Aflac Inc., long known for the quacking duck that stars
in its TV commercials, now is gaining attention for another reason: a
"say-on-pay" vote at its annual meeting in May.
The Columbus, Ga., insurer will become the first public
U.S. company to give investors an advisory, or nonbinding vote, on top
officers' compensation. Daniel P. Amos, Aflac's longtime chief
executive officer, persuaded fellow directors to embrace the idea after
a shareholder last year submitted a resolution requesting the vote.
Companies in Britain, Australia, Sweden and the
Netherlands grant investors such a vote. U.S. activists want to import
the practice, hoping that public censure -- or the threat of it -- will
persuade corporate boards to curb outsize executive rewards. Proponents
have filed resolutions seeking nonbinding votes at nearly 100 U.S.
companies this year. Apple Inc. shareholders this week approved a
resolution seeking a say-on-pay vote. A proposed law to require such
votes is stalled in the Senate.
Aflac will reveal details about its say-on-pay vote in
its proxy statement, which could be filed as early as today. In 2006,
Mr. Amos received $3.7 million in salary, bonus and other compensation,
and was granted restricted stock and stock options valued at $9.3
million. Some pay experts criticize Mr. Amos's retirement benefits,
valued at more than $49 million at the end of 2006.
The 56-year-old CEO is the son and nephew of Aflac's
three founders; he owns 82 ties decorated with ducks. He talked recently
to The Wall Street Journal about the imminent vote. Excerpts follow:
WSJ: Why offer investors a vote on executive
Mr. Amos: We have never had a question
concerning compensation. My initial reaction was, "What had we done
wrong?" [Shareholders backing the proposal] told us they liked our pay
practices. It was the name recognition. People knew who we were. As I
researched it, I realized there was momentum building with the issue of
pay for performance. At other companies, people were being rewarded when
the shareholders weren't being rewarded -- especially CEOs. Based on
chats with several Aflac shareholders, I said, "We ought to do it."
WSJ: What executive-pay practices will you
ask investors to approve?
Mr. Amos: The compensation methodology and
summary-compensation table [listed in the proxy statement]. Certain
people are going to say, "The number is too high." If you make more than
they do, it is too much. A large percent is going to vote no based on
the number. I have confidence the vote on executive compensation will
pass. Since I became CEO in 1990, the return to shareholders has been
3,867% through the end of last year.
WSJ: Did the board make any changes in
executive-pay practices in anticipation of the additional scrutiny?
Mr. Amos: The board compensation committee did
not think any changes were necessary.
WSJ: How did your 2007 pay package compare to
your 2006 pay?
Mr. Amos: My total compensation was about the
WSJ: How do you respond to criticism that
your promised retirement benefits are excessive?
Mr. Amos: The retirement benefits, based on my
salary and bonus, have accrued throughout my 35-year Aflac career. Our
market capitalization has grown significantly during my tenure as CEO.
WSJ: Considering you're the biggest
individual stockholder, with about 9.9 million shares and exercisable
options, why did directors give you options last year?
Mr. Amos: You pay people according to what the
position is worth. If I leave tomorrow, what are you going to have to
pay to replace me? I don't work based on monetary reasons. At the same
time, I want to be paid what I am worth.
WSJ: How quickly will Aflac directors change
executive-pay practices if you get a significant negative vote?
Mr. Amos: Immediately. We will have to go back
to the large institutions who control the company and ask what they
WSJ: What if they want you to stop receiving
Mr. Amos: I will have to make a decision at that
time. Will I be as motivated if you cut my pay below everybody else's?
The answer is no. I would be insulted that a rookie CEO that has never
done anything his whole life could walk in and make more than I do. I
have more money than I will ever spend. But there's got to be a score
card to tell what you are worth. And compensation is the way the score
card is kept.
WSJ: Has the coming say-on-pay vote helped
your U.S. business?
Mr. Amos: Just showing we are a transparent
company is good. But there is no correlation between sales and this
change. It is very important for shareholders, not policy holders,
because they are the owners of the company.
WSJ: Many U.K. businesses now check with
institutional investors before they revamp executive-pay practices or
install new ones. Will Aflac reach out to investors in a similar way?
Mr. Amos: I do not think we will ask questions
beforehand when we are putting in a new practice. Shareholders have
empowered board members to make that decision.
WSJ: Some people fear a say on pay creates a
dangerous precedent that could interfere with management. How would you
react if Aflac holders sought advisory votes on capital spending, new
products or expansion in Japan, your biggest market?
Mr. Amos: I would oppose it. If individual
shareholders try to micromanage the company, they have to get rid of the
CEO. I think my track record speaks for itself.
WSJ: Why not also let Aflac shareholders vote
on pay practices for other officers? Your lower officers receive
restricted shares whose limitations lapse over time, and aren't tied to
Mr. Amos: The number of shares we offer is based
on past performance. If the officers don't perform, we are not going to
keep them and the restricted stock is not going to vest. What I am
really trying to do is to lower the turnover rate.
WSJ: Would officers leave sooner if their
restricted shares had performance triggers?
Mr. Amos: Knowing you are guaranteed something,
you will stay much longer than if you have to wait and see if you
Write to Joann S. Lublin at