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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.            )

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

UnitedHealth Group Incorporated

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 


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LOGO

9900 Bren Road East, Minnetonka, Minnesota 55343

April 19, 2019

Dear Shareholder:

We cordially invite you to attend our 2019 Annual Meeting of Shareholders. We will hold our meeting on Monday, June 3, 2019, at 10:00 a.m. Central Time in the lower level conference center at 300 North LaSalle, Chicago, Illinois 60654.

As a shareholder of UnitedHealth Group, you play an important role in our company by considering and taking action on the matters set forth in the attached proxy statement. We appreciate the time and attention you invest in making thoughtful decisions.

Attached you will find a notice of meeting and proxy statement containing further information about the items upon which you will be asked to vote and the meeting itself, including:

    How to obtain admission to the meeting if you plan to attend; and

    Different methods you can use to vote your proxy, including by Internet, telephone and mail.

Every shareholder vote is important, and we encourage you to vote as promptly as possible. If you cannot attend the meeting in person, you may listen to the meeting via webcast. Instructions on how to access the live webcast are included in the proxy statement.

Sincerely,

SIGNATURE

David S. Wichmann
Chief Executive Officer

SIGNATURE

Stephen J. Hemsley
Executive Chairman of the Board


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LOGO

Notice of 2019 Annual Meeting of Shareholders

Date June 3, 2019

Time


10:00 a.m. Central Time

Location


Lower Level Conference Center
300 North LaSalle
Chicago, Illinois 60654

Record Date


April 9, 2019. Only shareholders of record of the Company's common stock at the close of business on the record date are entitled to receive notice of, and to vote at the Annual Meeting and any adjournments or postponements of the meeting.

Items of Business

Elect the eleven nominees set forth in the attached proxy statement to the Company's Board of Directors.

Conduct an advisory vote to approve the compensation paid to the Company's named executive officers as disclosed in the attached proxy statement (a "Say-on-Pay" vote).

Ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2019.

Consider a shareholder proposal set forth in the attached proxy statement, if properly presented at the Annual Meeting.

Transact other business that properly may come before the Annual Meeting or any adjournments or postponements of the meeting.


Admission to the Annual Meeting


To attend the Annual Meeting in person, you will need to bring an admission ticket and valid photo identification. You may attend the Annual Meeting by following the procedures described under Question 7 of the "Questions and Answers About the Annual Meeting and Voting" section in the attached proxy statement.

Proxy Voting


Important.
Even if you plan to attend the Annual Meeting, we still encourage you to submit your proxy by Internet, telephone or mail prior to the meeting. If you later choose to revoke your proxy or change your vote, you may do so by following the procedures described under Question 13 of the "Questions and Answers About the Annual Meeting and Voting" section in the attached proxy statement.

Webcast


You can listen to the live webcast of the Annual Meeting by visiting our website at www.unitedhealthgroup.com and clicking on "Investors" and then on the link to the webcast. See Question 10 of the "Questions and Answers About the Annual Meeting and Voting" section in the attached proxy statement.

By Order of the Board of Directors,

SIGNATURE

Dannette L. Smith
Secretary to the Board of Directors

April 19, 2019

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 3, 2019:

The Notice of Internet Availability of Proxy Materials, Notice of Annual Meeting of Shareholders, Proxy Statement and Annual Report are available at www.unitedhealthgroup.com/proxymaterials.


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Table of Contents

 
 
Page
Proxy Summary 1



Proposal 1 — Election Of Directors


6



Director Nomination Process


6



2019 Director Nominees


9
     
Director Compensation 13



Cash Compensation


13



Equity-Based Compensation


13



Stock Ownership and Retention Guidelines


14



Director Deferral Plan


14



Other Compensation


15
     
2018 Director Compensation Table 16



Overview


18



Principles of Governance


20



Code of Conduct: Our Principles of Ethics & Integrity


20
     
Compliance and Ethics 20



Director Independence


21



Board Leadership Structure


21



Risk Oversight


23



Board Meetings and Annual Meeting Attendance


24



Board Committees


24
     
Communication with the Board of Directors 27



Executive Summary


28



Compensation Discussion and Analysis


30



Compensation Committee Report


48
     
Compensation Committee Interlocks and Insider Participation 48



2018 Summary Compensation Table


49



2018 Grants of Plan-Based Awards


52



Outstanding Equity Awards at 2018 Fiscal Year-End


55



2018 Option Exercises and Stock Vested


56



2018 Pension Benefits


58



2018 Non-Qualified Deferred Compensation


59



Executive Employment Agreements


60



Potential Payments Upon Termination or Change in Control


65



CEO Pay Ratio


66



Proposal 2 — Advisory Approval of the Company's Executive Compensation


68

 


 


 
     


 


 

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Page



Audit Committee Report


69
     
Disclosure of Fees Paid to Independent Registered Public Accounting Firm 71



Audit Committee's Consideration of Independence of Independent Registered Public Accounting Firm


71



Audit and Non-Audit Services Approval Policy


71

Proposal 3 — Ratification of Independent Registered Public Accounting Firm 72
     
     
Proposal 4 — Shareholder Proposal Regarding Amendment to Proxy Access Bylaw 73
     
Questions and Answers About the Annual Meeting and Voting 76



Security Ownership of Certain Beneficial Owners and Management


84



Householding Notice


86



Other Matters at Meeting


86
     
Certain Relationships and Transactions 87
     
Section 16(a) Beneficial Ownership Reporting Compliance 88

 


 


 

 


 


 
     
   
Appendix A — Reconciliation of Non-GAAP Financial Measures 89

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Proxy Summary

This summary highlights information contained elsewhere in this proxy statement. We encourage you to review the entire proxy statement.

Business Results

We are a diversified health care company whose mission is to help people live healthier lives and to help make the health system work better for everyone. UnitedHealth Group, Optum and UnitedHealthcare are actively engaged in helping to achieve the Triple Aim — better health outcomes, lower costs and a better consumer experience. We put the needs of others first, one person at a time. In turn, we grow and earn the opportunity to serve more people in more ways, delivering exceptional returns for society and for our shareholders. We again achieved strong business results in 2018, including:

    Revenues increased 12% to $226.2 billion from $201.2 billion in 2017;

    Operating earnings increased 14% year-over-year to $17.3 billion; net earnings to UnitedHealth Group common shareholders increased to $12 billion; and cash flows from operations grew 16% year-over-year to $15.7 billion;

    Diluted earnings per share increased 14% to $12.19 per share from $10.72 in 2017. Adjusted earnings per share1 increased 28% to $12.88 per share from $10.07 per share in 2017;

    Return on equity was consistent with the prior year at 24.4% in 2018;

    Cumulative shareholder return for UnitedHealth Group, which is defined as the increase in stock price, together with dividends reinvested when paid, was 122% over the 2016-2018 time period and 258% over the 2014-2018 time period. Cumulative shareholder return for the S&P 500 Index was 30% over the 2016-2018 time period and 50% over the 2014-2018 time period;

    Our annual cash dividend rate increased to $3.60 per share, paid quarterly, representing a 20% increase over the annual cash dividend rate of $3.00 per share paid quarterly since the second quarter of 2017;

    UnitedHealth Group was the top ranked company in the insurance and managed care sector on Fortune's 2019 "World's Most Admired Companies" list. This is the ninth consecutive year UnitedHealth Group has ranked No. 1 overall in its sector. The Company ranked No. 1 on all nine key attributes of reputation — innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, quality of products and services and global competitiveness. The Company was rated No. 1 in innovation for the tenth consecutive year.

    UnitedHealth Group was named to both the Dow Jones Sustainability World and North America Indices for the 20th consecutive year;

    UnitedHealth Group was included among the 2018 Best Employers for Diversity by Forbes;

    UnitedHealth Group was named one of America's Most JUST Companies by JUST Capital and Forbes in 2018. The JUST 100 rankings measure how U.S. companies perform on issues Americans care about most, including worker pay and treatment, customer respect, product quality and environmental impact; and

    In the 2017-2018 Newsweek Green Rankings, created in partnership with Corporate Knights Capital and HIP Investor, UnitedHealth Group ranked in the top 10% out of the largest 500 U.S. companies in corporate sustainability and environmental impact.

   


1
Adjusted earnings per share is a non-GAAP financial measure. Refer to Appendix A in this proxy statement for a reconciliation of adjusted earnings per share to the most directly comparable GAAP measure.

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Corporate Governance

UnitedHealth Group is committed to meeting high standards of ethical behavior, corporate governance and business conduct. Our company and our people are committed to the shared cultural values of integrity, compassion, innovation, relationships and performance. This commitment has led us to implement many governance best practices, including the following:

    Board Structure and Composition — Our directors are elected annually by a majority vote of our shareholders. We have an Executive Chairman of our Board of Directors and an Independent Lead Director, and nine of our eleven directors are independent.

    Chief Executive Officer ("CEO") Succession Planning — Our succession plan, which is reviewed annually by our Board of Directors, addresses both an unexpected loss of our CEO and longer-term succession.

    Board Refreshment and Tenure — Since January 2017, we have appointed five new directors to the Board who are standing for election this year, four of whom are independent, advancing both the skill and experience profile of the Board as well as its diversity.

    Nominating Advisory Committee — Our Nominating Advisory Committee, comprised of long-term shareholders of the Company and a member of the medical community, provides our Nominating and Corporate Governance Committee (the "Nominating Committee") with additional input regarding desirable characteristics of director candidates and the composition of our Board.

    Proxy Access — A shareholder or group of shareholders who have owned at least 3% of our common stock for at least three years, and who comply with specified procedural and disclosure requirements, may include in our proxy materials shareholder-nominated director candidates representing up to 20% of the Board.

    Stock Ownership Guidelines — Each of our executive officers and directors were in compliance with our stock ownership guidelines as of April 9, 2019. Mr. Wichmann, our CEO, is required to own shares equal to eight times his base salary by the fifth anniversary of his appointment as CEO. As of April 9, 2019, Mr. Wichmann owned shares equal to 169 times his base salary.

    Stock Retention Policy — We generally require executive officers to hold, for at least one year, one-third of the net shares acquired upon vesting or exercise of any equity award. Our directors are generally required to hold all equity awards granted until completion of service on the Board, or until they have met our stock ownership requirements.

    Clawback Policy — We have adopted a clawback policy that entitles the Board of Directors to seek reimbursement from our senior executives if they are involved in fraud or misconduct that causes a material restatement or in the event of a senior executive's violation of non-compete, non-solicit or confidentiality provisions.

    Independent Compensation Consultant — Our Compensation and Human Resources Committee (the "Compensation Committee") uses an independent compensation consultant that performs no other consulting or services for the Company.

    Political Contributions Disclosure — We publicly disclose our political contributions and public advocacy efforts and the contributions of our federal and state political action committees.

    Environmental Policy — We seek to minimize our environmental impact and to heighten our employees' awareness of the importance of the environment.

    Short Selling and Hedging Transactions in Company Securities — Our insider trading policy prohibits all directors, executive officers and employees from engaging in short sales and hedging transactions relating

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      to our common stock, and requires advance approval of the Compensation Committee of any pledging of common stock by directors, executive officers and other members of management.

    Absence of Rights Plan — We do not have a shareholder rights plan, commonly referred to as a "poison pill."

See the "Corporate Governance" portion of this proxy statement for further information on our governance practices.

Enterprise-Wide Risk Oversight

Our Board of Directors, assisted by its committees, oversees management's enterprise-wide risk management activities. Risk management activities include assessing and taking actions necessary to mitigate and manage risk incurred in connection with the long-term strategic direction and operation of our business.

Executive Compensation

Our executive compensation program uses a mix of base salary, annual and long-term cash incentives, equity awards and broad-based benefits to attract and retain highly qualified executives and maintain a strong relationship between executive pay and Company performance. Shareholders again expressed strong support for our executive compensation program at our 2018 Annual Meeting of Shareholders, with more than 95% of the votes cast in favor of our Say-on-Pay proposal.

Our Overall Compensation Program Principles

    Pay-for-performance — A substantial portion of the total compensation of our executive officers is earned based on achievement of enterprise-wide goals that drive long-term performance, including growth and shareholder value.

    Enhance the value of the business — Incentive compensation is designed to grow and sustain the longer-term value of the Company and avoid excessive risk-taking.

    Reward long-term growth and focus management on sustained success and shareholder value creation — Compensation of our executive officers is weighted toward equity awards that encourage sustained performance and drive shareholder returns over time.

    Standard benefits and very limited perquisites — We provide standard employee benefits and very limited perquisites to our executive officers.

Summary of Compensation Paid to CEO David S. Wichmann in 2018

    Base salary — $1.3 million.

    Cash incentive awards — Annual cash incentive award of $4.5 million and long-term cash incentive award of $890,600, which reflect the Company's performance against pre-set goals and continued strong leadership by Mr. Wichmann.

    Equity awards — Performance shares with a target grant date fair value of $5.55 million, restricted stock units with a grant date fair value of $2.775 million and stock options with a grant date fair value of $2.775 million.

    Company matching contributions — $178,875 under our 401(k) and executive savings plan.

Information regarding compensation paid to each of our named executive officers in 2018 is described in the "Compensation Discussion and Analysis" section.

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Strong Governance Standards in Oversight of Executive Compensation Policies

We maintain strong governance standards in the oversight of our executive compensation policies and practices, including:

    Performance based compensation arrangements, including performance based equity awards, that use a variety of performance measures, with different measures used for annual and long term plans.

    Double trigger change in control arrangements for equity grants.

    No excise tax gross ups in the event of a change in control.

    Our 2011 Stock Incentive Plan prohibits the repricing of stock options and stock appreciation rights without shareholder approval.

    Annual advisory shareholder votes to approve the Company's executive compensation.

    Stock ownership guidelines requiring executive officers to beneficially own specified amounts of the Company's common stock within five years of their appointment as an executive officer.

    A stock retention policy generally requiring executive officers to hold, for at least one year, one third of the net shares acquired upon vesting or exercise of any equity award.

    A clawback policy entitling the Board of Directors to seek reimbursement from senior executives if they are involved in fraud or misconduct that causes a material restatement or in the event of a senior executive's violation of non-compete, non-solicit or confidentiality provisions.

This proxy statement and our Annual Report for the year ended December 31, 2018, are first being mailed to the Company's shareholders and made available on the Internet at www.unitedhealthgroup.com/investors/annual-reports.html on or about April 19, 2019. Website addresses included throughout this proxy statement are for reference only. The information contained on our website is not incorporated by reference into this proxy statement.

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Voting Matters and Vote Recommendations

Proposal
Board Recommendation
Reasons for Recommendation
More Information
1 Election of eleven directors FOR The Board and Nominating Committee believe the eleven Board candidates possess the experience, skills, attributes and diversity to effectively monitor performance, provide oversight and advise management on the Company's strategy. Page 6
GRAPHIC
         
2 Advisory Approval of the Company's Executive Compensation (a "Say-on-Pay" vote) FOR Our executive compensation program is designed to attract and retain highly qualified executives and to maintain a strong link between pay and the achievement of enterprise-wide goals. We emphasize and reward teamwork and collaboration among executive officers, which we believe fosters Company growth and performance, optimizes the use of enterprise-wide capabilities, drives efficiencies and integrates products and services for the benefit of our customers and other stakeholders. Page 68
GRAPHIC
         
3 Ratification of Independent Registered Public Accounting Firm FOR Based on the Audit Committee's assessment of Deloitte & Touche's qualifications and performance, it believes their retention for fiscal year 2019 is in the best interests of the Company. Page 72
GRAPHIC
         
4 Shareholder Proposal Regarding Amendment to Proxy Access Bylaw AGAINST The Board does not believe the proposal is in the best interests of the Company or our shareholders and is unnecessary given our current corporate governance practices and strong Board accountability. Page 73
GRAPHIC
         

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  1

Board of
Directors


2

Corporate
Governance


3

Executive
Compensation


4

Audit

5

Annual
Meeting


6

Other
Information

BOARD OF DIRECTORS

Proposal 1 — Election of Directors

Director Nomination Process

Criteria for Nomination to the Board

We believe that an effective Board consists of a diverse group of individuals who bring a variety of complementary skills and a range of personal and business experience to their positions on the Board. The Nominating Committee developed and maintains a skills matrix to assist in considering the appropriate balance of experience, skills and attributes required of a director and to be represented on the Board as a whole. The skills matrix is consistent with the Company's long-term strategic plan and is regularly reviewed and updated by the Nominating Committee. The Nominating Committee evaluates Board candidates against the skills matrix on an annual basis to determine whether to recommend candidates for initial election to the Board and whether to recommend currently serving directors for reelection to the Board.

The skills matrix has two sections — a list of core criteria every member of the Board should meet and a list of skills and attributes to be represented collectively by the Board. The core director criteria are:

    Independence under the Company's Standards for Director Independence and New York Stock Exchange ("NYSE") listing requirements, subject to waiver by the Nominating Committee;

    Service on no more than three other public company boards; except our Chief Executive Officer may serve on no more than one other public company board;

    High integrity and ethical standards;

    Standing and reputation in the individual's field;

    Risk oversight ability with respect to the particular skills of the individual director;

    Understanding of and experience with complex public companies or like organizations; and

    Ability to work collegially and collaboratively with other directors and management.

Each of our independent director nominees has satisfied all the core director criteria set forth in the skills matrix. Messrs. Hemsley and Wichmann are not independent directors because Mr. Hemsley serves as Executive Chairman of the Board and Mr. Wichmann is Chief Executive Officer.

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  1

Board of
Directors


2

Corporate
Governance


3

Executive
Compensation


4

Audit

5

Annual
Meeting


6

Other
Information

In addition, the skills matrix provides a number of substantive areas of expertise that the Board as a whole should represent. The following table includes a list of these areas and indicates the director nominees with expertise in each area.

 


Ballard




Burke




Flynn




Hemsley




Hooper




McNabb




Montgomery
Rice





Noseworthy




Renwick




Wichmann




Wilensky



 

Corporate Governance

  ·   ·   ·   ·   ·   ·       ·   ·   ·   ·  

 

Finance

  ·   ·   ·   ·   ·   ·           ·   ·      

 

Health Care Industry

  ·   ·       ·   ·       ·   ·   ·   ·   ·  

 

Direct Consumer Markets

          ·           ·       ·   ·          

 

Social Media/Marketing

                      ·           ·          

 

Diversity

                  ·       ·       ·       ·  

 

Experience with Large Complex Organizations

  ·   ·   ·   ·   ·   ·   ·   ·   ·   ·   ·  

 

Technology/Business Processes

  ·   ·   ·   ·   ·   ·       ·   ·   ·      

 

Clinical Practice

                          ·   ·              

 

Political/Health Care Policy/Regulatory

  ·   ·   ·   ·       ·   ·   ·   ·   ·   ·  

 

Capital Markets

  ·   ·   ·   ·       ·           ·   ·      

Our Nominating Committee also strives to maintain a balance of tenure on the Board. Long-serving directors bring valuable experience with our Company and familiarity with the successes and challenges the enterprise has faced over the years, while newer directors contribute fresh perspectives and innovative ideas. Tenure of the eleven director nominees is as follows:

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  1

Board of
Directors


2

Corporate
Governance


3

Executive
Compensation


4

Audit

5

Annual
Meeting


6

Other
Information

Board Diversity

UnitedHealth Group embraces and encourages a culture of diversity and inclusion. Valuing diversity makes good business sense and helps to ensure our future success, because the customers, clients and consumers we serve are as diverse as the thousands of communities where we live and work across all 50 states in the U.S. and 130 other nations. UnitedHealth Group's commitment to diversity and inclusion empowers our employees to contribute their best work, collaborating to be the preeminent health and well-being business and community partner of choice.

While our Board has not adopted a formal definition of diversity, and does not establish specific goals with respect to diversity, the Board's diversity is a consideration in the director nomination process and is assessed annually when the Board evaluates overall effectiveness.

For this year's election, the Board has nominated eleven individuals; all are incumbent nominees who collectively bring tremendous diversity to the Board. Each nominee is a strategic thinker and has varying, specialized experience in the areas relevant to the Company and its businesses. Moreover, their collective experience covers a wide range of geographies and industries, including health care, insurance, consumer products, technology and financial services, and roles in academia, corporate governance and government. The eleven director nominees range in age from 56 to 78; three of the eleven director nominees are women; two are African American; and one is a citizen of New Zealand.

Update on Recent Changes in Board Membership

Recent changes to the Board of Directors include:

    Timothy P. Flynn, former Chairman of KPMG International, joined the Board in 2017;

    Valerie C. Montgomery Rice, M.D., President and Dean of the Morehouse School of Medicine, joined the Board in 2017;

    F. William McNabb III, former Chairman of The Vanguard Group, Inc., joined the Board in 2018;

    John H. Noseworthy, M.D., former Chief Executive Officer and President of Mayo Clinic, joined the Board in 2019;

    Sir Andrew P. Witty relinquished his position on our Board in 2018 in anticipation of his appointment as Chief Executive Officer of Optum and Executive Vice President of UnitedHealth Group later the same year; and

    Kenneth I. Shine, M.D., retired from the UnitedHealth Group Board of Directors in 2018 after nearly ten years of exceptional service as an independent director.

We have for several years maintained an active "Evergreen" director candidate pipeline which reflects our continuing commitment to diversity in life, cultural and business experience among director nominees. The Nominating Committee has an outside firm on retainer to assist in identifying and evaluating director candidates. The Nominating Committee will also consider recommendations submitted by shareholders for director candidates. Recommendations should be directed to the Secretary to the Board of Directors. None of the Company's shareholders recommended candidates for the Board of Directors in connection with the 2019 Annual Meeting.

Prior to the appointment of each of the new independent directors in 2017, 2018 and 2019, the Nominating Committee considered a wide slate of potential candidates, including qualified women and minority candidates. Each eventual nominee was selected due to his or her overall skills and experience.

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  1

Board of
Directors


2

Corporate
Governance


3

Executive
Compensation


4

Audit

5

Annual
Meeting


6

Other
Information

Nominating Advisory Committee

The Board of Directors formed the Nominating Advisory Committee in 2006 to provide the Nominating Committee with additional input from shareholders and others regarding desirable characteristics of director candidates and the composition of the Board of Directors. The key features of the skills matrix are also discussed with members of our Nominating Advisory Committee and their feedback is considered by the Nominating Committee when it updates the skills matrix. The Nominating Committee considers, but is not bound by, input provided by the Nominating Advisory Committee. The Nominating Advisory Committee currently includes four individuals affiliated with long-term shareholders of the Company and one individual who is a member of the medical community. Members of the Nominating Advisory Committee do not receive any compensation from the Company for serving on the Nominating Advisory Committee. The Nominating Advisory Committee met once in 2018. A description of the Nominating Advisory Committee, including a description of how the members of the committee are nominated and selected, can be found on our website at www.unitedhealthgroup.com/about/corporate-governance.

Shareholder Director Candidates for Inclusion in our Proxy Statement (Proxy Access)

Our Bylaws provide a shareholder or group of shareholders (of up to 20) who have owned at least 3% of our common stock for at least three years the ability to include in our proxy statement shareholder-nominated director candidates for up to 20% of the Board. To be eligible to use this right, the shareholder(s) and the candidate(s) must satisfy the requirements specified in our Bylaws. Our Bylaws are available at www.unitedhealthgroup.com/about/corporate-governance. For the 2020 Annual Meeting, director nominations submitted under these Bylaw provisions must be received at our principal executive offices, directed to the Secretary to the Board of Directors, no earlier than November 21, 2019 and no later than December 21, 2019.

Shareholder Nominations of Director Candidates at an Annual Meeting

Our shareholders may also nominate candidates for election to the Board of Directors from the floor of our Annual Meeting of Shareholders, instead of including the director candidate in our proxy statement, only by submitting timely written notice to the Secretary to the Board in accordance with our Bylaws. The notice must include the information required by our Bylaws, which are available at www.unitedhealthgroup.com/about/corporate-governance. For the 2020 Annual Meeting, this notice must be received at our principal executive offices, directed to the Secretary to the Board of Directors, no earlier than February 4, 2020 and no later than March 5, 2020.

2019 Director Nominees

Our Certificate of Incorporation and Bylaws provide that each member of our Board of Directors is elected annually by a majority of votes cast if the election is uncontested. The Board of Directors has nominated the eleven directors set forth below for election by the shareholders at the 2019 Annual Meeting. All of the director nominees were elected by our shareholders at the 2018 Annual Meeting except for Dr. Noseworthy, who was appointed unanimously by the Board in February 2019. The Company and the Nominating Committee were familiar with Dr. Noseworthy and had considered him as a potential Board candidate upon his availability following retirement from the Mayo Clinic. Following Dr. Shine's retirement from the Board, the Nominating Committee was particularly interested in strengthening the depth of clinical expertise on the Board. All of the nominees have informed the Board they are willing to serve as directors if elected. If any nominee should become unable to serve as a director for any reason, the persons named as proxies will elect a replacement.

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  1

Board of
Directors


2

Corporate
Governance


3

Executive
Compensation


4

Audit

5

Annual
Meeting


6

Other
Information

The Board of Directors recommends that you vote FOR the election of each of the nominees. Executed proxies will be voted FOR the election of each nominee unless you specify otherwise.

Name
Age
Director Since
William C. Ballard, Jr. 78 1993
Richard T. Burke 75 1977
Timothy P. Flynn 62 2017
Stephen J. Hemsley 66 2000
Michele J. Hooper 67 2007
F. William McNabb III 61 2018
Valerie C. Montgomery Rice, M.D. 57 2017
John H. Noseworthy, M.D. 67 2019
Glenn M. Renwick 63 2008
David S. Wichmann 56 2017
Gail R. Wilensky, Ph.D. 75 1993

The director nominees, if elected, will serve until the 2020 Annual Meeting or until their successors are elected and qualified. Following is a brief biographical description of each director nominee. A table listing the areas of expertise in the skills matrix held by each director and which, in part, led the Board to conclude each respective director should continue to serve as a member of the Board, is included on page 7.

William C. Ballard, Jr. Director since 1993

Mr. Ballard served as Of Counsel to Bingham Greenebaum Doll LLP (formerly Greenebaum Doll & McDonald PLLC), a law firm in Louisville, Kentucky, from 1992 until 2008. In 1992, Mr. Ballard retired from Humana, Inc., a health and well being company, after serving with Humana in various roles for 22 years, including as the Chief Financial Officer ("CFO") and a director. In the past five years, he also served as a director of Welltower, Inc. (formerly Health Care REIT, Inc.).

Richard T. Burke


Director since 1977

Mr. Burke is Lead Independent Director of the Board of Directors of UnitedHealth Group and has served in that capacity since September 2017. Mr. Burke served as Chairman of the Board from 2006 to August 2017, has been a member of our Board since 1977, and was Chief Executive Officer of UnitedHealthcare, Inc., our predecessor corporation, until 1988. From 1995 until 2001, Mr. Burke was the owner, Chief Executive Officer and Governor of the Phoenix Coyotes, a National Hockey League team. Mr. Burke serves as a director of Meritage Homes Corporation.

Timothy P. Flynn


Director since 2017

Mr. Flynn was Chairman of KPMG International ("KPMG"), a global professional services organization that provides audit, tax and advisory services, from 2007 until his retirement in October 2011. From 2005 until 2010, he served as Chairman and, from 2005 to 2008, as CEO of KPMG LLP in the U.S., the largest individual member firm of KPMG. Prior to serving as Chairman and CEO of KPMG LLP, Mr. Flynn was Vice Chairman, Audit and Risk Advisory Services, with operating responsibility for Audit, Risk Advisory and Financial Advisory Services practices. He previously served as a trustee of the Financial Accounting Standards Board, a member of the World Economic Forum's International Business Council, and a director of the International Integrated Reporting Council. Mr. Flynn serves as a director of Alcoa Corporation, JPMorgan Chase & Co. and Walmart Inc.

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Stephen J. Hemsley


Director since 2000

Mr. Hemsley is Executive Chairman of the Board of UnitedHealth Group and has served in that capacity since September 2017. Mr. Hemsley previously served as Chief Executive Officer from 2006 to August 2017. He has been a member of the Board of Directors since 2000. Mr. Hemsley joined the Company in 1997 as Senior Executive Vice President and became Chief Operating Officer in 1998. Mr. Hemsley served as President and Chief Operating Officer from 1999 to 2006 and as President and Chief Executive Officer from 2006 to November 2014. Mr. Hemsley serves as a director of Cargill, Inc.

Michele J. Hooper


Director since 2007

Ms. Hooper is President and CEO of The Directors' Council, a private company she co-founded in 2003 that works with corporate boards to increase their independence, effectiveness and diversity. She was President and CEO of Voyager Expanded Learning, a developer and provider of learning programs and teacher training for public schools, from 1999 until 2000. Prior to that, she was President and CEO of Stadtlander Drug Company, Inc., a provider of disease-specific pharmaceutical care, from 1998 until Stadtlander was acquired in 1999. Ms. Hooper is a nationally recognized corporate governance expert. Ms. Hooper serves as a director of PPG Industries, Inc. and United Continental Holdings, Inc.

F. William McNabb III


Director since 2018

Mr. McNabb served as Chairman of The Vanguard Group, Inc. from 2008 until his retirement in 2018 and served as CEO from 2008 to 2017. He joined Vanguard in 1986. In 2010, he became Chairman of the Board of Directors and the Board of Trustees of the Vanguard group of investment companies. Earlier in his career, Mr. McNabb led each of Vanguard's client facing business divisions. Mr. McNabb serves as the Vice-Chairman of the Investment Company Institute's Board of Governors and served as Chairman from 2013 to 2016. Mr. McNabb is Chairman of the Board of the Zoological Society of Philadelphia and serves on the Wharton Leadership Advisory Board and the Dartmouth Athletic Advisory Board. He is also a board member of CECP: The CEO Force for Good.

Valerie C. Montgomery Rice, M.D.


Director since 2017

Dr. Montgomery Rice is President and Dean of the Morehouse School of Medicine, a medical school in Atlanta, Georgia, and has served in that capacity since 2014. Dr. Montgomery Rice served as the Executive Vice President and Dean from 2011 to 2014. Morehouse School of Medicine is among the nation's leading educators of primary care physicians and was recently recognized as the top institution among U.S. medical schools for their social mission. Prior to joining Morehouse School of Medicine, she served as dean of the School of Medicine and Senior Vice President of health affairs at Meharry Medical College from March 2006 to June 2009, and as director of the Center for Women's Health Research, one of the nation's first research centers devoted to studying diseases that disproportionately impact women of color, from 2005 to 2011. Dr. Montgomery Rice also serves as a Council Member of the National Institute of Health and National Center for Advancing Translational Science. Dr. Montgomery Rice previously served on the National Institute of Health's Minority Health and Health Disparities and Office of Research on Women's Health advisory councils and the Association of American Medical Colleges Council of Deans' administrative board. Dr. Montgomery Rice is a member of the National Academy of Medicine and is a renowned infertility specialist and women's health researcher.

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John H. Noseworthy, M.D.


Director since 2019

Dr. Noseworthy is the former Chief Executive Officer and President of Mayo Clinic, a world renowned, non-profit health care organization. He retired at the end of 2018 after a 28 year career at Mayo Clinic, recognized by
U.S. News and World Report as best in its honor roll of America's top providers of care for patients with serious and complex problems. Mayo Clinic cares for patients from every state and 143 countries worldwide. Dr. Noseworthy joined Mayo Clinic in 1990 and has served in various capacities since that time, including chairman of Mayo Clinic's internal Board of Governors, member of the Board of Trustees, Professor of Neurology at Mayo Clinic College of Medicine & Science, chair of Mayo's Department of Neurology, medical director of the Department of Development and Vice Chair of the Mayo Clinic Rochester Executive Board. Dr. Noseworthy also served as editor-in-chief of Neurology, the official journal of the American Academy of Neurology, from 2007 to 2009. Dr. Noseworthy was a Health Governor of the World Economic Forum from 2012 to 2018 and serves as a director of Merck & Co.

Glenn M. Renwick


Director since 2008

Mr. Renwick has been Chairman of the Board of Fiserv, Inc. since May 2017, and has been a director of Fiserv since 2001. Mr. Renwick served as Chairman of the Board of Directors of The Progressive Corporation, an auto insurance holding company, from November 2013 to May 2018, as Executive Chairman of Progressive from July 2016 to June 2017, and as President and CEO from 2001 to 2016. Before being named President and CEO in 2001, Mr. Renwick served as CEO-Insurance Operations and Business Technology Process Leader at Progressive from 1998 to 2000. Prior to that, he led Progressive's Consumer Marketing group and served as President of various divisions within Progressive. Mr. Renwick joined Progressive in 1986 as Auto Product Manager for Florida.

David S. Wichmann


Director since 2017

Mr. Wichmann is Chief Executive Officer of UnitedHealth Group and a member of the Board of Directors, having served in that capacity since September 2017. Mr. Wichmann previously served as President of UnitedHealth Group from November 2014 to August 2017. Mr. Wichmann also served as Chief Financial Officer of UnitedHealth Group from January 2011 to June 2016. From April 2008 to November 2014, Mr. Wichmann served as Executive Vice President of UnitedHealth Group and President of UnitedHealth Group Operations. Mr. Wichmann serves as a director of Tennant Company.

Gail R. Wilensky, Ph.D.


Director since 1993

Dr. Wilensky has been a senior fellow at Project HOPE, an international health foundation, since 1993. From 2008 to 2009, Dr. Wilensky was President of the Department of Defense Health Board and chaired its sub-committee on health care delivery. From 2006 to 2008, Dr. Wilensky co-chaired the Department of Defense Task Force on the Future of Military Health Care. During 2007, she also served as a commissioner on the President's Commission on Care for America's Returning Wounded Warriors. From 2001 to 2003, she was the Co-Chair of the President's Task Force to Improve Health Care for our Nation's Veterans. From 1997 to 2001, she was also Chair of the Medicare Payment Advisory Commission. From 1992 to 1993, Dr. Wilensky served as the Deputy Assistant to President George H. W. Bush for policy development, and from 1990 to 1992, she was the Administrator of the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services), directing the Medicaid and Medicare programs for the United States. Dr. Wilensky is a nationally recognized health care economist. Dr. Wilensky serves as a director of Quest Diagnostics Incorporated.

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Director Compensation

We seek to compensate our non-employee directors fairly for work required for a company of our size, complexity and scope and to align their interests with the long-term interests of our shareholders. Director compensation reflects our desire to attract, retain and benefit from the expertise of highly qualified people. The Compensation Committee annually reviews the compensation of our non-employee directors and makes recommendations to the Board of Directors. In August 2018, the Compensation Committee, with the advice of its independent compensation consultant, undertook a review of the structure, philosophy and overall mix of the director compensation program as compared to the Company's compensation peer group and also the four large publicly traded managed health care companies. Following this review, the Compensation Committee recommended, and the Board approved, an increase in the annual grant of deferred stock units awarded to non-employee directors from $175,000 to $205,000, effective as of October 1, 2018. No other changes were made to the compensation of non-employee directors. The Compensation Committee's recommendations, and the Board's subsequent approval, were made after considering the results of the market practices review and the complexity of the Company's structure and operations.

The following table highlights the material elements of our director compensation program:

Compensation Element
Compensation Value
Annual Cash Retainer $125,000
Annual Audit Committee Chair Cash Retainer $  25,000
Annual Compensation Committee Chair Cash Retainer $  20,000
Annual Nominating Committee Chair Cash Retainer $  20,000
Annual Public Policy Committee Chair Cash Retainer $  20,000
Annual Lead Independent Director Cash Retainer $  75,000
Annual Equity Award $205,000 aggregate fair value of deferred stock units *
Equity Conversion Program At the director's election, cash compensation may be converted into DSUs, or if the director has met the stock ownership guidelines, into common stock
*
Effective October 1, 2018, the annual deferred stock unit award was increased from $175,000 to $205,000.

Cash Compensation

Cash retainers are payable on a quarterly basis in arrears on the first business day following the end of each fiscal quarter, and are subject to pro rata adjustment if the director did not serve the entire quarter. Directors may elect to receive deferred stock units ("DSUs") or common stock (if the director has met the stock ownership guidelines) in lieu of their cash compensation or may defer receipt of their cash compensation to a later date pursuant to the Directors' Compensation Deferral Plan ("Director Deferral Plan"). The cash retainers are in consideration of general service and responsibilities and required meeting preparation.

Equity-Based Compensation

Non-employee directors receive annual grants of DSUs under the 2011 Stock Incentive Plan having an aggregate fair value of $205,000 effective October 1, 2018 and pro-rated for the remainder of the year. Prior to October 1, 2018, the aggregate fair value of the DSUs was $175,000. The grants are issued quarterly in arrears on

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the first business day following the end of each fiscal quarter and prorated if the director did not serve the entire quarter. The number of DSUs granted is determined by dividing $51,250 (the quarterly value of the annual equity award; $43,750 prior to October 1, 2018) by the closing price of our common stock on the grant date, rounded up to the nearest share. The grants are in consideration of general service and responsibilities and required meeting preparation.

The DSUs immediately vest upon grant and must be retained until completion of the director's service on the Board of Directors. Upon completion of service, the DSUs convert into an equal number of shares of the Company's common stock. A director may defer receipt of the shares for up to ten years after completion of service pursuant to the Director Deferral Plan. Non-employee directors who have met their stock ownership requirement may elect to receive common stock in lieu of DSUs and/or in-service distributions on pre-selected dates.

If a director elects to convert his or her cash compensation into common stock or DSUs, such conversion grants are made on the day the eligible cash compensation becomes payable to the director. The director receives the number of shares of common stock or DSUs, as applicable, equal to the cash compensation foregone, divided by the closing price of our common stock on the date of grant, rounded up to the nearest share. The DSUs immediately vest upon grant. A director may only elect to receive common stock if he or she has met the stock ownership guidelines.

The Company pays dividend equivalents in the form of additional DSUs on all outstanding DSUs. Dividend equivalents are paid at the same rate and at the same time that dividends are paid to Company shareholders and are subject to the same vesting conditions as the underlying grant.

Stock Ownership and Retention Guidelines

Under our stock ownership guidelines, we require non-employee directors to achieve ownership of shares of the Company's common stock (excluding stock options, but including vested DSUs and vested restricted stock units) having a fair market value equal to five times the directors' annual base cash retainer. Non-employee directors must comply with the stock ownership guidelines within five years of their appointment to the Board of Directors. All of our non-employee directors have met the stock ownership requirement or have served as a director for less than five years. Our directors are required to hold all equity awards granted until completion of service on the Board or until they have met our stock ownership requirements.

Director Deferral Plan

Under the Director Deferral Plan, subject to compliance with applicable laws, non-employee directors may elect annually to defer receipt of all or a percentage of their compensation. Amounts deferred are credited to a bookkeeping account maintained for each director participant that uses a predetermined collection of unaffiliated mutual funds as measuring investments. Subject to certain additional rules set forth in the Director Deferral Plan, a participating director may elect to receive the distribution in one of the following ways:

    a series of five or ten annual installments following the completion of his or her service on the Board of Directors;

    a delayed lump sum following either the fifth or tenth anniversary of the completion of his or her service on the Board of Directors;

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    for cash deferrals, an immediate lump sum upon the completion of his or her service on the Board of Directors; or

    pre-selected amounts to be distributed on pre-selected dates while the director remains a member of the Board of Directors.

The Director Deferral Plan does not provide for matching contributions by the Company.

Other Compensation

We reimburse directors for any out-of-pocket expenses incurred in connection with service as a director. We also provide health care coverage to directors if the director is not eligible for subsidized coverage under another group health care benefit program. Health care coverage is provided generally on the same terms and conditions as current employees. Upon retirement from the Board of Directors, directors may continue to obtain health care coverage under benefit continuation coverage, and after the lapse of such coverage, under the Company's post-employment medical plan for up to a total of 96 months if they are otherwise eligible.

The Company maintains a program through which it will match up to $15,000 of charitable donations made by each director for each calendar year. The directors do not receive any financial benefit from this program because the charitable income tax deductions accrue solely to the Company. Donations under the program may not be made to family trusts, partnerships or similar organizations.

Our corporate aircraft use policy prohibits personal use of corporate aircraft by any independent director. However, because there is essentially no incremental cost to the Company, the policy permits a director's family member to accompany the director on a business flight on Company aircraft provided a seat is available.

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The following table provides summary information for the year ended December 31, 2018, relating to compensation paid to or accrued by us on behalf of our non-employee directors who served in this capacity during 2018.

2018 Director Compensation Table

Name(1)


Fees Earned
or Paid in
Cash
($)(2)




Stock
Awards
($)(3)



Option
Awards
($)(4)



Change in Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)(5)







All Other
Compensation
($)(6)



Total
($)

William C. Ballard, Jr.

131,484 175,331 18,490 325,395

Richard T. Burke

200,000 175,331 30,654 406,075

Timothy P. Flynn

300,658 24,892 325,550

Michele J. Hooper

145,000 175,331 18,374 338,795

Rodger A. Lawson

97,990 118,599 22,350 238,610

F. William McNabb III

189,626 189,626

Valerie C. Montgomery Rice, M.D.

125,000 175,331 18,000 318,421

Glenn M. Renwick

325,526 27,189 352,715

Kenneth I. Shine, M.D.

125,000 175,331 18,000 318,421

Gail R. Wilensky, Ph.D.

145,000 175,600 18,000 338,690

Andrew P. Witty

56,250 78,976 18,000 153,226
(1)
Messrs. Hemsley and Wichmann are employee directors and do not receive additional compensation for serving as directors. Dr. Noseworthy joined the Board on February 12, 2019 and is not included in the table. Mr. McNabb joined the Board on February 13, 2018, and compensation was prorated from that date. Dr. Shine retired from the Board of Directors, effective December 31, 2018. Mr. Lawson did not stand for re-election at the 2018 Annual Meeting of Shareholders. For Mr. Witty, the amounts reported reflect compensation earned in connection with his service as a director through March 13, 2018. Compensation paid in connection with Mr. Witty's service as Chief Executive Officer of Optum, which commenced on July 1, 2018, is reported in the Summary Compensation Table and additional tabular disclosures, as appropriate.

(2)
Mr. Flynn converted his $125,000 cash compensation into 530 DSUs, Mr. McNabb converted his $78,820 cash compensation into 320 DSUs and Mr. Renwick converted his $150,000 cash compensation into 635 DSUs.

(3)
The amounts reported reflect the aggregate grant date fair value of the stock awards granted in 2018 computed in accordance with FASB ASC Topic 718, based on the closing price of our common stock on the grant date. For a description of the assumptions used in computing the aggregate grant date fair value, see Note 11 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. For each director, the amounts reported include the aggregate grant date fair value of the annual equity award of DSUs granted in quarterly installments. The amounts reflect the value of fractional shares issued with the quarterly installments as we round equity grants up to the nearest whole share. For Messrs. Flynn, McNabb and Renwick, we combined the cash compensation they elected to convert into DSUs on a quarterly basis and the value of the quarterly DSU grant prior to determining the number of DSUs to be granted each quarter. For 2018, Dr. Shine elected that all of his, and Dr. Wilensky elected that a portion of her, annual DSU awards be granted in shares of common stock.

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    The aggregate grant date fair values of the stock awards granted in 2018, computed in accordance with FASB ASC Topic 718 based on the closing price of our common stock on the grant date, are as follows:

Name
January 2,
2018
($)
April 2,
2018
($)
July 2,
2018
($)
October 1,
2018
($)

William C. Ballard, Jr.

43,790 43,874 43,804 43,863

Richard T. Burke

43,790 43,874 43,804 43,863

Timothy P. Flynn*

75,194 75,151 75,234 75,079

Michele J. Hooper

43,790 43,874 43,804 43,863

Rodger A. Lawson

43,790 43,874 30,935

F. William McNabb III*

39,313 75,234 75,079

Valerie C. Montgomery Rice, M.D.

43,790 43,874 43,804 43,863

Glenn M. Renwick*

81,387 81,450 81,421 81,268

Kenneth I. Shine, M.D.

43,790 43,874 43,804 43,863

Gail R. Wilensky, Ph.D.

43,790 43,874 43,804 44,132

Andrew P. Witty

43,790 35,186
*
Includes the value of DSUs issued upon conversion of annual cash retainers as described in footnote 1 above of $125,000 for Mr. Flynn, $78,820 for Mr. McNabb and $150,000 for Mr. Renwick.

As of December 31, 2018, our non-employee directors held outstanding DSU awards as follows:
Name
Deferred
Stock Units

William C. Ballard, Jr.

23,191

Richard T. Burke

23,191

Timothy P. Flynn

2,484

Michele J. Hooper

29,858

F. William McNabb III

770

Valerie C. Montgomery Rice, M.D.

891

Glenn M. Renwick

44,179

Kenneth I. Shine, M.D.

6,351

Gail R. Wilensky, Ph.D.

21,419
(4)
The Company did not grant stock option awards to directors in 2018. As of December 31, 2018, our non-employee directors held outstanding (and unexercised) stock option awards as follows: Mr. Ballard — 10,000; Mr. Burke — 15,000; and Dr. Wilensky — 10,860.

(5)
The Director Deferral Plan does not credit above-market earnings or preferential earnings to the amounts deferred. There are no measuring investments tied to Company stock performance. The measuring investments are a predetermined collection of unaffiliated mutual funds identified by the Company.

(6)
In 2018, the Company matched $15,000 in charitable contributions made by the following directors to charitable organizations selected by the directors pursuant to the Company's Board Matching Program: Messrs. Ballard, Burke, Flynn, Lawson, Renwick and Witty; and Drs. Montgomery Rice, Shine and Wilensky, and $14,884 in charitable contributions made by Ms. Hooper. In 2018, the Company also made $3,000 contributions to charitable organizations selected by the following directors: Messrs. Ballard, Burke, Flynn, Lawson, Renwick and Witty; Ms. Hooper; and Drs. Shine, Montgomery Rice and Wilensky. In 2018, the Company also paid $12,654, $9,189, $6,892, $4,350, $490 and $490 in health care premiums on behalf of Messrs. Burke, Renwick, Flynn, Lawson, Ballard and Ms. Hooper, respectively.

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CORPORATE GOVERNANCE

Overview

UnitedHealth Group is committed to high standards of corporate governance and ethical business conduct. Important documents reflecting this commitment are listed below.

Corporate Governance Documents

GRAPHIC
Certificate of Incorporation
GRAPHIC
Code of Conduct: Our Principles of Ethics & Integrity

GRAPHIC
Bylaws
GRAPHIC
Related-Person Transactions Approval Policy

GRAPHIC
Principles of Governance
GRAPHIC
Board of Directors Communication Policy

GRAPHIC
Board of Directors Committee Charters
GRAPHIC
Political Contributions Policy

GRAPHIC
Standards for Director Independence
GRAPHIC
Corporate Environmental Policy

You can access these documents at www.unitedhealthgroup.com/about/corporate-governance to learn more about our corporate governance practices. We will also provide copies of these documents without charge upon written request to the Company's Secretary to the Board of Directors. Our key corporate governance practices are highlighted below.

Board Structure and Shareholder Rights

    All members of our Board of Directors are elected annually by our shareholders.

    Our Certificate of Incorporation provides, in an uncontested election, each director must be elected by a majority vote. To address a provision in Delaware law that allows a director who has not been re-elected to remain in office until a successor is elected and qualified, we have a policy requiring any director who does not receive a greater number of votes "for" than "against" his or her election in an uncontested election to tender his or her resignation from the Board of Directors following certification of the shareholder vote.

    Our Bylaws provide eligible shareholders the right to include shareholder director nominees representing up to 20% of the Board in our proxy statement.

    Each share of stock is entitled to one vote and our Certificate of Incorporation and Bylaws do not have any supermajority shareholder approval provisions.

    We have an Executive Chairman of the Board and a Lead Independent Director.

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Board and Board Committee Composition and Performance

    All members of our Audit Committee are "audit committee financial experts" as defined by the Securities and Exchange Commission ("SEC").

    A non-management director may not serve on more than three other public company boards of directors, and our CEO may not serve on more than one other public company board of directors.

    Our directors are required to offer their resignations upon a change in their primary careers.

    Our Board of Directors and each Board committee regularly conduct executive sessions of non-management directors. Our Lead Independent Director presides over each executive session of non-management directors. Committee Chairs preside over executive sessions of their respective committees.

    Our Board of Directors and Board committees have the authority to retain independent advisors.

    Our Board of Directors and Board committees conduct performance reviews annually.

Guidelines and Board Policies

    Our Board of Directors has developed a CEO succession plan with input from our CEO and reviews the plan annually. The CEO succession plan has two components: one addressing an emergency or unanticipated loss of our CEO and one addressing longer-term succession. Material features of this plan include identification of Board members to lead the succession process, identification and development of internal candidates and identification of external resources necessary to ensure a successful transition.

    We maintain stock ownership and retention guidelines for directors and executive officers. See "Compensation Discussion and Analysis — Elements of Our Compensation Program — Other Compensation Practices — Executive Stock Ownership Guidelines and Stock Retention Policy," "Director Compensation — Equity-Based Compensation" and "Director Compensation — Stock Ownership and Retention Guidelines" for further information.

    We have a related-person transactions approval policy regarding the review, vote and ratification by our Nominating Committee on all proposed related-person transactions. See "Certain Relationships and Transactions."

    We have a clawback policy that entitles the Board of Directors to seek reimbursement from our senior executives if they are involved in fraud or misconduct that causes a material restatement or in the event of a senior executive's violation of non-compete, non-solicit or confidentiality provisions. See "Compensation Discussion and Analysis — Elements of Our Compensation Program — Other Compensation Practices — Potential Impact on Compensation from Executive Misconduct/Compensation Clawbacks."

    We have a political contributions policy that is overseen by our Public Policy Strategies and Responsibility Committee (the "Public Policy Committee"). The Company's political contributions and public advocacy efforts and the contributions of our federal and state political action committees are disclosed on our website.

    We have an environmental policy that outlines our focus on minimizing our impact on the environment and creating a Company culture that heightens our employees' awareness of the importance of preserving the environment and conserving energy and natural resources.

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    Our insider trading policy prohibits all directors, executive officers and employees from engaging in short sales and hedging transactions relating to our common stock, and requires advance approval of the Compensation Committee of any pledging of common stock by directors, executive officers and other members of management.

    Our Board of Directors believes that effective Board-shareholder communication strengthens the Board of Directors' role as an active, informed and engaged fiduciary, so we have a communication policy that outlines how shareholders and other interested parties may communicate with the Board of Directors. See "Corporate Governance — Communication with the Board of Directors."

    A Nominating Advisory Committee comprised of representatives from the shareholder and medical communities provides input into the composition of our Board of Directors.

Principles of Governance

Our Certificate of Incorporation and Bylaws, together with Delaware law and NYSE and SEC rules, govern the Company. Our Board has also adopted "Principles of Governance," which set forth many of our practices, policies and procedures in corporate governance. The policies and practices covered in our Principles of Governance include shareholder rights and proxy voting; structure, composition and performance of the Board of Directors; stock ownership and retention requirements; Board of Directors operation; individual director responsibilities; and Board committees. Our Principles of Governance are reviewed at least annually by our Nominating Committee and are revised as necessary.

Code of Conduct: Our Principles of Ethics & Integrity

The Code of Conduct: Our Principles of Ethics & Integrity document is posted on our website and covers our principles and policies related to business conduct, conflicts of interest, public disclosure, legal compliance, reporting and accountability, corporate opportunities, confidentiality, fair dealing and protection and proper use of Company assets. Any waiver of the Code of Conduct for the Company's executive officers, senior financial officers or directors may be made only by the Board of Directors or a committee of the Board. We will publish any amendments to the Code of Conduct and waivers of the Code of Conduct for an executive officer or director on our website.

Compliance and Ethics

We strongly and broadly encourage employees to raise ethics and compliance concerns, including concerns about accounting, internal controls or auditing matters. We offer several channels for employees and third parties to report ethics and compliance concerns or incidents, including by telephone or online, and individuals may choose to remain anonymous in jurisdictions where anonymous reporting is permissible. We prohibit retaliatory action against any individual who in good faith raises concerns or questions regarding ethics and compliance matters or reports suspected violations. We train all employees annually and periodically advise them regarding the means by which they may report possible ethics or compliance issues and their affirmative responsibility to report any possible issues. In our 2018 employee survey, 96% of employees said they knew what to do if they believed unethical behavior or misconduct occurred in their work area.

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Director Independence

Our Board of Directors has adopted the Company's Standards for Director Independence, which are available on our website at www.unitedhealthgroup.com/about/corporate-governance. The Standards for Director Independence requirements exceed the independence standards set by the NYSE.

Our Board of Directors has determined that William C. Ballard, Jr., Richard T. Burke, Timothy P. Flynn, Michele J. Hooper, F. William McNabb III, Valerie C. Montgomery Rice, M.D., John H. Noseworthy, M.D., Glenn M. Renwick and Gail R. Wilensky, Ph.D. are each "independent" under the NYSE rules and the Company's Standards for Director Independence, and have no material relationships with the Company that would prevent the directors from being considered independent. Stephen J. Hemsley, Executive Chairman of the Board, and David S. Wichmann, CEO, are not independent directors.

In determining independence, the Board of Directors considered, among other factors, the business relationships between the Company and our directors and nominees, their immediate family members (as defined by the NYSE) and their affiliated companies. The Board of Directors considered whether any director or any nominee was a director, partner, significant shareholder or executive officer of an organization that has a relationship with the Company, and also considered charitable contributions that the Company or its affiliates made to organizations with which such directors or nominees are or have been associated. In particular, the Board of Directors evaluated the following relationships and determined that such relationships were in the normal course of business and did not impair the directors' ability to exercise independent judgment:

    Mr. Burke is an owner of Rainy Partners, LLC. Rainy Partners is a customer of the Company and paid the Company premiums for health insurance of approximately $398,600 in 2018. These premiums were determined on the same terms and conditions as premiums for other comparable customers.

    Dr. Montgomery Rice is President and Dean of Morehouse School of Medicine. In 2018, Morehouse School of Medicine paid the Company approximately $175,600 for claims software and medical records review services. The Company paid Morehouse School of Medicine approximately $910,000 for services as a network care provider in 2018. Total moneys paid by the Company and the United Health Foundation to Morehouse School of Medicine during 2018 were substantially less than 1% of Morehouse School of Medicine's total revenues for 2018. Dr. Montgomery Rice was not directly involved in these relationships.

The Board of Directors also considered relationships between the Company and organizations on which our non-employee directors or their immediate family members serve only as directors and determined that such relationships did not impair the directors' exercise of independent judgment.

Board Leadership Structure

Our Board of Directors believes having independent Board leadership is an important component of our governance structure. As such, our Bylaws require the Company to have either an independent Chairman of the Board or a Lead Independent Director. Our current Board of Directors' leadership structure also separates the positions of CEO and Chairman of the Board. The Board believes this separation is appropriate for the Company at this time because it allows for a division of responsibilities and a sharing of ideas between individuals having different perspectives.

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In connection with the CEO succession that took place in 2017, our Board created the position of Executive Chairman. The Board unanimously selected Mr. Hemsley to serve as our Executive Chairman due to his vision for the Company's future and his understanding of the Company and its evolving competitive environment. Given that Mr. Hemsley is not an independent director under applicable NYSE rules, the Board determined to continue the strong voice of independent directors and created the role of Lead Independent Director. Mr. Burke was appointed to serve as Lead Independent Director.

Our Principles of Governance outline the specific duties of the Lead Independent Director, including:

    serving as the principal liaison between the Independent Directors and the Chairman;

    presiding at all meetings of the Board at which the Chairman is not present and at executive sessions of the Board's Independent Directors;

    calling meetings of the Independent Directors as appropriate and, in coordination with the Chairman, all members of the Board;

    facilitating discussion and open dialogue among the Independent Directors during Board meetings, executive sessions and outside of Board meetings;

    serving as an ex officio member of each Board committee of which the Lead Independent Director is not a member and working with the Board committee chairs on the performance of their designated roles and responsibilities;

    working with the Chairman to approve the agendas and meeting schedules for Board meetings;

    working with the Chairman on the appropriateness (including quality and quantity) and timeliness of information provided to the Board;

    meeting individually with the Chairman after each regularly scheduled Board meeting;

    coordinating the preparation of agendas and materials for executive sessions of the Board's Independent Directors, if any;

    leading the Board's annual goal setting and evaluation process for the Chairman;

    assisting the Chair of the Nominating and Corporate Governance Committee in reviewing and reporting on the results of the Board and committee performance self-evaluations;

    communicating to the Chairman any decisions reached, suggestions, views or concerns expressed by Independent Directors in executive sessions or outside of Board meetings;

    meeting periodically with individual Independent Directors to discuss Board and committee performance, effectiveness and composition;

    where appropriate, supporting the Company in interactions with shareholders and regulators in consultation with the Chief Executive Officer and Chairman; and

    interviewing, along with the Chair of the Nominating and Corporate Governance Committee, all Board candidates and making director candidate recommendations to the Nominating and Corporate Governance Committee.

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Risk Oversight

Enterprise-Wide Risk Oversight

Our Board of Directors oversees management's enterprise-wide risk management activities. Risk management activities include assessing and taking actions necessary to manage risk incurred in connection with the long-term strategic direction and operation of our business. Each director on our Board is required to have risk oversight ability for each skill and attribute the director possesses that is reflected in the collective skills section of our director skills matrix described in "Proposal 1 — Election of Directors — Director Nomination Process — Criteria for Nomination to the Board" above. Collectively, our Board of Directors uses its committees to assist in its risk oversight function as follows:

    The Audit Committee oversees management's internal controls and compliance activities. The Audit Committee also oversees management's processes to identify and quantify material risks facing the Company, including risks disclosed in the Company's Annual Report on Form 10-K. The enterprise risk management function assists the Company in identifying and assessing the Company's material risks. The Company's General Auditor, who reports to the Audit Committee, assists the Company in evaluating risk management controls and methodologies. The Audit Committee receives periodic reports on the enterprise risk management function. The Audit Committee also receives periodic reports on the Company's cyber security efforts. In connection with its risk oversight role, the Audit Committee regularly meets privately with representatives from the Company's independent registered public accounting firm and the Company's CFO, General Auditor and Chief Legal Officer;

    The Compensation Committee oversees risk associated with our compensation practices and plans;

    The Nominating Committee oversees Board processes and corporate governance-related risk; and

    The Public Policy Committee oversees risk associated with the public policy arena, including health care reform and modernization activities, political contributions, government relations, community and charitable activities and corporate social responsibility.

Our Board of Directors maintains overall responsibility for oversight of the work of its various committees by receiving regular reports from the Committee Chairs regarding their work. In addition, discussions about the Company's strategic plan, consolidated business results, capital structure, merger and acquisition-related activities and other business discussed with the Board of Directors include a discussion of the risks associated with the particular item under consideration.

Enterprise-Wide Incentive Compensation Risk Assessment

Our Compensation Committee requested that management conduct an annual risk assessment of the Company's enterprise-wide compensation programs. The risk assessment reviewed both cash incentive compensation plans and individual cash incentive awards paid in 2018 for the presence of potential design elements that could motivate employees to incur excessive risk. The review included the ratio and level of incentive to fixed compensation, the amount of manager discretion, the level of compensation expense relative to the business units' revenues, and the presence of other design features that serve to mitigate excessive risk-taking, such as the Company's clawback policy, stock ownership and retention guidelines, multiple performance measures and similar features.

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After considering the results of the risk assessment, management concluded that the level of risk associated with the Company's enterprise-wide compensation programs is not reasonably likely to have a material adverse effect on the Company. The results of the risk assessment were reviewed with the Compensation Committee at its February 2019 meeting. Please see "Compensation Discussion and Analysis" for a discussion of compensation design elements intended to mitigate excessive risk-taking by our executive officers.

The Compensation Committee also receives an annual report on the Company's compliance with its equity award program controls.

Board Meetings and Annual Meeting Attendance

Directors are expected to attend Board meetings, meetings of committees on which they serve and the Annual Meeting of Shareholders. All then-current directors attended the 2018 Annual Meeting. During the year ended December 31, 2018, the Board of Directors held twelve meetings. All then-current directors attended at least 75% of the meetings of the Board and any Board committees of which they were members in 2018.

Board Committees

The Board of Directors has established four standing committees: Audit, Compensation, Nominating and Public Policy. These committees help the Board fulfill its responsibilities and assist the Board in making informed decisions. Each committee operates under a written charter, and evaluates its charter and conducts a committee performance evaluation annually.

The following table identifies the members of each committee as of April 9, 2019:

GRAPHIC

*
Mr. Burke is the Lead Independent Director and an ex-officio member of the Compensation Committee and Public Policy Committee. As an ex-officio member, Mr. Burke has a standing invitation to attend each committee meeting, but does not count for quorum purposes or vote on committee matters.

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  Audit Committee Meetings Held in 2018: 9

 


Committee Members:


 

 


Glenn M. Renwick (Chair), Michele J. Hooper and F. William McNabb III


 

 


Primary Responsibilities:


 

 


The Audit Committee has responsibility for the selection and retention of the independent registered public accounting firm and oversees financial reporting, internal controls and public disclosure. The Audit Committee reviews and assesses the effectiveness of the Company's policies, procedures and resource commitments in the areas of compliance, ethics, privacy and cyber security, by interacting with personnel responsible for these functions. The Audit Committee also oversees management's processes to identify and quantify material risks facing the Company. The Audit Committee establishes procedures concerning the receipt, retention and treatment of complaints regarding accounting, internal accounting controls and auditing matters. The Audit Committee operates as a direct line of communication between the Board of Directors and our independent registered public accounting firm, as well as our internal audit, compliance and legal personnel.


 

 


Independence:


 

 


Each of the Audit Committee members is an independent director under the NYSE listing standards and the SEC rules. The Board of Directors has determined that Messrs. Renwick and McNabb and Ms. Hooper are "audit committee financial experts" as defined by the SEC rules.

  



 




 


 


 
  Compensation and Human Resources Committee Meetings Held in 2018: 5

 


Committee Members:


 

 


William C. Ballard, Jr. (Chair), Richard T. Burke, Timothy P. Flynn and Gail R. Wilensky, Ph.D.


 

 


Primary Responsibilities:


 

 


The Compensation and Human Resources Committee (the "Compensation Committee") is responsible for overseeing our policies and practices related to total compensation for executive officers, the administration of our incentive and equity-based plans and the risk associated with our compensation practices and plans. The Compensation Committee also establishes employment arrangements with our CEO and other executive officers, conducts an annual performance review of the CEO, and reviews and monitors director compensation programs and the Company's stock ownership guidelines.


 

 


Independence:


 

 


Each of the Compensation Committee members is an independent director under the NYSE listing standards and the SEC rules, a non-employee director under the SEC rules and an outside director under the Internal Revenue Code of 1986 (the "Internal Revenue Code").

  



 

 


 


 


 

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  Nominating and Corporate Governance Committee Meetings Held in 2018: 3

 


Committee Members:


 

 


Michele J. Hooper (Chair), William C. Ballard, Jr. and Richard T. Burke


 

 


Primary Responsibilities:


 

 


The Nominating and Corporate Governance Committee's (the "Nominating Committee") duties include identifying and nominating individuals to be proposed as nominees for election as directors at each Annual Meeting or to fill Board vacancies, conducting the Board evaluation process, evaluating the categorical standards which the Board of Directors uses to determine director independence, and monitoring and evaluating corporate governance. The Nominating Committee also oversees Board processes and corporate governance-related risk.


 

 


Independence:


 

 


Each of the Nominating Committee members is an independent director under the NYSE listing standards.

  



 

 


 


 


 
  Public Policy Strategies and Responsibility Committee Meetings Held in 2018: 4

 


Committee Members:


 

 


Gail R. Wilensky, Ph.D. (Chair) and Valerie C. Montgomery Rice, M.D.


 

 


Primary Responsibilities:


 

 


The Public Policy Strategies and Responsibility Committee (the "Public Policy Committee") is responsible for assisting the Board of Directors in fulfilling its responsibilities relating to the Company's public policy, health care reform and modernization activities, political contributions, government relations, community and charitable activities and corporate social responsibility. The Public Policy Committee is also responsible for overseeing the risks associated with these activities.


 

 


Independence:


 

 


Each of the Public Policy Committee members is an independent director under the NYSE listing standards.

  



 

 


 


 


 

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Communication with the Board of Directors

The Board of Directors values the input and insights of our shareholders and other interested parties and believes effective communication strengthens the Board of Directors' role as an active, informed and engaged fiduciary. The Board of Directors has adopted a Board of Directors Communication Policy to facilitate communication between shareholders and other interested parties and the Board. Under this policy, the Board of Directors has designated the Company's Secretary to the Board of Directors as its agent to receive and review communications.

The Secretary to the Board of Directors will not forward to the directors communications received which are of a personal nature or not related to the duties and responsibilities of the Board of Directors, including, without limitation, junk mail, mass mailings, business solicitations, routine customer service complaints, new product or service suggestions and opinion surveys. The Secretary to the Board of Directors will forward such complaints and suggestions received to the appropriate members of the Company's management.

Appropriate matters to raise in communications to the Board include:

    Board composition;

    Board succession planning process;

    CEO succession planning process;

    Executive compensation;

    Use of capital;

    Corporate governance; and

    General Board oversight, including accounting, internal controls, auditing and other related matters.

The policy, including information on how to contact the Board of Directors, may be found in the corporate governance section of our website, www.unitedhealthgroup.com/about/corporate-governance.

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EXECUTIVE COMPENSATION

Executive Summary

UnitedHealth Group's compensation program is designed to attract and retain highly qualified executives and to maintain a strong link between pay and the achievement of enterprise-wide goals. We emphasize and reward teamwork and collaboration among executive officers, which we believe fosters Company growth and performance, optimizes the use of enterprise-wide capabilities, drives efficiencies and integrates products and services for the benefit of our customers and other stakeholders.

In determining 2018 executive compensation, the Compensation Committee considered the Company's strong growth, operating performance and financial results, all of which were achieved in an uncertain environment, as well as individual executive performance. Some of our key business results for 2018 were:

    Revenues increased 12% to $226.2 billion from $201.2 billion in 2017;

    Operating earnings increased 14% year-over-year to $17.3 billion; net earnings to UnitedHealth Group common shareholders increased to $12 billion; and cash flows from operations grew 16% year-over-year to $15.7 billion;

    Diluted earnings per share increased 14% to $12.19 per share from $10.72 in 2017. Adjusted earnings per share1 increased 28% to $12.88 per share from $10.07 per share in 2017;

    Return on equity was consistent with the prior year at 24.4% in 2018;

    Cumulative shareholder return for UnitedHealth Group, which is defined as the increase in stock price, together with dividends reinvested when paid was 122% over the 2016-2018 time period and 258% over the 2014-2018 time period. Cumulative shareholder return for the S&P 500 Index was 30% over the 2016-2018 time period and 50% over the 2014-2018 time period;

    Our annual cash dividend rate increased to $3.60 per share, paid quarterly, representing a 20% increase over the annual cash dividend rate of $3.00 per share paid quarterly since the second quarter of 2017;

    UnitedHealth Group was the top ranked company in the insurance and managed care sector on Fortune's 2019 "World's Most Admired Companies" list, based on 2018 results. This is the ninth consecutive year UnitedHealth Group has ranked No. 1 overall in its sector. The Company ranked No. 1 on all nine key attributes of reputation — innovation, people management, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment, quality of products and services and global competitiveness. The Company was rated No. 1 in innovation for the tenth consecutive year.

    UnitedHealth Group was named to both the Dow Jones Sustainability World and North America Indices for the 20th consecutive year; and

    UnitedHealth Group was included among the 2018 Best Employers for Diversity by Forbes.

1
Adjusted earnings per share is a non-GAAP financial measure. Refer to Appendix A in this proxy statement for a reconciliation of adjusted earnings per share to the most directly comparable GAAP measure.

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The Compensation Committee believes total compensation for the executive officers listed in the 2018 Summary Compensation Table (the "named executive officers" or "NEOs") should be heavily weighted toward long-term performance-based compensation. In 2018, long-term compensation represented approximately 75% of the total compensation granted to our named executive officers. The elements of compensation for our named executive officers were unchanged from 2017.

We endeavor to maintain strong governance standards in the oversight of our executive compensation programs, including the following policies and practices that were in effect during 2018:

    Compensation Committee consisting entirely of independent Board members.

    Performance-based compensation arrangements, including performance-based equity awards that use a balanced set of performance measures, with different metrics used for annual and long-term incentive plans.

    Double-trigger accelerated vesting of equity awards, requiring both a change in control and a qualifying employment termination, which is our only change in control consideration.

    No excise tax gross-ups and generally no executive-only perquisites such as company cars, security systems or financial planning.

    A compensation clawback policy that entitles the Board of Directors to seek reimbursement from our senior executives if they are involved in fraud or misconduct that causes a material restatement, or in the event of a senior executive's violation of non-compete, non-solicit or confidentiality provisions.

    A stock retention policy that generally requires executive officers to hold, for at least one year, one-third of the net shares acquired upon vesting or exercise of any equity award.

    Each of our executive officers and directors were in compliance with our stock ownership guidelines as of April 9, 2019. Mr. Wichmann, our CEO, is required to own shares equal to eight times his base salary by the fifth anniversary of his appointment as CEO. As of April 9, 2019, Mr. Wichmann owned shares equal to 169 times his base salary.

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

    Prohibition on hedging transactions and advance approval of the Compensation Committee required for pledging transactions.

    Annual advisory shareholder vote to approve the Company's executive compensation.

    The direct retention by the Compensation Committee of its independent compensation consultant, Pay Governance LLC, which performs no other consulting or other services for the Company.

As discussed in detail below and reflected in the 2018 Summary Compensation Table, our CEO, Mr. Wichmann, received the following compensation for 2018:

    Base salary of $1.3 million;

    Annual cash incentive award of $4.5 million, which represents 173% of his target opportunity;

    Long-term cash incentive award of $890,600 for the 2016-2018 performance period, which represents above target performance by the Company against pre-set 2016-2018 long-term incentive plan performance goals (this cash plan has been discontinued);

    A performance-based restricted stock unit opportunity ("performance shares") with a target grant date fair value of $5.55 million, restricted stock units ("RSUs") with a grant date fair value of $2.775 million, and non-qualified stock options with a grant date fair value of $2.775 million; and

    Company matching contributions of $178,875 made under the Company's 401(k) plan and Executive Savings Plan.

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Compensation Discussion and Analysis

Our Compensation Program Philosophy and Objectives

We seek to attract and retain highly qualified executives and establish a strong pay-for-performance alignment by linking senior management compensation to enterprise and individual performance goals. The primary objectives of our executive compensation program are to:

    Align the economic interests of our executive officers with those of our shareholders.

    Reward performance that advances our mission of helping people live healthier lives and helping to make the health system work better for everyone.

    Reward performance that emphasizes teamwork and close collaboration among executive officers while also recognizing individual performance.

    Reward performance that supports the Company's values.

    Foster an entrepreneurial spirit with innovative thinking and action that leverages the ingenuity of our employees.

Compensation Program Principles

Our Compensation Committee uses the following principles to implement our compensation philosophy and achieve our executive compen