At Anthem, we understand how important it is to earn trust. Accountability and ethical behavior are central to our culture. We conduct our business from a core of financial integrity and operational control, and we believe the only results worth having are those achieved with integrity and a commitment to excellence.
Anthem places a high priority on strong corporate governance measures. We take great care to ensure that we follow the securities laws, the rules and regulations set forth by the Securities and Exchange Commission and the guidelines set forth by the New York Stock Exchange. And our executive officers, associates and Board of Directors are governed by Anthem’s Standards of Ethical Business Conduct.
Board of Directors
Anthem’s Board of Directors oversees and guides our business. The primary responsibility of the board is to further Anthem’s long-term success and maintain our fiduciary duty to our shareholders. It also considers the interests of other constituents such as consumers, associates, business partners and the communities in which we operate.
The 10-member board includes Gail Boudreaux, Anthem’s president and CEO, and nine independent directors. Our audit, compensation and governance committees are composed entirely of independent directors. Our board has adopted standards to assist it in making determinations of independence and whether or not a director has a material relationship with us.
The board’s directors possess qualifications that meet Anthem’s strategic needs and have diverse experience with key business, financial and other challenges that face a publicly held health insurance company. The Governance Committee has identified the following skills, experiences, and attributes that are desirable for one or more directors to possess: CEO; COO/Executive Leadership; insurance industry; finance/capital markets; healthcare industry; marketing/consumer insights; technology; regulatory/public policy; environmental, social and governance; and gender and ethnic diversity. Anthem’s annual proxy statement includes a skills-and-experience matrix identifying which of the desired skills are possessed by each director.
The board is diverse in gender and race, with four female directors, one African American director, one Hispanic director, one Latino director and one Northern African director. The average director tenure was approximately seven years as of December 2018, as a result of the board’s refreshment practices and policies.
Policies on Corporate Governance
Our corporate governance policies reflect our goal of adopting best practices to promote high-level performance from the Board of Directors and management. We believe our practices promote the long-term interests of our shareholders and strengthen board and management accountability.
Among the practices we adhere to are the following:
- Majority voting for the election of directors in an uncontested election;
- Proxy access for shareholder-chosen director nominees;
- Right of shareholders to call a special meeting of shareholders;
- An independent chair of the board;
- Board, committee and director peer performance evaluations conducted annually, including an evaluation led by an external party;
- Individuals not being able to stand for election as directors if age 72 or older;
- A prohibition on service by independent directors on more than three other public company boards, and by the CEO on more than one other public company boards;
- Significant stock ownership guidelines that align our executives’ and directors’ interests with those of shareholders;
- A recoupment policy to recover incentive compensation payments from our executive officers in the event of a restatement of our financial statements due to misconduct; and
- A prohibition on tax gross-ups on payments made in connection with a change in control or on perquisites.
Building positive relationships with our shareholders is critical to our long-term success. We spend significant time meeting with them, listening to their concerns and responding to their feedback.
Through our robust outreach and engagement program in 2018, we engaged with our largest shareholders, representing in aggregate a majority of our outstanding shares. Topics discussed included corporate governance practices, environmental and social sustainability initiatives, Board composition and refreshment and executive compensation. In addition, our management team regularly meets with shareholders to discuss our strategic plan, consolidated business results, capital structure, and other topics of interest to them. We value our relationship with our shareholders and believe that we strengthen our ability to lead the company by constructively discussing our business and strategy.
We were pleased that our shareholders overwhelmingly approved the nonbinding advisory vote on our executive compensation in 2018; approximately 94 percent of votes cast were in favor of the proposal. Nevertheless, we continue to examine our executive compensation program to ensure alignment between the interests of our executive officers and those of our shareholders.
Classified Board Structure
Anthem is an independent licensee of the Blue Cross Blue Shield Association (BCBSA). These licensee obligations require Anthem to maintain a classified board structure, whereby directors serve staggered three-year terms (rather than one-year terms). Our corporate governance guidelines provide that, if the BCBSA requirement for a classified board structure is eliminated or is no longer applicable to us, the board will submit amendments to our Articles of Incorporation recommending approval by the shareholders to eliminate the classified board structure. If the shareholders approve the amendments to our Articles of Incorporation to eliminate the classified board structure, the board will phase in the annual election of directors over a three-year period.
Enterprise Risk Management
Our Board of Directors oversees risk-management processes that are implemented by our executives, to determine whether those processes are functioning as intended and are consistent with our business and strategy. The board oversees our exposure to major enterprise risks and, with the assistance of the Audit Committee, the processes by which we assess, monitor and manage our exposure to those risks. The board reviews and approves certain risk-tolerance levels and action plans regarding major risks. The board also reviews and approves the Own Risk and Solvency Assessment Summary Report, filed annually with state insurance departments.
Social Responsibility and Sustainability
Accountable to the Governance Committee of the Board of Directors, the Sustainability Council is responsible for monitoring Anthem’s corporate social responsibility and environmental sustainability initiatives. Anthem’s director of sustainability coordinates with leaders from across the organization to monitor and report on our environmental, social and governance performance. Anthem benchmarks our programs and monitors improvement by disclosing information to the Carbon Disclosure Project, Ethisphere (World’s Most Ethical Companies) and RobecoSAM (Dow Jones Sustainability Index). Anthem was included in the 2018 Dow Jones Sustainability Index.