Health Net 2015 Annual Report Download - page 117

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Use of Independent Compensation Consultant. The Compensation Committee engages its own
independent compensation consultant, who performs an annual comprehensive market analysis of our
executive compensation programs and pay levels, and confirms their independence on an annual basis.
Risk Management. Our compensation programs have been designed and are periodically reviewed to
ensure that they do not encourage inappropriate risk-taking. See “Executive Compensation—
Compensation Risk Assessment” for further discussion.
Anti-Hedging and Anti-Pledging Policy. Our Insider Trading and Disclosure of Material Insider
Information policy prohibits all employees, including our named executive officers, from engaging in
certain speculative trading activities, including selling our securities “short,” holding our securities in
margin accounts, pledging our securities or engaging in hedging transactions with respect to our
securities.
What We Don’t Do
X No Tax Gross-Up Payments on Perquisites. We generally do not permit tax gross-up payments in
connection with perquisites provided to executive officers, except pursuant to certain Company-wide
policies that are limited in nature.
X No Excise Tax Gross-Ups. We do not permit tax gross-up payments under Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), on severance and change in control pay for
any person who became an executive officer after 2007.
X No Discounting of Stock Options or Repricing of Underwater Options. We expressly prohibit the
discounting of stock options and the repricing of underwater stock options.
Impact of 2015 Advisory Vote on the Compensation of Named Executive Officers
In May 2015, we provided stockholders an advisory vote to approve the compensation of our named executive
officers (the “say-on-pay proposal”). At our 2015 Annual Meeting of Stockholders, our stockholders approved the
compensation of our named executive officers, with over 97% of the votes cast in favor of the say-on-pay proposal. In
evaluating our executive compensation program, the Compensation Committee considered the results of the say-on-pay
proposal and numerous other factors, as discussed in this CD&A. The Compensation Committee believes the support of
our stockholders for the 2015 say-on-pay proposal indicates our stockholders are generally supportive of our approach to
executive compensation. As a result of the foregoing, the Compensation Committee concluded that it would retain our
compensation program’s emphasis on at-risk, performance-based incentive compensation. The Compensation Committee
will continue to monitor and assess our executive compensation program and consider the outcome of our say-on-pay
votes when making future compensation decisions for our named executive officers.
What is the role of the Compensation Committee?
The Compensation Committee has the primary authority to structure our compensation programs and establish
compensation levels for our executives, including our named executive officers; however, our Board approves final
compensation decisions (including any grant of equity awards) with regard to our Chief Executive Officer and our
second-highest paid executive. A detailed discussion of the Compensation Committee’s role and responsibilities can be
found under “Corporate Governance.”
What are the objectives of our executive officer compensation programs?
Managed care is a complex industry that faces regulatory and marketplace challenges, especially in light of the
sweeping changes enacted and proposed under federal health care reform legislation and other state and federal
legislation and regulation. In light of the continuing uncertainty throughout our industry, we continue to face challenges
in developing our incentive compensation programs and policies. We have found that the pool of executives with the
relevant industry experience and skills to provide effective leadership in this complex and uncertain health care
environment is limited. Therefore, our compensation program for executive officers and other key employees must
remain competitive in the industry to support our goal of attracting and retaining executive talent with the knowledge and
leadership capability needed for us to operate successfully and to meet upcoming challenges and opportunities. Of equal
importance, our compensation program must (i) motivate our executive officers to meet or exceed our short-term
performance objectives and (ii) align the interests of our executives with those of our stockholders by rewarding our
executives for results that create long-term stockholder value.