higher end of the competitive range. Internal pay comparisons among the NEOs are not generally considered by the Committee for purposes of determining target pay mix and target total direct compensation. For 2017, target total direct compensation of our NEOs as a group resulted in a target compensation opportunity in the aggregate of within 15% of the 50th percentile of both our compensation peer group and our general industry peer group.

As illustrated in the charts below, performance-based compensation represents approximately 90% of Mr. Cordani’s target total direct compensation, including 70% in long-term incentives and 20% in annual incentives. On average, performance-based compensation represents 79% of target total direct compensation for the other NEOs, including an average of 57% in long-term incentives and 22% in annual incentives. These percentages are targets only and will not match the percentages calculable from the actual compensation paid reflected in the Summary Compensation Table.

 

CEO TARGET        

PAY MIX        

 

        OTHER NEO AVERAGE

        TARGET PAY MIX

 

 

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ELEMENTS OF COMPENSATION

Cigna’s 2017 executive compensation program consists of the following elements:

 

 

    ELEMENT

 

      PURPOSE

 

 

Base salary

 

 

Fixed portion of total direct compensation, set with reference to competitive market data and designed to attract and retain key talent.

 

         

 

Management Incentive

Plan (MIP)

 

 

Performance-based cash compensation designed to reward the achievement of annual enterprise results relative to pre-established goals, as well as individual performance, accomplishments and contributions.

 

         

 

Long-Term
Incentives (LTI)

 

 

Stock Options

 

 

Performance-based compensation, the potential realized value of which is determined by stock price appreciation from the date of grant through the date of exercise.

 

 

 

Strategic Performance Shares

 

 

Performance-based compensation, the payout of which is based upon the achievement of pre-determined enterprise goals and the Company’s relative TSR over a three-year performance period.

 

         

 

Retirement and Deferred Compensation

 

 

Savings-based component that is aligned to competitive market practice and includes 401(k) plans and a voluntary non-qualified deferred compensation program that does not have any Company contributions. U.S.-based NEOs hired before July 1, 2009 have accrued benefits from defined benefit pension plans that were frozen on July 1, 2009.

 

         

 

Limited Perquisites and Other Benefits

 

 

Limited perquisites that are designed to attract and retain key talent or to provide for the safety and security of executive officers.

 

         

 

Actions Impacting 2017 Compensation

Promotions. In connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. In addition, Mr. Palmer was awarded transitional SPSs for the 2017-2019 performance period, as further described on page 44. In connection with Mr. Hocevar’s promotion to President, Strategy, Segments and Solutions in February 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. The Committee approved the base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar following a review of the market data for both the compensation peer group and the general industry peer group. The base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar are reflected in the tables on pages 38, 41 and 44, respectively.

Market-Based Adjustments. Due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation, the Committee and, with respect to Mr. Cordani, the Board, had not approved increases to MIP targets since December 2014 or base salaries since March 2015 for most executive officers. In July 2017, following termination of the merger agreement, the Committee and, with respect to Mr. Cordani, the Board reviewed and approved adjustments to the base salary and 2017 MIP targets for Mr. Cordani, Ms. Jones and Mr. Sadler. The Committee believed that these adjustments were necessary to maintain the competitive positioning of target total direct

compensation. The base salary increases were effective July 31, 2017 and are reflected in the table on page 38. The 2017 MIP targets are reflected in the table on page 41.

Base Salary

 

           
   

 

Base salary
represents only 10%
of CEO target pay
and an average of 21% for
all other NEOs, with the
balance of target
compensation being
performance-based.

 
   
     
           

Base salary is the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation.

Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted as a result of updated market information and an assessment of an executive’s role and performance contributions, including the executive’s demonstration of Cigna’s core values and the achievement of the expectations associated

 

 

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with his or her role. As further described above, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s base salary to maintain the competitive positioning of their target total direct compensation. The average base salary increase for these NEOs was 12%. Base salaries for these executive officers had not been increased since March 2015 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation.

The table below shows base salaries for each of the NEOs. The base salaries for Mr. Cordani, Ms. Jones and Mr. Sadler reflect the increases approved in July 2017. The base salaries for Mr. Palmer and Mr. Hocevar reflect the base salary levels approved in connection with their promotions.

 

NEO   2017 ANNUAL
BASE SALARY ($)

David M. Cordani

  1,400,000                  

Eric P. Palmer

  675,000                  

Christopher J. Hocevar

  550,000                  

Nicole S. Jones

  630,000                  

Jason D. Sadler

  648,837                  

Thomas A. McCarthy

  740,000                  

Matthew G. Manders

  750,000                  

Annual Incentives

 

           
   

 

Because profitability is

critical to the long-term

success of the business, no

annual incentive award

payments are made to

executive officers unless the

Company achieves a

pre-defined minimum level

of adjusted income from

operations.

 
   
   
     
           

Management Incentive Plan (MIP) Overview

Annual incentives are paid under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves:

 

    Enterprise performance measures and goals, which are designed to align with, and drive execution of, the Company’s business strategy;

 

    Individual targets for the NEOs, except for Mr. Cordani’s target, which is approved by the Board upon the recommendation of the Committee;
    Aggregate funding levels for actual MIP awards; and

 

    Actual MIP awards for the NEOs, except for Mr. Cordani’s award, which is approved by the Board upon the recommendation of the Committee.

Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate awards based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent. For 2017, MIP awards ranged from 130% to 155% of target for the NEOs serving as executive officers at the end of 2017, based on Company results and individual contributions.

MIP Performance Measures and Goals

Each year, the Committee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2017, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and strategic priorities. More detailed information on these measures is included in the 2017 Performance Goals, Measures and Actual Results table.

In past years, we have included net promoter score (NPS) as a performance measure in the MIP. In 2017, we replaced the former NPS measure with a “strategic priorities” measure to emphasize the importance of incentivizing and recognizing progress in certain areas beyond financial results that support our business strategy. The strategic priorities measure, weighted 20% of the overall MIP value, measures the Company’s progress in three key strategic categories: (1) customer, client and reputational focus (which includes NPS); (2) employee engagement; and (3) enterprise focus on compliance. The operating expense improvement ratio measure is now weighted 10%. The weightings for the adjusted income from operations and revenue measures, 50% and 20%, respectively, remain unchanged.

For each MIP goal other than strategic priorities, the Committee specifies certain below target, target and

 

 

 

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above target levels of performance. For the strategic priorities measure, the Committee evaluates the Company’s progress among the three key strategic categories against the Company’s performance in the prior year. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to

the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group.

 

 

Executive Officer MIP Funding and Award Determination Process

The key considerations to funding the MIP and determining individual award amounts are discussed below.

 

STEP 1

Achieve Earnings Minimum

The Committee believes that achieving Cigna’s profitability goals is critically important to the long-term success of the business. In recognition of this importance, the Committee establishes a minimum level of adjusted income from operations that must be achieved for the year in order for any MIP award to be earned. If the Company does not meet that pre-defined minimum level, then no annual incentives will be paid to executive officers.

 

 

STEP 2

Company Performance Drives Funding Level

If the Company achieves the earnings minimum, the Committee may fund the executive officer MIP pool from 0% to 200% of the aggregate targets based upon whether each performance measure is below target, at target, or above target. The following table sets forth the ranges between which the MIP pool may be funded for each performance measure, in each case, assuming the earnings minimum has been achieved:

 

 

Measure

 

 

 

Performance

 

  

 

Funding Range

 

 

 

Adjusted income from
operations

 

 

Above target range  

  

 

Above 120% to 200%  

Revenue

 

 

Within target range  

 

  

 

80% to 120%  

 

Operating expense ratio
improvement

 

 

 

Below target range  

 

 

  

 

Less than 80%  

 

 

 

Strategic Priorities

 

 

The Committee evaluates progress in the three key strategic
categories year over year.

 

          

The Company’s actual performance relative to each measure determines which funding range applies for purposes of that measure. However, the Committee maintains the discretion to determine at which point within that range the actual funding of the MIP pool will be set. In setting the actual funding percentage for each measure, the Committee considers Cigna’s performance as a whole (both in absolute terms and relative to competitors), as well as Cigna’s achievement of the goals within the performance measure. The MIP funding mechanisms ensure that a minimum level of performance is achieved and that NEOs’ MIP awards reflect the Company’s performance.

 

 

STEP 3

Award Amounts Based on Individual Contributions to Company Performance

Once MIP funding has been determined, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) assesses each named executive officer’s individual contributions and how such contributions impacted the achievement of the MIP goals to determine the actual award amounts for each NEO. Actual awards can range from 0% to 200% of a NEO’s MIP target, allowing the Committee to differentiate payouts based on each individual’s contributions.

 

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2017 Performance Goals, Measures and Actual Results

The Committee considers the appropriate measures for the MIP program for the upcoming year at its October and December meetings, and then considers and approves the actual performance targets at its meetings in January and February. For 2017, the Committee established the performance measures, weightings and target performance goals below, which were used to determine the range of potential aggregate funding for MIP awards.

 

 

MEASURE

 

 

 

ALIGNMENT WITH
BUSINESS  STRATEGY

 

 

 

WEIGHTING

 

 

 

TARGET

PERFORMANCE GOALS

 

 

 

ACTUAL RESULT

 

         

Adjusted income from operations*

 

  Reinforces the importance
of profitable growth
across the enterprise.

 

  50%

 

  10.5% to 19.5%

growth

 

 

24.5% growth was above target range

 

The target was set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments.

 

                 
         

Revenue

 

  Focuses on enterprise
growth, encourages
business decisions that
optimize results for the
enterprise, promotes
collaboration across
business units and drives
customer focus.

 

  20%

 

  0.0% to 6.0%

growth

 

 

4.9% growth was within

target range

 

The target was set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments.

 

         

Operating expense ratio improvement

 

  Drives continued focus on
delivering ongoing
expense efficiency while
furthering investment
capacity for ongoing
innovation.

 

  10%

 

  1.0% to 5.5%

improvement

 

 

2.3% improvement was

within target range

 

The target was set as a composite objective, which measures operating expense improvement in Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments versus 2016. Operating expenses are expressed as a percent of revenue for each segment.

 

                 
         

Strategic Priorities

 

  Emphasizes the
importance of recognizing
progress in areas beyond
financial results and of
aligning our goals,
contributions and rewards
with our business
strategy.

 

  20%   The Committee evaluates
progress in each category
compared to 2016.
 

Above target performance reflects:

•   Strong progress in community health and client retention

•   A higher NPS score relative to 2016

•   Strong employee engagement results

•   Advancement of enterprise compliance initiatives

The categories for the strategic priorities measure for 2017 include (1) customer, client and reputational focus; (2) employee engagement; and (3) enterprise focus on compliance.

 

 

  * Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets.

In setting the target performance goals for each measure in February 2017, the Committee considered Cigna’s publicly disclosed earnings estimates, historical Company and SPS performance peer company results, analyst commentary and the Company’s then-current expectations for the industry and economic environment. The Committee considered

 

 

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various market forces impacting the Company and related uncertainties, including the expectation that the industry would continue to face significant market changes and disruption in 2017 and initial reactions to the 2016 U.S. election, as well as uncertainty regarding the proposed merger with Anthem. The Committee believed that the target performance goals represented competitively attractive goals that would be challenging to achieve in light of the circumstances facing the Company in 2017.

2017 Individual MIP Targets and Awards

MIP target levels for the 2017 performance year for the NEOs are set forth in the table below. As further described on page 37, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s 2017 MIP targets to maintain the competitive positioning of their target total direct compensation. The average MIP target increase was 26%. MIP targets for these executive officers had not been increased since December 2014 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation. The 2017 MIP targets in the table below reflect the approved increases. The 2017 MIP targets for Mr. Palmer and Mr. Hocevar reflect the targets approved in connection with their promotions.

In determining actual MIP awards, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) takes an integrated approach, assessing enterprise results together with each named executive officer’s individual contributions during 2017. Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflecting pay-for-performance alignment.

 

     

NEO

 

    

2017

MIP

TARGET

($)

 

      

ACTUAL

MIP

PAYOUT

($)

 

      

PAYOUT
AS  A PERCENT

OF TARGET

(%)

 

 
     

David M. Cordani

 

      

 

2,800,000

 

 

 

      

 

4,000,000

 

 

 

      

 

143

 

 

 

     

Eric P. Palmer

 

      

 

750,000

 

 

 

      

 

975,000

 

 

 

      

 

130

 

 

 

     

Christopher J. Hocevar

 

      

 

500,000

 

 

 

      

 

775,000

 

 

 

      

 

155

 

 

 

     

Nicole S. Jones

 

      

 

680,000

 

 

 

      

 

1,054,000

 

 

 

      

 

155

 

 

 

     

Jason D. Sadler

 

      

 

648,837

 

 

 

      

 

908,371

 

 

 

      

 

140

 

 

 

     

Thomas A. McCarthy(1)

 

      

 

800,000

 

 

 

      

 

400,000

 

 

 

      

 

50

 

 

 

     

Matthew G. Manders(2)

 

      

 

900,000

 

 

 

      

 

900,000

 

 

 

      

 

100

 

 

 

 

  (1) Mr. McCarthy’s Agreement and Release provided that he would receive a 2017 MIP payment of $400,000, or 50% of his target, subject to the Company’s attainment of 2017 MIP targets.

 

  (2) Mr. Manders’ Agreement and Release provided that he would receive a 2017 MIP payment of $900,000, or 100% of his target, subject to the Company’s attainment of 2017 MIP targets.

Mr. Cordani

In early 2018, the Committee, together with the independent Chairman of the Board, assessed the performance of Mr. Cordani in the context of the overall Company performance. This assessment included a review of the Company’s financial performance in 2017 as well as Mr. Cordani’s individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordani’s MIP award for 2017. The Board considered these recommendations as part of its own independent review of Mr. Cordani’s performance. More specifically, the Board considered the following factors:

Enterprise Performance. Cigna’s 2017 results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life, providing Cigna with momentum for continued growth in 2018. Specifically, 2017 enterprise performance included:

 

    Consolidated revenue of $41.6 billion, an increase of 5% over 2016;

 

    Consolidated adjusted income from operations of $2.7 billion, compared to $2.1 billion in 2016, reflecting increased earnings contributions from each of our business segments;

 

    Global medical customer growth of 700,000 customers during the year, totaling 15.9 million customers at year end, driven by strong growth across our Commercial market segments; and

 

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    An industry leading medical cost trend, reflecting benefits from increased alignment for our customers and clients, deeper collaborative relationships with providers and differentiated specialty integration models.

Strategy Execution. During 2017, following termination of the merger with Anthem, Mr. Cordani led the evolution of Cigna’s Go strategy to Go Deeper, Go Local and Go Beyond and effectively communicated this evolved strategy to investors, clients, customers and partners. Highlights of the execution of the Company’s Go strategy, include:

 

    Strategic investments through the acquisitions of Zurich Middle East, which enabled Cigna to provide more personalized products to individuals, employers and government entities in the Middle East, and Brighter, an innovative technology company working with leading health service and dental organizations to engage patients and providers in personalized and seamlessly integrated experiences to more efficiently deliver higher-value healthcare;

 

    The increase in number of members using Cigna One Guide, a personalized multi-modal service experience that supports consumers consultatively at the point they choose a plan, find care and other “moments that matter,” to more than two million Cigna customers; and

 

    Targeted initiatives and increased investments that benefit our customers and communities and further promote Cigna’s mission and global brand, including the TV Doctors of America campaign for preventive care, the creation of the Health Improvement Tours featuring health screening, opioid reduction initiatives and veterans support.

Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Despite two key retirements, he ensured a strong leadership team remained in place through a number of internal promotions. Throughout 2017, Cigna continued the implementation and execution of the operating model announced in early 2017, which is designed to ensure the executional focus necessary to deliver greater choice, quality, affordability and personalization to Cigna’s customers and clients. In addition, the results of employee engagement efforts were positive and turnover, particularly among key employees, remained low. Cigna also delivered meaningful results on diversity and inclusion efforts.

Regulatory Environment and Compliance. Mr. Cordani represented Cigna and the health care industry in a number of forums in Washington, D.C. and across the country to reinforce the needs of the Company’s customers and clients. In 2017, Cigna restructured the Enterprise Compliance team to further align with Cigna’s strategic plan and operating model. In June 2017, the CMS audit work was completed and Cigna resumed marketing its Medicare Advantage-Prescription Drug and Medicare Part D Plans and enrolling beneficiaries. Cigna’s Seniors business emerged from the audit with a strong operating model and a continued commitment to customer centricity and compliance.

Based on these factors, and in particular given the Company’s strong 2017 financial performance, the positive momentum going into 2018 and Mr. Cordani’s continued focus on execution of the Company’s strategy and leading the organization during a challenging year, the Board awarded Mr. Cordani a MIP payout for 2017 of $4,000,000, or 143% of his 2017 MIP target.

Other NEOs

For all other NEOs, Mr. Cordani makes recommendations to the Committee regarding MIP awards based on his evaluation of each NEO’s performance and contributions to enterprise goals. The Committee considers Mr. Cordani’s recommendations when determining MIP awards. While not exhaustive, below are certain key factors the Committee considered when making award determinations.

Mr.  Palmer. Mr. Palmer was appointed Executive Vice President and Chief Financial Officer in June 2017. Since that time, he has led the partnership between the Company’s business teams and their financial counterparts and has provided critical guidance and leadership in support of the Company’s development and assessment of strategic paths. Through this leadership, Mr. Palmer supported the delivery of strong results in each of our ongoing businesses in 2017. In addition, he successfully executed on Cigna’s capital management objectives, including a $1.6 billion debt offering and a tender offer for $1 billion of outstanding debt. He also led the reorganization of the finance leadership team to align with and support the Company’s evolved operating model and initiated a process to streamline and improve efficiencies of the Company’s core finance and underwriting disciplines. As a result of Mr. Palmer’s contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $975,000, or 130% of his target.

 

 

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Mr. Hocevar. Mr. Hocevar was appointed President, Strategy, Segments and Solutions in February 2017. In this role, Mr. Hocevar is responsible for the strategic, growth and profitability plans for the Company’s U.S. Commercial, Pharmacy and Group Insurance businesses. He also oversees the strategic development of product solutions and their market positioning and the enterprise informatics strategy and analytics teams, aligning internal resources to deliver valuable solutions to our customers. During 2017, Mr. Hocevar led the delivery of strong financial performance and robust customer growth within our U.S. Commercial business and made meaningful progress in advancing strategic initiatives, including the Company’s localization, personalization and affordability strategies. In addition, he was key to the development and execution of Cigna’s sovereign strategy in 2017. As a result of Mr. Hocevar’s contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $775,000, or 155% of his target.

Ms.  Jones. As Executive Vice President and General Counsel, Ms. Jones continued to lead Cigna’s legal, compliance and government affairs teams in 2017 and the partnership between those teams and the Company’s businesses and other corporate functions. During the past year, Ms. Jones continued to enhance and strengthen the Company’s compliance organization and created and led cross-functional teams to identify and mitigate potential compliance risks across the enterprise. With respect to the proposed merger with Anthem, Ms. Jones provided key strategic legal counsel. She also provided legal guidance related to the Company’s global business and mergers and acquisitions strategy. As a result of Ms. Jones’ contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $1,054,000, or 155% of her target.

Mr.  Sadler. Mr. Sadler continued to serve as President, International Markets in 2017, delivering strong performance, value and service to clients, customers and partners across all businesses in our international markets, with particularly strong results in the Global Supplemental Benefits business. Mr. Sadler led the continued evolution of our International Markets strategy and the reorganization of our International Markets team in support of that strategy. He also led continued growth in the Middle East, furthered by the Company’s acquisition of Zurich Insurance Middle East. As a result of Mr. Sadler’s contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $908,371, or 140% of his target.

 

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Long-Term Incentives

 

           
   

 

Long-term incentives are

designed to incent and

reward sustained financial

success and strategic

accomplishments that

benefit Cigna and its

shareholders over

the long-term.

 
         
           

LTI Overview

Long-term incentives are administered under the Cigna Long-Term Incentive Plan and are delivered annually through a mix of strategic performance shares (SPSs) and stock options. SPS awards have a three-year performance period and are denominated in shares of Cigna common stock. At the end of the three-year performance period, the actual number of shares earned is based on Cigna’s performance against pre-established enterprise goals. The SPSs earned will range from 0% to 200% of the SPS award opportunity. Cigna’s stock options, whose actual value realized depends upon stock price appreciation at the time that the options are exercised, generally vest (or first

become exercisable) in equal installments over three years beginning on the first anniversary of the grant and have a ten-year term.

2017 Individual LTI Targets and Awards

A named executive officer’s LTI target is expressed as a dollar value and is determined based on the compensation peer group and the general industry peer group market data for the officer’s role. The Committee sets the target as an absolute dollar value, not as a percentage of salary, with the primary consideration being the comparison to the 50th percentile LTI level of the market data for both peer groups. For 2017, an executive could receive a grant between 0% and 200% of his or her individual target value. In determining awards for the NEOs, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) primarily evaluates individual contributions, but also may take into consideration enterprise performance, LTIP share utilization, succession planning needs and other factors as circumstances warrant.

2017 LTI awards ranged from 100% to 115% of each NEO’s target for the NEOs who served as an executive officer at the time of the 2017 LTI award. These awards were delivered 50% in stock options and 50% in SPS awards having a 2017-2019 performance period. The Committee believes this mix provides an appropriate balance between emphasizing stock price appreciation and enterprise performance.

 

 

The table below provides more detail about the 2017 LTI target values, grant values and percentages relative to LTI targets.

 

   

2017

LTI

TARGET

($)

   

ACTUAL

LTI  GRANT
VALUE(1)

($)

   

LTI AWARD
AS A PERCENT

OF TARGET

(%)

 

David M. Cordani

    9,600,000       11,040,000       115  

Eric P. Palmer(2)

    2,100,000       1,266,000       (2) 

Christopher J. Hocevar

    1,250,000       1,250,000       100  

Nicole S. Jones

    1,424,500       1,638,175       115  

Jason D. Sadler

    1,000,000       1,150,000       115  

Thomas A. McCarthy

    2,400,000       2,400,000       100  

Matthew G. Manders

    2,600,000       2,600,000       100  

 

  (1) Awarded in February 2017. The LTI Grant Value referenced in the table differs from the sum of the Stock Award and Option Award grant date fair values referenced in the Summary Compensation Table. This is largely due to the timing and determination of the grant date fair value of SPS awards under ASC Topic 718. Under ASC Topic 718, SPS grant date fair values reflect a probable achievement level of the TSR performance condition as of grant date; however this probable achievement level is not determined until after the Committee has determined the dollar amount of the LTI grant. Thus, an SPS award’s grant date fair value for accounting purposes may be higher or lower than the dollar amount of the LTI grant approved by the Committee if the TSR probable achievement level is above or below target, respectively. For more information on the TSR performance condition, please see the “Stock Awards” footnote for the Summary Compensation Table.

 

  (2)

Reflects the LTI target approved by the Committee in connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017. The actual LTI grant value includes the LTI award granted to Mr. Palmer in February 2017, prior to his promotion, plus the aggregate value of transitional SPSs that he was awarded for the 2017-2019 performance period in connection

 

 

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  with his promotion. The objective of the transitional SPS award is to align Mr. Palmer’s 2017-2019 SPS award with his new LTI target. As Mr. Palmer was not an executive officer at the time the 2017 LTI award was granted, we have not included his award as a percent of target.

Equity awards granted in 2017 are disclosed in terms of their grant date fair value in columns (e) and (f) of the Summary Compensation Table and in the Grants of Plan-Based Awards Table.

Strategic Performance Shares Program

Our SPS program is designed to incent and reward sustained long-term financial discipline and strategic accomplishments that benefit Cigna and its shareholders over the long-term.

 

Grants

At the time of grant, a total LTI dollar value is approved for each named executive officer. The SPS portion of

the award (50% of the total LTI value) is converted into a specific number of SPSs on the grant date based on

Cigna’s stock price on that date.

 

 

Vesting

SPSs vest in the first quarter of the year following the end of the three-year performance period.

 

 

Payout Determination

The Committee determines a performance factor of 0% to 200% based on Company achievement of pre-established measures during the performance period, and that factor is multiplied by each SPS award to determine the number of shares to be paid in respect of vested awards.

 

Measure: Relative TSR, compounded over the three-year performance period

 

Weighting: 50%

 

Alignment with Business Strategy: Rewards NEOs for stock performance relative to Cigna’s applicable peer group at the time of the award

 

Comparator: The SPS performance peer group is used to measure relative TSR.

 

Measure: Adjusted income from operations

 

Weighting: 50%

 

Alignment with Business Strategy: Reinforces the importance of sustained profitable growth across the enterprise

 

Segments Included: Global Health Care, Global Supplemental Benefits and Group Disability and Life

 

Threshold Performance: Performance that would result in funding of less than 35% of target yields no payment for this measure

 

Final Payout

SPS awards are ultimately settled in Cigna stock, so the actual value of the earned awards is based on

Cigna’s stock price at the time of payment.

 

The SPS program is designed to pay at the competitive median for performance results against stretch targets. Each year, when the Committee approves the performance measures and goals for the SPS performance period, the Committee sets the goals with the expectation that performance resulting in a number of shares paid between 80% and 120% of target would be challenging and not certain, while performance resulting in a number of shares

paid over 120% of target would be difficult, but not unattainable. The Committee believes that the SPS performance measures are effective in evaluating the Company’s long-term success and value created for shareholders.

The SPS programs outstanding as of the end of 2017 include the 2015-2017 performance period, the 2016-

 

 

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2018 performance period and the 2017-2019 performance period. If earned, these SPSs will be paid out in 2018, 2019 and 2020, respectively. For each of these programs, the SPS performance peer group, which is used to measure relative TSR, includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation,

MetLife, Inc., UnitedHealth Group Incorporated and Unum Group. Centene Corp. was added to the SPS performance peer group for the 2017-2019 performance period. In the event the number of companies in the peer group falls below ten during the three-year performance period, the Company’s TSR will be ranked against the remaining companies.

 

 

2015-2017 SPS Program

The performance goals for the 2015-2017 SPSs are presented in the table below, along with actual results for the three-year performance period.

 

MEASURE   WEIGHTING    

TARGET PERFORMANCE GOALS

(DOLLARS IN MILLIONS)

  ACTUAL RESULT
(DOLLARS IN MILLIONS)

Relative TSR

    50  

50th Percentile

 

78th Percentile

(183% of target)

                 

Adjusted income
from operations(1)

    50  

Cumulative adjusted income from operations of $7,220 to $7,948, calculated assuming a compound annual growth rate of 3.5%-8.5%

 

$7,532

(97.1% of target)

                 

 

  (1) Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets.

Over the three-year period from 2015 to 2017, three-year annual compounded TSR was 25.5%, which ranked at the 78th percentile relative to the applicable peer group companies and was 183% of target.

Based on the results in the table above, in February 2018, the Committee approved a payout of the 2015-2017 SPSs at 139.8% of target. The calculations utilized to determine the payout were reviewed for accuracy by PricewaterhouseCoopers LLP.

2014-2016 SPS Program

The shares earned under the 2014-2016 SPS program were measured using performance through December 31, 2016 and were delivered to each executive officer in February 2017. The total share value realized by each NEO on the payment date is reflected in the Option Exercises and Stock Vested Table. The performance measures, targets, results and payout for the 2014-2016 SPS program are discussed in greater detail in our definitive proxy statement for our 2017 annual meeting of shareholders, filed with the SEC on March 17, 2017.

 

Retirement and Deferred Compensation

401(k) Retirement Plan and

Supplemental 401(k) Plan

All U.S. full-time employees are eligible for the tax-qualified 401(k) Plan, which provides for employee contributions as well as Company matching contributions of up to 4.5% of eligible pay. Certain employees, including the U.S.-based NEOs, are eligible for the Cigna Supplemental 401(k) Plan.

The Supplemental 401(k) Plan is a non-qualified deferred compensation plan that provides an annual credit to employees equal to 1.5% of earnings that cannot be treated as eligible earnings under the regular 401(k) Plan due to Internal Revenue Code limits and cannot be the

basis for employee or Company matching contributions under the regular 401(k) Plan. Earnings eligible for the credit are salary and bonus amounts that exceed the IRS annual limit on eligible earnings ($270,000 in 2017) or that an employee defers under the Cigna Deferred Compensation Plan. Credits accumulate with hypothetical interest equal to the rate of return under the 401(k) Plan’s Fixed Income Fund (3.0% as of January 1, 2017 and January 1, 2018). The account will vest under the same rules that apply to the regular 401(k) Plan. The account balance will be paid after termination of employment in accordance with the plan.

Nonqualified Deferred Compensation Plan

Cigna provides the NEOs and certain other employees with the opportunity to defer base salary and annual

 

 

 

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incentive awards under the Cigna Deferred Compensation Plan. Cigna does not make any contributions to this plan on behalf of employees. This plan provides eligible employees an opportunity to postpone both the receipt of compensation and the income tax on that compensation —typically until after termination of employment with Cigna. Participants elect when to receive payment and can choose either a single lump sum or annual installments. For amounts deferred before 2005, participants can request an accelerated payment of all or part of their account balance subject to a 10% penalty. Otherwise, early withdrawals are permitted only under financial hardship circumstances.

Additional information about deferred compensation can be found in the Nonqualified Deferred Compensation Table and accompanying narrative.

Defined Benefit Pension Plans

The Cigna Pension Plan and the Cigna Supplemental Pension Plan were frozen on July 1, 2009. Benefits earned under these plans have been determined based on eligible earnings through July 1, 2009. The freeze did not affect benefits earned before July 1, 2009. The Company’s NEOs hired before July 1, 2009 participated in the Pension Plan and the Supplemental Pension Plan.

Additional information about pension benefits can be found in the Pension Benefits Table and accompanying narrative.

Retirement Plans for Non-U.S.-based Employees

Mr. Sadler participates in the Mandatory Provident Fund program for Hong Kong employees. Local law requires employees to contribute 5% of their monthly salary up to a maximum amount ($1,500 KHD or approximately $200 USD per month). Employers also are required to contribute 5% of the employee’s monthly salary up to the same maximum amount. Employer contributions vest at a rate of 10% per year and are fully vested after 10 years of service. Participants may withdraw their lump sum benefit upon attaining the normal retirement age of 60.

As a citizen of the United Kingdom working in Hong Kong, Mr. Sadler also participates in Cigna’s Third Country National Pension Plan. At the end of each calendar quarter, Cigna allocates a hypothetical contribution equivalent to 9% of eligible base and bonus earnings for the period. The hypothetical balance earns interest based on investment elections. Employees are vested in plan benefits after five years of service. At the time of separation of service from Cigna, Mr. Sadler will receive a lump sum payment of his vested plan benefit.

Limited Perquisites and Other Benefits

Cigna’s executive compensation program provides limited perquisites to executive officers, offered primarily to

attract and retain key talent or provide for an executive officer’s safety and security. Perquisites generally have included an annual allowance under our executive financial services program (as described below), payments for residential security system monitoring and maintenance and relocation benefits when a move is required. Executive officers working outside of the United States also may be provided with benefits that are customary in the country in which they are based. In addition, Mr. Cordani is expected to use the corporate aircraft for business and personal travel to increase his time available for business purposes and as a means to better ensure his safety and security. Mr. Cordani is fully responsible for any personal income tax liability associated with his personal use of the corporate aircraft.

Cigna’s executive financial services program offers executive officers an annual allowance of up to $6,500 for the costs of financial or estate planning (including associated legal services) and tax return preparation, with the exception of Mr. Cordani who is reimbursed for all such expenses incurred for any year.

The NEOs also are eligible to receive all of the benefits offered to Cigna employees generally, including medical and other health and welfare benefits as well as voluntary benefits.

Actions Impacting 2018 Compensation

In July 2017, following termination of the merger agreement with Anthem, which restricted adjustments to executive compensation, and in December 2017, as part of the annual review of target total direct compensation, the Committee reviewed survey data and other public information to evaluate the competitive positioning of the NEOs’ compensation. As a result of these reviews, the Committee, and with respect to Mr. Cordani, the Board, approved the following adjustments:

MIP. The 2018 MIP targets for Mr. Cordani, Mr. Palmer and Mr. Hocevar were increased to $3,000,000, $825,000 and $575,000, respectively.

LTI. The Board approved a target range of $9,000,000 to $13,000,000 for future LTI awards for Mr. Cordani, replacing the LTI target of $10,000,000 that the Board approved in July 2017. Mr. Cordani’s future LTI awards will continue to be based primarily on enterprise performance and his individual contributions, as well as an assessment of then-current market data. The LTI targets for future awards for Mr. Palmer, Ms. Jones, Mr. Hocevar and Mr. Sadler were set at $2,500,000, $1,690,000, $1,600,000 and $1,500,000, respectively.

 

 

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EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS

Employment Arrangements

We typically do not enter into individual employment contracts with our executive officers. Consistent with our approach of rewarding performance, employment is not guaranteed, and either Cigna or the executive officer may terminate the relationship at any time. An executive officer receives an offer letter upon his or her hire or promotion that describes initial compensation terms, such as base salary, any sign-on or other cash bonus or equity awards, any relocation assistance and target opportunities for annual cash incentive and long-term equity incentive compensation.

Severance Arrangements

Other than following a change of control of Cigna, the Committee generally has discretion to determine, on a case-by-case basis, whether to make any post-termination payments to an executive officer. In the past, the Committee has approved varying amounts of severance pay for departing executive officers in exchange for certain obligations, including, for example, a general release of all claims or an extended non-competition and non-solicitation period. In approving a severance arrangement, the Committee exercises its business judgment based on individual circumstances, including, but not limited to, the executive officer’s term of employment, past accomplishments, reasons for termination, opportunities for future employment and total unvested annual or long-term incentive compensation.

Jason Sadler

As an employee based in Hong Kong, Mr. Sadler is entitled to certain protections in the event of his termination that are customary for local employees. Unless he is terminated for cause, to terminate his employment, either Cigna or Mr. Sadler must provide at least three months’ prior written notice of the termination, or payment in lieu thereof.

Other Post-Termination Arrangements

Under the Cigna Long-Term Incentive Plan, if, absent a change of control, an executive officer’s employment terminates prior to the vesting of a stock option, restricted stock, RSU or SPS award, the award is generally forfeited, subject to specific exceptions for disability, death or retirement (as defined in the plan). Upon an executive officer’s disability, death or retirement, stock options, restricted stock, RSUs and SPS awards may vest, depending on the nature of the award, the termination event, and the terms of the grant agreements. For a full explanation of how equity awards are treated in the event of an executive officer’s disability, death or retirement,

please see “Executive Compensation Tables — Potential Payments Upon Termination or Change of Control.”

In 2017, in connection with their retirements, the Committee approved the terms of an Agreement and Release for each of Mr. McCarthy and Mr. Manders as well as an Advisory Services Agreement for Mr. McCarthy. These agreements are described in “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement” and “— Terms of Mr. Manders’ Retirement Arrangement” in the Executive Compensation Tables.

Change of Control Arrangements

 

           
    Cigna does not provide
executive officers with any
single-trigger payments or golden parachute excise tax gross-ups or excise tax reimbursements
upon a change of control.
 
   
     
           

The Cigna Executive Severance Benefits Plan applies to executive officers in the event of a qualified separation of service of the executive officer. A mere change of control itself (i.e., a “single trigger”) does not trigger benefits. The intent of the plan is to encourage executives to continue to act in shareholders’ best interests in evaluating potential transactions and ensure management talent will be available to assist with the transaction and business integration.

Under the Cigna Executive Severance Benefits Plan and Cigna Long-Term Incentive Plan, an executive officer will be eligible for benefits if his or her employment is terminated upon or during the two-year period following a change of control (i.e., a “double trigger”) if such termination is:

 

  initiated by the company other than “for cause” as defined in the applicable plan; or

 

  initiated by the executive officer after determining, in his or her reasonable judgment, that there has been a material reduction in authority, duties or responsibilities, any reduction in compensation or any changes in the executive’s principal office location of more than 35 miles from the location on the date of a change of control. Under the Executive Severance Benefits Plan, the executive must deliver notice to the company within 30 days after such reduction or change and at least 30 days before separation, after which the company has 30 days to remedy the circumstances before a separation upon a change of control is deemed to have occurred.
 

 

 

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Benefits in a double-trigger situation include the following:

 

  A lump sum cash severance payment equal to 156 weeks (approximately three years) of base salary plus three times the higher of (i) the most recent annual incentive paid or (ii) the target annual incentive. The intent of the formula for the annual incentive amount is to reward the executive officer for his or her level of expected performance prior to the change of control.

 

  Full vesting of all unvested stock options, restricted stock and RSUs. As a result, if an executive is involuntarily terminated without cause or resigns for good reason after a change of control, the executive is able to realize the shareholder value to which he or she contributed while employed at the company.

 

  Full vesting of all unvested SPS awards with the calculation of such vesting made at the highest of: (1) the target vesting percentage; (2) the vesting percentage for the most recent payout of SPS awards (i.e., the prior cycle); or (3) the average of the vesting percentage established by the Committee for the most recent two SPS payouts. The intent of this formula is to provide executive officers with a reasonable estimate of the potential payouts and to avoid placing executive officers at a disadvantage as a result of a change of control.

 

  At the company’s expense, twelve months of basic life insurance plan coverage and six months of reasonable outplacement services following a change of control.

If any portion of the change of control benefits paid to an executive officer would be subject to a change in control excise tax, then either (1) the executive will receive the full amount of the benefits and will pay any resulting excise tax or (2) the change of control benefits will be reduced enough to avoid the excise tax entirely, whichever alternative provides the executive with the greater amount of after-tax benefits.

For more information concerning the financial amount of these benefits, see “Executive Compensation Tables —Potential Payments upon Termination or Change of Control.”

PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION

The Role of the People Resources Committee in Executive Compensation

The Committee is composed entirely of independent directors. Pursuant to its charter, the Committee is charged with oversight of the Company’s compensation and benefit plans and policies that apply to executive officers. The Committee regularly reviews Cigna’s compensation programs against the Company’s strategic goals, industry practices, and emerging trends to ensure a strong linkage between executive pay and performance and alignment with shareholder interests. At each of its regularly scheduled meetings, the Committee conducts executive sessions, without Cigna management present. In addition, the Committee has engaged Pay Governance as its independent compensation consultant to assist the Committee in its responsibilities.

Risk Oversight

As part of its responsibilities, the Committee considers whether Cigna’s compensation programs and policies encourage unnecessary or excessive risk-taking behavior. At the request of the Committee, on an annual basis, the Chief Risk Officer conducts a comprehensive review of executive and employee compensation programs to determine whether incentive compensation plans are likely to promote risk-taking behavior that could have a material adverse effect on the Company. The findings of this review are presented to, and discussed by, the Committee in February of each year. The review analyzes:

 

    compensation governance processes, including general design philosophy and risk considerations in structuring compensation and incentive plans;

 

    situations where compensation programs may have the potential to raise material risks to the Company;

 

    internal controls that mitigate the risk of incentive compensation having an unintended negative impact; and

 

    plan design features that further mitigate compensation risk, including clawback arrangements, holding periods, earnings thresholds, payment structures and plan caps.

After conducting the review and assessing potential risks, the Committee determined that the Company’s incentive programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

 

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 COMPENSATION MATTERS

 

 

Process for Executive Compensation Decisions

Chief Executive Officer Compensation

 

     

The Committee and

independent Chairman

of the Board evaluate

CEO performance and

enterprise goals.

 

The Committee makes

recommendations to the

independent members

of the Board about

CEO performance and compensation.

 

The Board considers

the Committee’s

recommendations as it

reviews and determines the

CEO’s compensation.

 

The Chairman of the

Board reviews the results

of the performance

evaluation with the CEO.

     

 

Mr. Cordani is not present when the Committee and the Board make decisions about his compensation. At the request of the Committee, the Executive Vice President, Human Resources and Services and the independent compensation consultant may attend this Committee session.

Other NEO Compensation

Generally, the Executive Vice President, Human Resources and Services presents recommendations for all other NEOs’ compensation targets for the Committee’s consideration. For compensation decisions involving actual payouts for the NEOs, Mr. Cordani presents his recommendations to the Committee for its consideration. Mr. Cordani discusses Cigna’s performance and the individual officer’s performance. The Executive Vice President, Human Resources and Services is generally present for the discussion of compensation for all executive officers other than himself.

Compensation Consultant Role in Executive Compensation

While the Committee or Board ultimately makes all executive compensation decisions, the Committee engages the services of outside advisors for assistance. The Committee utilized Pay Governance as the Committee’s independent compensation consultant throughout 2017 to provide independent, objective analysis, advice and information and to generally assist the Committee in the performance of its duties. The Committee will typically request information and recommendations directly from the compensation consultant as it deems appropriate to structure and evaluate Cigna’s compensation programs, practices and plans. As part of its engagement, at the direction of the Committee, the compensation consultant will work with the Committee chair, the Executive Vice President, Human Resources and Services and Cigna’s compensation department in their work on the Committee’s behalf.

 

 

ADVICE RECEIVED BY THE COMMITTEE FROM ITS COMPENSATION

CONSULTANT FOR 2017 COMPENSATION DECISIONS

   Analyzed compensation levels and pay practices as compared to Cigna’s compensation peer group to assess whether three- and five-year realizable pay were aligned with Cigna’s performance and compensation philosophy

 

   Presented a comparison of competitive market data to the current compensation levels of each executive officer to assist in setting compensation targets

 

   Provided market research on incentive plans to assist in the design of short-term and long-term incentive compensation plans

 

   Reviewed incentive measures in the 2017 MIP and 2017–2019 SPS program to provide the Committee with objective reference points to consider when determining target goals

 

   Evaluated the effect of Cigna’s equity programs on annual share use, burn rate and total overhang to provide the Committee with context for its determination of the maximum share limit for use in 2017

 

 

At the request of the Committee, a representative of Pay Governance regularly attended the Committee’s meetings in 2017. The Committee regularly reviews and evaluates its compensation consultant engagement, and annually reviews the compensation consultant’s performance.

Independence of the Compensation Consultant

The Committee’s policy requires that the compensation consultant be independent of the Company. A compensation consultant is deemed independent under the policy if the compensation consultant (1) is retained by and reports solely to the Committee for all executive compensation services; (2) does not provide any services or products to the Company or management except with approval of the Committee’s chair; and (3) is otherwise free from conflicts. The Committee has assessed Pay Governance’s independence pursuant to Cigna’s policy and NYSE rules and concluded that Pay Governance is free from conflicts and independent. In addition, each year the Committee receives a letter from its compensation consultant providing appropriate assurances and confirmation of independence.

 

 

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COMPENSATION MATTERS 

 

 

OTHER PRACTICES

 

           
   

 

Executive officers are subject to robust stock ownership requirements, prohibited from hedging and restricted in their ability to pledge Cigna securities.

 
   
     
           

Stock Ownership Guidelines

We believe that the ownership of meaningful levels of Cigna stock by our executive officers is a critical factor in aligning the long-term interests of management and our shareholders. To promote this goal, we have adopted stock ownership guidelines that apply to all of our executive officers, including our NEOs. As of December 31, 2017, all of our NEOs are in compliance with the stock ownership guidelines and each of our NEOs met or exceeded their ownership requirements, or are within the five-year share accumulation period described below. The chart below shows the stock ownership requirements and actual value of holdings as a multiple of base salary as of December 31, 2017 for the CEO and the average of the other NEOs that are presently employed by the Company.

 

 

 

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FEATURES OF OUR STOCK OWNERSHIP GUIDELINES

   Wholly owned shares, restricted stock, stock equivalents, and shares owned through benefit plans (such as investments in the Cigna stock fund of the Cigna 401(k) Plan) are counted toward meeting the guidelines. SPSs and stock options do not count toward meeting guidelines.

 

   Executive officers have five years from date of hire, promotion or any other event that changes their multiple of base salary to meet their applicable ownership requirement. Prior to meeting their stock ownership requirement, executives may only engage in transactions that increase their holdings. Once an executive attains his or her required holding level, the executive must maintain the requirement on a continuous basis, even if the requirement is met before the end of the five-year period.

 

 

 

SHARE RETENTION REQUIREMENTS ENCOURAGE A LONG-TERM OWNERSHIP PHILOSOPHY

•    Once ownership requirements are met,

 

¡   executive officers may not sell more than 50% of the shares held above their applicable guideline in any single open trading period; and

 

 

 

¡   executive officers must retain, for at least one year, a minimum of 50% of the shares acquired upon exercise of any stock options and 50% of the shares acquired upon vesting of restricted stock grants, net of shares withheld for taxes or payment of exercise prices, fees and expenses.

 

 

 

 

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 COMPENSATION MATTERS

 

 

OTHER PRACTICES REGARDING TRANSACTIONS IN CIGNA STOCK

   Executive officers may only transact in Cigna securities during approved open trading periods after satisfying mandatory clearance requirements.

 

   CEO approval is required for all transactions in Cigna stock by executive officers.

 

   General Counsel approval is required for all transactions in Cigna stock by the CEO.

 

 

 

Hedging and Pledging Restrictions

Our insider trading policy prohibits our directors, executive officers and all employees from engaging in hedging, speculative or other transactions that hedge or offset any decrease in the market value of Cigna stock. Prohibited transactions include, but are not limited to, trading in put or call options, short sales, zero cost collars and forward sale contracts.

The Committee has adopted a policy that prohibits directors and Section 16 officers from pledging Cigna stock as loan collateral or holding Cigna stock in a margin account. Cigna’s Office of the Corporate Secretary, in consultation with the Chairman of the Board and the Chief Executive Officer, may grant exceptions to this prohibition only with respect to shares held above the stock ownership guidelines. Exceptions may be granted upon a determination that the pledge is reasonable in amount and scope and structured to minimize risks associated with pledging. This determination will be based on the following considerations, among others:

 

    the amount of the pledge as compared to Cigna’s total stock outstanding, market value or trading volume;

 

    the amount of the pledge as compared to the total value of Cigna stock held by the individual above the applicable stock ownership guideline;

 

    the individual’s ability to repay loans secured by Cigna stock or substitute other assets as collateral; and

 

    the terms of the pledging documentation.

In 2017, none of our directors, NEOs or other Section 16 officers received an exception from our policy prohibiting pledging.

Disgorgement of Awards (Clawback) Policy

The Board of Directors has the authority to recoup compensation paid to executive officers in the event of a restatement of financial results, beyond the mandates of Sarbanes-Oxley. In addition, Cigna will review its policy and, if necessary, amend it to comply with any new clawback mandates under applicable law.

Currently, the Board will, in all appropriate cases and to the full extent permitted by law, require reimbursement of any bonus or other cash incentive compensation awarded to an executive officer or cancel unvested restricted or deferred stock awards previously granted to the executive officer if:

 

    the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were later the subject of a restatement;

 

    the executive engaged in intentional misconduct that caused or partially caused the need for the restatement; and

 

    the amount of the bonus or incentive compensation that would have been awarded to the executive had the financial results been properly reported would have been lower than the amount actually awarded.

In addition, Cigna’s stock option, restricted stock, RSU and SPS awards include a clawback provision that applies to any Cigna employee, including any NEO, who:

 

    is terminated by Cigna due to misconduct;

 

    engages in behavior that would be considered grounds for termination due to misconduct;

 

    competes with Cigna within one year following any voluntary termination;

 

    solicits a Cigna employee or customer within one year following any termination;

 

    discloses Cigna confidential information improperly; or

 

    fails to assist Cigna in the handling of investigations, litigation or agency matters with respect to which the employee has relevant information.

If an executive engages in any of the above “violation events,” any option gains realized over the two years before the event and the value of any restricted stock, RSU or SPS vesting over the year before the event are required to be paid back to Cigna. These provisions are designed to discourage executives from engaging in activities that can cause Cigna competitive harm.

 

 

 

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COMPENSATION MATTERS 

 

 

Tax and Accounting Treatment

Section 162(m)(6) of the Internal Revenue Code pertains to the deductibility of compensation paid by health insurers, including Cigna. Under Section 162(m)(6) of the Internal Revenue Code, any per person compensation in excess of $500,000 paid to any employee or, generally, any individual service provider, will not be deductible by Cigna. The tax deduction limitation applies whether or not compensation is performance-based or is provided pursuant to a shareholder-approved plan.

The tax deduction limitation under Section 162(m)(6) results in the loss of some tax benefits related to employee compensation in excess of the $500,000 per person deduction limit. While the Committee considers the impact of Section 162(m)(6), it believes that shareholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting the executive compensation program, even if non-deductible compensation expenses could result.

Separately, the Committee also considers the accounting consequences of its compensation decisions.

 

 

Report of the People Resources Committee

 

The People Resources Committee of the Board of Directors reviewed and discussed with Cigna’s management the Compensation Discussion and Analysis. Based on this review and discussion, the People Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and be incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission. The Board accepted the Committee’s recommendation.

People Resources Committee:

William D. Zollars, Chair

Eric J. Foss

John M. Partridge

Eric C. Wiseman

 

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 COMPENSATION MATTERS

 

 

Executive Compensation Tables

 

2017 SUMMARY COMPENSATION TABLE

This table includes information regarding 2017, 2016 and 2015 compensation for each of the NEOs. Other tables in this Proxy Statement provide more detail about specific types of compensation with respect to 2017.

 

NAME AND PRINCIPAL

POSITION

(a)

 

YEAR

(b)

   

SALARY

($)

(c)

   

BONUS

($)

(d)

   

STOCK

AWARDS

($)

(e)

   

OPTION

AWARDS

($)

(f)

   

NON-EQUITY

INCENTIVE
PLAN

COMPENSATION

($)

(g)

   

CHANGE IN
PENSION

VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS

($)

(h)

   

ALL OTHER
COMPENSATION

($)

(i)

   

TOTAL

($)

(j)

 

David M. Cordani

President and Chief

Executive Officer

    2017       1,284,615             6,513,698       5,520,020       4,000,000       48,222       229,237       17,595,792  
    2016       1,200,000             6,690,115       6,000,012       1,100,000       62,000       227,730       15,279,857  
    2015       1,189,615             7,105,072       5,800,033       2,860,000             352,952       17,307,672  
                                                                         

Eric P. Palmer(1)

Executive Vice President

and Chief Financial Officer

    2017       594,769             1,161,994       281,581       975,000       12,950       33,624       3,059,918  
                 
                 
                                                                         

Christopher J. Hocevar(2)

President, Strategy,

Segments & Solutions

    2017       534,458             737,529       625,015       775,000       14,035       22,506       2,708,543  
                 
                 
                                                                         

Nicole S. Jones

Executive Vice President,

General Counsel

    2017       601,810             966,654       819,103       1,054,000       5,777       23,595       3,470,939  
    2016       581,137             953,114       854,702       431,200       7,207       35,294       2,862,654  
    2015       577,867             1,003,501       819,089       756,000       0       31,390       3,187,847  
                                                                         

Jason D. Sadler(3)

President,

International Markets

    2017       611,832             678,576       575,032       908,371             222,623       2,996,434  
    2016       589,463             641,256       575,039       399,796             239,383       2,444,937  
    2015       586,330             704,494       575,025       575,297             235,637       2,676,783  
                                                                         

Thomas A. McCarthy(4)

Retired Executive Vice President

and Chief Financial Officer

    2017       369,779             1,416,105       1,200,000       400,000       307,479       205,520       3,898,883  
    2016       740,000             1,471,894       1,320,035       536,000       65,616       34,898       4,168,443  
    2015       719,231             1,470,005       1,200,013       1,000,000       0       29,036       4,418,285  
                                                                         

Matthew G. Manders(5)

Retired President, Gov’t & Indiv.

Programs and Group Insurance

    2017       634,615             1,534,012       1,300,012       900,000       495,465       27,744       4,891,848  
    2016       750,000             1,594,526       1,430,035       675,000       289,130       41,900       4,780,591  
    2015       732,692             1,347,529       1,100,015       1,080,000       0       37,253       4,297,489  
                                                                         

 

  (1) Mr. Palmer was appointed Executive Vice President and Chief Financial Officer effective June 16, 2017.

 

  (2) Mr. Hocevar was appointed President, Strategy, Segments and Solutions effective February 23, 2017.

 

  (3) Mr. Sadler’s base salary and annual award under the Management Incentive Plan are paid in Hong Kong dollars and, throughout these Executive Compensation Tables, have been converted to U.S. dollars using an exchange rate equal to the average of the daily mid-points between the bid and the ask prices for each trading day in the month of December for the relevant year. For 2017 base salary and the 2017 MIP award, $1 Hong Kong dollar = $0.12799676 U.S. dollars.

 

  (4) Mr. McCarthy retired effective June 16, 2017. On June 16, 2017, he and the Company entered into an Agreement and Release (the “McCarthy A&R Agreement”) in connection with his retirement. The McCarthy A&R Agreement is described in “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement” of the Executive Compensation Tables.

 

  (5) Mr. Manders retired effective November 3, 2017. On October 16, 2017, he and the Company entered into an Agreement and Release (the “Manders A&R Agreement”) in connection with his retirement. The Manders A&R Agreement is described in “Potential Payments Upon Termination or Change of Control — Terms of Mr. Manders’ Retirement Arrangement” of the Executive Compensation Tables.

Stock Awards (Column (e))

Amounts in this column represent the grant date fair value of stock awards computed in accordance with ASC Topic 718 as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and, for SPSs, are based upon the probable outcome of the performance conditions. All awards were made under the Cigna Long-Term Incentive Plan. No stock awards, other than SPSs, were granted to the NEOs in 2017.

 

 

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The SPSs are subject to performance conditions. The grant date fair value of SPS awards granted in 2017 reflects the probable achievement level of the TSR performance condition as of the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% of the weighting of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO, as reflected in the CD&A. The amount reported in column (e) is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under ASC Topic 718, excluding the effect of estimated forfeitures, as follows:

 

NAME

    

 

VALUE OF SPSs GRANTED IN 2017

 

 
    

 

GRANT DATE
FAIR VALUE

      

 

AT HIGHEST
PERFORMANCE ACHIEVEMENT*

 
      

($)

 

      

($)

 

 

David M. Cordani

       6,513,698          9,273,739  

Eric P. Palmer

       1,161,994          1,654,364  

Christopher J. Hocevar

       737,529          1,050,042  

Nicole S. Jones

       966,654          1,376,254  

Jason D. Sadler

       678,576          966,108  

Thomas A. McCarthy **

       1,416,105          2,016,150  

Matthew G. Manders **

       1,534,012          2,184,016  
   

 

   * The value at the highest performance achievement reflects adjusted income from operations at 200% of target and projected achievement of total shareholder return relative to Cigna’s SPS performance peer group based on accounting assumptions.

 

  ** Mr. McCarthy and Mr. Manders will receive a prorated portion of their award in accordance with their respective A&R Agreements.

Option Awards (Column (f))

Represents the grant date fair value of option awards made under the Cigna Long-Term Incentive Plan computed in accordance with ASC Topic 718 applying the same model and assumptions as Cigna applies for financial statement reporting purposes, as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (disregarding any estimates for forfeitures).

Non-Equity Incentive Plan Compensation (Column (g))

This column reflects performance-based compensation awarded under the MIP.

Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column (h))

This column includes the aggregate change in the actuarial present value of accumulated benefits under the pension plans, which value increases and decreases from period to period and is subject to the assumptions discussed in connection with the Pension Benefits Table. Information regarding accumulated benefits under the pension plans is also discussed in the narrative to the Pension Benefits Table. In 2017, Mr. McCarthy received a full distribution of his Cigna Pension Plan (Part B) account, as reflected on the Pension Benefits Table. The amounts in this column do not include deferred compensation because we do not provide above market earnings to our executive officers. The “†” symbol in the table represents a negative change in pension value.

All Other Compensation (Column (i))

This column includes:

 

  Cigna’s matching contributions to the NEOs’ accounts under its 401(k) and supplemental 401(k) plans in the following amounts: Mr. Cordani — $43,869; Mr. Palmer — $20,712; Mr. Hocevar —$22,506; Ms. Jones — $23,595; Mr. McCarthy —$21,263; and Mr. Manders — $27,744.

 

  Cigna’s contributions of $91,168 to Mr. Sadler’s Third Country National Pension Plan account and $2,304 to Mr. Sadler’s Mandatory Provident Fund account.

 

  Dividends paid in 2017 on restricted stock units of $414 for Mr. Sadler.

 

  Payment of $180,000 to Mr. McCarthy pursuant to his Advisory Services Agreement. For more information on the Advisory Services Agreement, see “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement.”

 

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 COMPENSATION MATTERS

 

 

  As permitted by SEC rules, we have included the perquisites and other personal benefits that we provided to certain named executive officers in 2017 where the aggregate amount of such compensation exceeds $10,000. 2017 perquisites valued at incremental cost (the cost incurred by Cigna due to the NEO’s personal use or benefit) as follows:

 

  ¡    For Mr. Cordani, perquisites included the use of the corporate aircraft for personal travel ($143,840), costs for security system monitoring and maintenance ($31,558) and fees for financial planning, tax preparation and legal services related to tax and estate planning. The incremental cost for the use of the corporate aircraft is determined by dividing the annual variable costs by the total number of flight hours and multiplying the result by the number of personal flight hours during the year. Variable costs include fuel, crew travel, trip-related maintenance, landing fees and hangar costs and other similar costs. Fixed costs that do not change based on usage are excluded from the incremental cost calculation.

 

  ¡    For Mr. Palmer, perquisites included fees paid for financial planning, tax preparation and legal services related to tax and estate planning and costs for security system monitoring and maintenance.

 

  ¡    For Mr. Sadler, perquisites are consistent with market practice for executives in Hong Kong, which included a housing allowance ($107,517), club memberships, a company car and a personal driver and fees paid for financial planning, tax preparation and legal services related to tax and estate planning.

Pay Ratio

The ratio of our CEO’s total annual compensation to our median employee’s total annual compensation (the “CEO Pay Ratio”) is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

Cigna is a global health service company with employees in over 30 countries. We identified our median employee using our global employee population as of October 1, 2017, which consisted of 38,271 U.S. and 7,561 non-U.S. employees as of that date. This population consisted of our full-time, part-time and temporary employees. In accordance with SEC rules, we excluded all employees in the 24 countries with our smallest employee populations, totaling in the aggregate 2,209 employees (approximately 4.8% of our total employee population at October 1, 2017). Employees from the following countries were excluded: United Arab Emirates (131), Australia (4), Bahrain (2), Canada (25), Chile (2), China (221), France (2), Germany (2), Hong Kong (315), Indonesia (327), India (30), Italy (1), Kenya (30), Kuwait (1), Lebanon (2), Malaysia (84), Netherlands (6), New Zealand (222), Norway (1), Oman (7), Saudi Arabia (5), Singapore (30), Switzerland (7) and Turkey (752). After excluding employees in these countries, our employee population as of October 1, 2017 consisted of 43,623 employees (including 38,271 employees in the U.S. and 5,352 employees outside of the U.S.).

To identify our median employee, we used direct cash compensation as our consistently applied compensation measure, as permitted by SEC rules. This included cash elements such as base pay, overtime, sales commissions, variable pay, bonuses (discretionary and non-discretionary) and beeper, on-call and night/weekend pay. This measure encompasses all of the principal methods of direct cash compensation we use for our employees around the globe and we believe reasonably reflects the annual compensation of our employees.

We calculated the median employee’s total annual compensation in accordance with the requirements of the Summary Compensation Table. Based on our calculation for 2017, our CEO’s annual total compensation for 2017 was $17,595,792 and our median employee’s annual total compensation for 2017 was $63,010. Accordingly, we estimated our CEO Pay Ratio for 2017 to be 279:1. Due to the flexibility afforded by Item 402(u) in calculating the CEO Pay Ratio, the ratio may or may not be comparable to CEO pay ratios presented by other companies.

 

 

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COMPENSATION MATTERS 

 

 

GRANTS OF PLAN-BASED AWARDS IN 2017

This table provides information about annual incentive targets for 2017 and grants of plan-based awards made in 2017 to the NEOs. The disclosed dollar and share amounts do not necessarily reflect the actual amounts that will be paid or issued to the NEOs. Those amounts will be known only if and when the awards vest or become payable.

 

NAME

(a)

 

GRANT

DATE

(b)

   

COMMITTEE

APPROVAL

DATE

(c)

   

AWARD

TYPE

(d)

   

 

ESTIMATED POSSIBLE PAYOUTS

UNDER NON-EQUITY INCENTIVE

PLAN AWARDS

   

ESTIMATED FUTURE PAYOUTS

UNDER EQUITY INCENTIVE

PLAN AWARDS

                               
       

THRESHOLD

($)

(e)

   

TARGET

($)

(f)

   

MAXIMUM

($)

(g)

   

THRESHOLD

(#)

(h)

   

TARGET

(#)

(i)

   

MAXIMUM

(#)

(j)

   

ALL
OTHER

STOCK

AWARDS:

NUMBER
OF

SHARES
OF

STOCK
OR UNITS

(#)

(k)

   

ALL OTHER

OPTION

AWARDS:

NUMBER OF

SECURITIES

UNDERLYING

OPTIONS

(#)

(l)

   

EXERCISE

OR BASE

PRICE OF

OPTION
AWARDS

($/Sh)

(m)

   

CLOSING

MARKET

PRICE

ON

DATE OF

GRANT

($/Sh)

(n)

   

GRANT

DATE

FAIR

MARKET

VALUE

OF

STOCK

AND

OPTION

AWARDS

($)

(o)

 

David M. Cordani

               
MIP
Target
 
 
          2,800,000       5,600,000                  
    2/28/2017       2/21/2017       SPS             6,477       37,014       74,028               6,513,698  
    2/28/2017       2/21/2017       Option                     119,053       149.135       148.90       5,520,020  
                                                                                                                 

Eric P. Palmer

               
MIP
Target
 
 
          750,000       1,500,000                  
    2/28/2017       2/21/2017       SPS             330       1,888       3,776               332,249  
    5/8/2017       4/25/2017       SPS             146       834       1,668               158,559  
    6/16/2017       4/25/2017       SPS             592       3,382       6,764               671,186  
    2/28/2017       2/21/2017       Option                     6,073       149.135       148.90       281,581  
                                                                                                                 

Christopher J. Hocevar

               
MIP
Target
 
 
          500,000       1,000,000                  
    2/28/2017       2/21/2017       SPS             733       4,191       8,382               737,529  
    2/28/2017       2/21/2017       Option                     13,480       149.135       148.90       625,015  
                                                                                                                 

Nicole S. Jones

               
MIP
Target
 
 
          680,000       1,360,000                  
    2/28/2017       2/21/2017       SPS             961       5,493       10,986               966,654  
    2/28/2017       2/21/2017       Option                     17,666       149.135       148.90       819,103  
                                                                                                                 

Jason D. Sadler

               
MIP
Target
 
 
          648,837       1,297,674                  
    2/28/2017       2/21/2017       SPS             675       3,856       7,712               678,576  
    2/28/2017       2/21/2017       Option                     12,402       149.135       148.90       575,032  
                                                                                                                 

Thomas A. McCarthy

               
MIP
Target
 
 
          400,000       400,000                  
    2/28/2017       2/21/2017       SPS             1,408       8,047       16,094               1,416,105  
    2/28/2017       2/21/2017       Option                     25,881       149.135       148.90       1,200,000  
                                                                                                                 

Matthew G. Manders

               
MIP
Target
 
 
          900,000       900,000                  
    2/28/2017       2/21/2017       SPS             1,525       8,717       17,434               1,534,012  
    2/28/2017       2/21/2017       Option                     28,038       149.135       148.90       1,300,012  
                                                                                                                 

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Columns (f) and (g))

Amounts in column (f) represent annual incentive targets for the 2017 performance period paid in 2018. Individual award values can range from 0% to 200% of target (as reflected in column (g)). The actual amounts earned by each NEO are as follows: Mr. Cordani — $4,000,000; Mr. Palmer — $975,000; Mr. Hocevar — $775,000; Ms. Jones — $1,054,000; Mr. Sadler —$908,371; Mr. McCarthy — $400,000; and Mr. Manders — $900,000.

Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (h), (i) and (j))

Represents SPSs awarded for the 2017—2019 performance period. The People Resources Committee will determine payout amounts for the SPSs, if any, in 2019. The number of shares paid can range from 0% to 200% of the number of SPSs awarded. Threshold shares represent a threshold value for the SPS awards at 17.5% of target, which represents the lowest possible level of share payout under these awards assuming achievement at threshold for adjusted income from operations.

 

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Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement

    

 

 

 

57

 

 


Table of Contents

 

 COMPENSATION MATTERS

 

 

All Other Option Awards (Column (l))

Represents stock option awards granted under the Cigna Long-Term Incentive Plan and approved by the People Resources Committee at its February 2017 meeting as part of each NEO’s long-term incentive award. Stock options represented 50% of the long-term incentive awards for executive officers in 2017.

Exercise or Base Price of Option Awards (Column (m))

Pursuant to the Cigna Long-Term Incentive Plan, the stock option exercise price is the average of the high and low trading price of Cigna common stock on the date of the award.

Grant Date Fair Market Value of Stock and Options Awards (Column (o))

These amounts represent the grant date fair value of equity awards computed in accordance with ASC Topic 718, applying the same model and assumptions Cigna uses for financial statement reporting purposes. The award values represented in the table are theoretical, and may not correspond to the actual value that will be recognized by the NEO. The grant date fair value of SPS awards granted in 2017 reflects the probable achievement level of the TSR performance condition as of the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% of the weighting of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO (as reflected in the CD&A).

 

 

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Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement


Table of Contents

 

COMPENSATION MATTERS 

 

 

OUTSTANDING EQUITY AWARDS AT YEAR-END 2017

This table provides information about unexercised stock options and unvested stock awards (restricted stock, restricted stock units (RSUs) and SPSs) held as of December 31, 2017 by the NEOs.

 

    OPTION AWARDS     STOCK AWARDS  

NAME

(a)

 

NUMBER OF

SECURITIES

UNDERLYING

UNEXERCISED

OPTIONS

(#)

EXERCISABLE

(b)

   

NUMBER OF

SECURITIES

UNDERLYING

UNEXERCISED

OPTIONS

(#) (1)

UNEXERCISABLE

(c)

   

OPTION

EXERCISE

PRICE

($)

(d)

   

OPTION

EXPIRATION

DATE

(e)

   

NUMBER

OF

SHARES

OR
UNITS

OF
STOCK

THAT
HAVE

NOT

VESTED

(#) (1)

(f)

   

MARKET
VALUE

OF
SHARES

OR UNITS

OF
STOCK

THAT
HAVE

NOT
VESTED

($)(2)

(g)

   

EQUITY

INCENTIVE

PLAN

AWARDS:

NUMBER OF

UNEARNED

SHARES,

UNITS OR

OTHER

RIGHTS

THAT HAVE

NOT
VESTED

(#) (1)

(h)

   

EQUITY

INCENTIVE

PLAN AWARDS:

MARKET OR

PAYOUT

VALUE OF

UNEARNED

SHARES,

UNITS OR

OTHER

RIGHTS THAT
HAVE NOT

VESTED

($)(2)

(i)

 

David M. Cordani

    189,610         42.1900       3/1/2021       67,070       13,621,246       80,112       16,269,946  
    200,229         44.4250       2/28/2022          
    206,843         58.7300       3/5/2023          
    229,443         78.0350       2/26/2024          
    106,258       53,130       120.8950       2/25/2025          
    47,600       95,201       139.2200       3/1/2026