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PBRS awards will be lower than target or reduced to zero if management fails to maintain appropriate risk-based
capital levels, as specified below. Additionally, the value of existing awards and other shares held by our executives
likely would decline, providing strong economic incentive to manage capital and risk. Options only provide value if
our share price appreciates and the options vest, which aligns with the long-term interests of shareholders.
The performance period for PBRS awards granted in 2016 is January 1, 2016, through December 31, 2018. The awards
will vest three years from the issuance date, subject to satisfaction of performance conditions and final Compensation
Committee authorization. Mr. Crawford received a one-time discretionary award of 4,104 PBRS to recognize superior
performance that will vest on the third anniversary of the grant date if the related performance metrics are met. The sole
performance measure for determining vesting for PBRS awards to NEOs is the achievement of specified RBC ratios as
determined on a U.S. statutory accounting basis. This performance measure was selected because the Compensation
Committee believes that capital adequacy is a significant concern for the financial markets and shareholder confidence.
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.
The final three-year PBRS award percentage will reflect the three-year average RBC (2016 to 2018).
For the three-year period, performance shares will vest as follows:
If the average RBC falls below 500%, there will be no vesting for the period. Vesting will be determined using linear
interpolation for an average RBC ratio between 500% and 700%. If the average RBC equals or exceeds 700%,
vesting will be equal to 100%.
CEO and President Compensation and Pay-for-Performance
The Compensation Committee’s longstanding process for reviewing and determining the CEO’s pay involves
a rigorous pay-for-performance approach that creates a direct link between the Company’s comparative
performance results and CEO compensation. To achieve this linkage, the compensation consultant annually
calculates the Company’s composite performance percentile rank for a variety of metrics among our peer group.
Starting in 2015, the Company’s President was placed under a similar program for his long-term incentive
compensation. Based on market analyses, and also considering the unique role held by Mr. Cloninger as of the
start of 2015 (he was President, CFO, and Treasurer at the time), the Compensation Committee determined that
Mr. Cloninger’s final 2016 pay package would be set at 55% of the CEO’s pay package. Mr. Cloninger’s 2016 long-
term incentive pay is 100% performance-based, as it is a function of the CEO’s pay, which is determined based on
the Company’s relative financial and total shareholder return (TSR) performance against our peers.
Long-term Equity Incentives
The CEO and President’s long-term equity incentives are addressed in the next section; this section pertains only
to the other NEOs.
In 2016, executive officers, including the NEOs, received
LTI awards in the form of PBRS, and all officers received
stock options. For NEOs, the target amount of each
award is competitively positioned relative to awards for
comparable executives at our peers and in the broader
insurance sector. The targeted LTI mix for 2016 for the
NEOs was 80% PBRS and 20% stock options. These
stock options have an exercise price based on the
closing price of the Company’s common stock on the
date of grant, and a three-year vesting period.
LTI targets as a percent of base salary for the NEOs
were as follows:
NEO
Target LTI
(as Percent of Base Salary)
Frederick J. Crawford
200%
Paul S. Amos II
200%
Eric M. Kirsch
200%
Threshold Goal
Target Goal
Maximum Goal
Average Risk-Based Capital Ratio
500%
700%
700%
Vesting Percentage
50%
100%
100%
Compensation Discussion & Analysis
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CEO and President Compensation and Pay-for-Performance
AFLAC INCORPORATED
2017 PROXY STATEMENT
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