Management is responsible for the day-to-day business operations of Aetna Inc. (the
"Company"). The Board of Directors (the "Board") oversees and guides the Company's
management and its business. The basic responsibility of the Board is to exercise its
business judgment to act in what it reasonably believes to be in the best interests of the
Company and its shareholders. Within this framework, the Board also considers the
Company's ethical behavior and may consider the interests of other constituents, including
the Company's customers, employees and the communities in which it functions.
In discharging their obligations, Directors are entitled to rely on the honesty and
integrity of the Company's executives, and its outside advisors and auditors. The
Directors also shall be entitled to have the Company purchase reasonable directors' and
officers' liability insurance on their behalf, to the benefits of indemnification to the
fullest extent permitted by law and the Company's Articles of Incorporation and By-Laws,
and to exculpation as provided by applicable state law and the Company's Articles of
Incorporation.
The Board provides oversight with respect to the strategic direction and key policies
of the Company. It approves major initiatives, advises on key financial and business
objectives, and monitors progress with respect to these matters.
The Board, directly and through its Audit Committee, provides oversight of the
integrity of the financial statements of the Company; the independent accountants'
qualifications and independence; the performance of the Company's internal audit function
and independent accountants; and the compliance by the Company with legal and regulatory
requirements.
The Board selects and annually evaluates the performance of the Chief Executive
Officer. Directly and through its Committee on Compensation and Organization (the
"Compensation Committee"), the Board also collaborates with the Chief Executive Officer in
the selection of senior management. The Compensation Committee, on behalf of the Board,
evaluates and determines the compensation of the Company's Chief Executive Officer and its
other executive officers; oversees compensation and benefits plans, policies and programs
of the Company; administers the equity-based incentive compensation plans of the Company;
and considers from time to time and, when appropriate, makes recommendations to the Board
as to the development and succession plans for the senior management of the
Company.
The Compensation Committee and the Board meet annually in full executive session, without
management, to assess the performance of the Chief Executive Officer and consider the
Chief Executive Officer's compensation.
The Company's By-Laws provide that the Chairman shall be the Chief Executive Officer,
unless the Board vests this position in another officer. The Board may determine to
separate these positions based on what is deemed to be in the Company's best interest at
any given point in time.
A Presiding Director is appointed by, and from, the independent Directors and serves
for a period of time which enables the Presiding Director to perform his or her functions
with continuity. Generally speaking, the Presiding Director is responsible for
coordinating the activities of the independent Directors. Among other things, the
Presiding Director sets the agenda for and leads the nonmanagement and independent
Director sessions held by the Board regularly, and briefs the Chairman and Chief Executive
Officer on any issues arising out of these sessions. The Presiding Director also acts as
the principal liaison to the Chairman and Chief Executive Officer for the views, and any
concerns and issues, expressed by the independent Directors, though all Directors continue
to interact one-on-one with the Chairman and Chief Executive Officer, as needed and as
appropriate. The Chairman and Chief Executive Officer consults with the Presiding
Director for input in setting the agenda for Board meetings and the Board meeting
schedule. The Presiding Director consults with the other Directors and advises the
Chairman about the quality, quantity and timeliness of Board information and the Board's
decision-making processes.
Composition of the Board and Selection of Directors
The size and composition of the Board should be appropriate for effective deliberation
of issues relevant to the Company's businesses and related interests. A substantial
majority of the members of the Board shall be, in the business judgment of the Board,
"independent" under the rules of the New York Stock Exchange, Inc.
The credentials of prospective director candidates are reviewed by the Nominating and
Corporate Governance Committee (the "Nominating Committee"). Nominees are selected
through a process based on criteria set with the concurrence of the full Board and
re-evaluated periodically. The criteria weighed in the Director selection process
include: the relevance of the candidate's experience to the business of the Company;
enhancing the diversity of the Board; the candidate's independence from conflict or direct
economic relationship with the Company; and the ability of the candidate to attend Board
meetings regularly and devote an appropriate amount of effort in preparation for those
meetings. It also is expected that outside Directors nominated by the Board shall be
individuals who possess a reputation and hold positions or affiliations befitting a
director of a large publicly held company, and are actively engaged in their occupations
or professions or are otherwise regularly involved in the business, professional or
academic community. Honorary Directors shall not be appointed.
In recommending Director nominees to the Board, the Nominating Committee solicits
candidate recommendations from its own members, other Directors and management. It may
also engage the services of a search firm to assist it in identifying potential Director
nominees. The Nominating Committee will also consider suggestions made by shareholders
for Director nominees who meet the established Director criteria.
All new Directors must participate in the Company's Director Orientation Program. This
orientation includes presentations by senior management to familiarize new Directors with
the Company's strategic plans, its significant financial, accounting and risk management
issues, its compliance programs, its code of business conduct and ethics, its principal
officers, and its internal and independent auditors. In addition, each Board Committee
also provides new Committee members with appropriate background information about the
workings of the Committee. The Board encourages formal Board continuing
education.
The Nominating Committee annually reviews Director suitability and the continuing
composition of the Board; it then recommends Director nominees who are voted on by the
full Board. The Board believes that, if this evaluation is well done, it obviates the
need for term limits, which could unnecessarily deprive the Company of experienced
Directors. All Director nominees stand for election by the shareholders
annually.
Any nominee for Director in an uncontested election who receives a greater number of
votes “against” his or her election than “for” such election, and who
otherwise remains on the Board pursuant to Pennsylvania law, promptly shall submit his or
her resignation for consideration by the Nominating Committee. The Nominating Committee
shall recommend to the Board the action to be taken with respect to such resignation and
the Board shall act with respect to such resignation, in each case within a reasonable
period of time. The Company promptly shall disclose to the public each such resignation
and decision by the Board.
The Company will hold the vote of each shareholder in confidence from Directors,
officers and employees except: (a) as necessary to meet applicable legal requirements
(including stock exchange listing requirements) and to assert or defend claims for or
against the Company and/or one or more of its consolidated subsidiaries; (b) as necessary
to assist in resolving any dispute about the authenticity or accuracy of a proxy card,
consent, ballot, authorization or vote; (c) if there is a contested proxy solicitation;
(d) if a shareholder makes a written comment on a proxy card or other means of voting or
otherwise communicates the shareholder's vote to management; or (e) as necessary to obtain
a quorum.
Any significant change in circumstances that may relate to a Director’s qualifications as a Director is considered in determining suitability for continued directorship. An analysis of potential conflicts and review by the Nominating Committee and the Board are conducted for proposed additional director affiliations with a for-profit enterprise or for proposed transactions involving the Company (or subsidiary of the Company) in which any Director would have a direct or indirect material interest; it is provided, however, that a Director shall limit the number of other public company directorships that he or she holds to four. Directors shall give the Chairman of the Nominating Committee notice of any such significant change in circumstances (including a change in primary occupation), proposed additional for-profit or charitable director affiliation or proposed transaction involving the Company. Where a Director has a significant change in circumstances, such as a change in his or her primary occupation, the Director also shall offer to submit his or her resignation, which offer may be accepted or rejected by the Board.
As a general matter, a retiring Chief Executive Officer (or other officer
Director) will resign from the Board at the time of his/her retirement from
the Company. Outside Directors resign no later than the Annual Shareholders
Meeting coincident with or immediately following their 76th birthdays.
Functioning of the Board
The Board sets the annual schedule of Board and Committee meetings. Committee
schedules are recommended by each Committee in order to meet the responsibilities of that
Committee. It is the policy of the Board that Directors should be present at the
Company's Annual Meeting of Shareholders.
Board agendas are generally set by the Chairman, in consultation with the Presiding
Director, with ample opportunity for suggestions from other Directors.
The Board is provided, in advance of meetings, with agendas and written background
information and data with respect to Board/Committee agenda items, as well as other
general information relevant to the Company's businesses. The Board also receives regular
updates between Board meetings.
The Chairman of the Company presides at Board meetings. In the event that the
Chairman of the Company is unable to attend a meeting of the Board of Directors, the
Presiding Director shall chair the meeting. In the event that both the Chairman of the
Company and the Presiding Director are unable to attend a meeting of the Board of
Directors, the most senior Director (in terms of current consecutive years of Board
service) present shall, at the request of the Chairman of this Company or the Corporate
Secretary of this Company, chair the meeting. Members of senior management are included
in open sessions of Board and Committee meetings, as appropriate. The Board meets
regularly in executive session with only Directors present. The nonmanagement Directors
of the Company also meet at regularly scheduled executive sessions, without management
Directors present. In addition, at least once per year, the Company's independent
Directors meet in executive session.
Board members have full access to Company management. In addition, the Board and any
of its Committees have the authority to retain counsel and other independent experts or
consultants, as they may deem necessary, without consulting or obtaining the approval of
any officer of the Company in advance.
The Board conducts a self-evaluation annually to determine whether it and its
Committees are functioning effectively. This review is overseen by the Nominating
Committee.
As a general matter, the Board believes that management speaks for the Company.
Committees of the Board
Committees support the role of the Board on issues that benefit from consideration by
a smaller, more focused subset of Directors. The Board will have at all times an Audit
Committee, a Compensation Committee and a Nominating Committee. All of the members of
these Committees will, in the business judgment of the Board, be "independent" Directors
under the rules of the New York Stock Exchange and meet any other standards of
independence required under applicable law. The Board also has established an Investment
and Finance Committee to assist the Board in reviewing the Company's investment policies,
strategies, transactions and performance, and in overseeing the Company's capital and
financial resources, and a Medical Affairs Committee to assist the Board in general
oversight of policies and practices that relate to providing members with access to
quality health care. The Board also has established an Executive Committee, which may act
on behalf of the full Board between regularly scheduled Board meetings, usually when
timing is critical. The Board may form other Committees from time to time to deal with
special issues. One or more Board members also serve on the Board of the Aetna Foundation
to oversee and coordinate the Company's charitable giving programs.
The roles of the Committees are defined by the Company's By-Laws and by Committee
charters adopted by the Board.
At least annually, the Nominating Committee, in consultation with the Chairman and the
Chief Executive Officer, reviews Committee assignments (members and chairs). In
considering a Director for Committee membership, the Committee takes into consideration
any factors it deems appropriate, including without limitation, the Director's experience
and background, and its relevance to the goals and responsibilities of the Committee and
the Director's Committee preferences. The Committee then makes Committee assignment
recommendations on which the full Board votes. It is the sense of the Board that
Committee members and Committee chairs should be rotated, where appropriate and practical,
while providing overlap to prevent loss of expertise and experience and maintain
continuity. Generally, consideration is given to rotating a Committee chair after
approximately five years of service as chair. The Board strives to select new Committee
chairs from Directors who have prior experience on the relevant Committee.
Committee agendas are set by the respective Committee chairs in consultation with
management and other Committee members. Committee chairs report on each Committee meeting
at the Board meeting following the Committee meeting. Minutes of Committee meetings also
are provided to each Director. Each Committee chairman convenes, as appropriate,
executive sessions of outside Directors of the Committee to discuss its operations and
other related matters.
In the absence of a Committee chair, the most senior Committee member (in terms of
Committee service) chairs the Committee meeting.
Compensation of Directors
At least annually, the Nominating Committee reviews competitive compensation survey
information, and considers the appropriateness of the form and amount of Director
compensation with a view toward attracting and retaining qualified Directors.
The Nominating Committee, with the concurrence of the full Board, has directed that a
significant portion of Director compensation be delivered in stock-based forms. In
addition, a deferred compensation plan also allows individual Directors voluntarily to
defer cash compensation into deferred stock units. The Board of Directors also has
adopted Stock Ownership Guidelines, whereby within five years of appointment to the Board,
each Director should own stock of the Company having a value equal to $400,000. It is
understood that if Directors temporarily do not meet this guideline because there has been
a significant drop in the price of the Company's stock, they would have a reasonable
period of time to acquire additional shares of stock necessary to meet the guidelines.
Conduct and Ethics Standards for Directors
Directors are subject to applicable provisions of the Company's Code of Conduct.
Among other things, Directors must conduct themselves in a manner that avoids actual or
apparent conflicts of interest and that protects the Company's business reputation. A
conflict of interest occurs when a Director's private interest interferes in any way - or
even appears to interfere - with the interest of the Company. Except as authorized by the
Board of Directors, no outside Director shall have a direct economic relationship with the
Company. Company loans to, or guarantees of obligations of, Directors and their family
members are prohibited.
Directors owe a duty to the Company to advance its legitimate interests when the
opportunity to do so arises. Accordingly, Directors are prohibited from taking for
themselves personally business opportunities that are discovered through the use of
Company property, information or position.
Directors, in the course of their Company duties, must comply fully with all federal
and state laws applicable to the Company's businesses, and with applicable Company
policies (including policies relating to use of confidential information and insider
trading).
Role of the Board
