10 / 72
Executive Compensation Highlights (beginning on page 27)
Our compensation philosophy, which extends to every employee level at the Company, is to provide pay-for-
performance that is directly linked to the Company’s results. We believe this is the most effective method for creating
shareholder value and that it has played a significant role in making the Company an industry leader.
The Company’s executive compensation programs reflect our corporate governance best practices principles:
Independent Compensation Committee oversees the program;
Independent compensation consultant hired by and reporting to the Compensation Committee;
Rigorous pay-for-performance formulaic structure for CEO compensation, in place for 18 years, which is regularly
evaluated by the Compensation Committee;
For the past 18 years, 100% of the CEO’s total direct compensation has been determined based on the
Company’s performance versus peers (relative financial performance (weighted 54%) and relative total
shareholder return (“TSR”) performance (weighted 46%));
Annual report by the independent compensation consultant to the full Board of Directors on CEO pay and
performance alignment;
First public company in the U.S. to provide shareholders with a say-on-pay vote (voluntary action starting in 2008,
three years before the vote became required);
Prohibition on entering into 10b5-1 plans (unless approved by the Compensation Committee), hedging, or future
pledging of the Company’s stock by executive officers and Directors;
Stock ownership guidelines for executive officers and Directors in place since 1998; grandfathered pledged
shares do not count toward the stock ownership guidelines;
Clawback policy in place since 2007;
No change-in-control excise tax gross-ups; and
Double trigger change-in-control requirements in all employment agreements.
Executive Compensation Program Changes in Response to Say-on-Pay Vote
The Company, which allowed shareholders a “say-on-pay” advisory vote beginning in 2008, before the requirement later
imposed on companies by the Dodd-Frank Wall Street Reform and Consumer Protection Act, had received
endorsement rates from our shareholders that had averaged more than 96% since its institution through 2013.
After receiving less favorable support in 2014 and engaging shareholders, the Compensation Committee made
modifications to the process for setting the CEO’s compensation in 2014 to better align our relative financial and total
shareholder return performance with the CEO’s pay in the same year, thus eliminating the timing disconnect under the
prior method. In 2015, our say-on-pay vote received strong support, with 87% of our shareholders voting in favor of our
executive compensation programs.
Consistent with our approach in prior years, the Company engaged in extensive shareholder outreach efforts throughout
2015. The feedback from these conversations was incorporated into the regular review of compensation practices by
the Compensation Committee, which in turn conducted a thorough analysis of best practices. Based on the feedback
resulting from the Company’s shareholder engagement and analysis, in 2015 we have eliminated the overlap in
performance metrics used in the annual non-equity incentive plan and long-term equity incentive plan. The RBC
demonstrates Aflac’s achievement in managing the capital level of the consolidated insurance operations of Aflac Japan
and Aflac U.S.
as reported to U.S. regulatory authorities. This capital measure reflects the Company’s ability to both
satisfy its obligations to policyholders and generate returns for shareholders. Therefore, RBC was determined to be the
best metric to measure and assess management’s long-term performance for our performance-based restricted share
(“PBRS”) awards.
For 2016, the Compensation Committee has changed the PBRS awards’ RBC goals and vesting to strengthen the rigor
of the RBC metric. The 2016 PBRS objectives will be based on the average RBC for the three year period 2016 to 2018
calculated as the arithmetic average of the year-end RBC for each of the three years. For the three year period,
performance shares will vest at 50% if threshold RBC ratio is achieved and 100% if target if attained. Vesting will be
determined using linear interpolation for an RBC ratio between 500% and 700%. If the RBC falls below 500% there will
be no vesting for the period. If the RBC equals or exceeds 700% vesting will be equal to 100%. Overall, we believe that
these modifications provide a stronger performance goal for the long-term equity incentives.
We constantly analyze our practices to ensure that we remain current in our approaches, a leader in executive
compensation best practices, and cognizant of shareholder concerns. As such, we will continue our review to determine
if additional changes should be made in 2016. As a company, we pride ourselves on incorporating ethics and
transparency into everything we do, including compensation disclosure.
3