A few Aetna Inc. shareholders took the health insurer to task Friday morning during an annual meeting in Tampa, Fla., over the way it structures its board leadership, how it discloses political spending and the manner in which it ran the annual meeting.
The majority of shareholders, however, sided with Aetna's board in supporting its current board structure and disclosure policies related to political spending. One shareholder proposal did pass — a resolution to require only "simple majority" on proposal votes and to eliminate "super majority" requirements.
Aetna held votes on three proposals brought by shareholders.
The first proposal was a resolution to make the chair of Aetna's board an independent director who is not a current or former employee and who has no professional, familial or financial connection to the company, the CEO or the directorship. The proposal was introduced by New York City Comptroller John C. Liu, trustee for the city's employee retirement systems, which holds shares in Aetna. Liu's office said in a written statement that it's a conflict of interest to have a CEO who is also a board chair.
"The role of the board is to oversee the CEO," Lee Bonta, speaking on Liu's behalf, said at the meeting which was available via webcast. "There is an irresolvable conflict of interest when the overseen is in charge of the overseer. The consequences can include higher executive compensation, lower shareholder returns, more aggressive risk-taking and ultimately less sustainable companies."
A June 2012 study of 180 North American companies by GMI Ratings found that the median total compensation paid to a combined chair and CEO is $16.1 million, which is 73 percent greater than the $9.3 million paid in total to the positions of CEO and an independent chair, Liu's office said in a written statement to Aetna.
Aetna's Chairman, CEO and President, Mark T. Bertolini, had a pay package last year that more than tripled his compensation in 2011. Bertolini was compensated a total of $36.36 million last year, not including $11.1 million in stock awards that vest later and are based on the company's performance. In 2011, Bertolini was compensated $9.7 million, not including $7.3 million in stock awards.
Most of Bertolini's pay last year was $34.23 million in value from stocks vested and options exercised in 2012. He also received a $977,159 salary, $892,800 in non-equity incentives and $256,971 in "other compensation." This does not include an increase of $33,584 in his pension value.
Bertolini said the board of directors disagreed with the proposal and opposed the proposal for reasons state in a proxy filed with the U.S. Securities and Exchange Commission.
The board, in its proxy statement filed with the SEC, said, "that the board should not be constrained by a requirement that the position of chairman be limited to a director who has not previously served as an executive officer. The company's existing governance structure allows the board flexibility to make changes in the company's leadership structure if and when the board believes that such actions are in the best interests of the company and its shareholders."
A second proposal by John Chevedden of Redondo Beach, Calif., asked to eliminate requirements in the company's charter and bylaws that called for more than a simple majority on votes. Chevedden argued that "super majority" requirements — or approval by two-thirds of shareholders — entrench a company in a behavior that could negatively affect performance. The board disagreed, saying that the proposal was unnecessary and would not enhance shareholder value. The proposal passed.
The third proposal, submitted by Boston-based Unitarian Universalist Association of Congregations, was a resolution requiring Aetna to amend its policy to disclose political contributions to include items it currently doesn't include.
"In our view, Aetna's policy does not provide for strong board oversight of corporate political expenditures," the association said in a written statement. "It states vaguely that '[a]ll corporate political contributions shall promote the interests of the company and will be made without regard for the private political preferences of company directors or officers.'"
The church association mentioned that Aetna gave $4 million to the U.S. Chamber of Commerce for "voter education initiatives" and $3 million to the American Action Network, which sponsored ads regarding political candidates in 2011. The "voter education" initiatives were an attack on certain political candidates, the association said.
The board said in writing that Aetna "is an active participant in the political process at all levels of government and seeks to promote political interests that are aligned with the business interests of the company, its shareholders and its members. Given the importance of this issue to the company, the company recently expanded the information available on its website about its policies and procedures regarding political contributions and the related oversight of those activities."
The proposal was rejected.
Shareholder David Caccamise attended an Aetna annual meeting for the first time and described the security measures as unwelcoming.
Bertolini responded, "If you'd been at this meeting two years ago, you'd have seen a very violent meeting where people bust into the room and they actually tried to knock me off the stage in protest over Aetna's role in health care reform. So, we've had to increase our security for the last three years as a result of that incident. We do get threats often, and, so, we measure those. And, hopefully, we'll return to a level of civility in this society, we can hold annual meetings where people don't have to be threatened by virtue of just getting together."
He was referring to the 2011 annual meeting in Philadelphia. At the meeting, protesters with bullhorns burst through the doors of the Le Meridien hotel meeting room, according to the Wall Street Journal. Two protesters were temporarily handcuffed outside the meeting, but police said there were no arrests, according to the Wall Street Journal.
An Aetna retiree asked when the company's annual meeting might come back to Hartford, to be closer to retirees living in New England.
Bertolini replied, "As you know, Mr. Lang, we've had the practice of moving our annual meetings around to places where a lot of our retirees live around the country. We continue to look at bringing it back to Hartford. I can tell you that before I leave, we'll have one in Hartford."