Health Net 2015 Annual Report Download - page 125

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• the recommendations of our Chief Executive Officer, Chief Financial and Operating Officer and/or Senior
Vice President, Organization Effectiveness and Chief People Officer, as applicable; and
• compensation levels of other internal executives.
We do not have a pre-defined framework that determines which of these factors may be more or less important,
and the emphasis placed on specific factors may vary among the executives. As further discussed herein, in assessing the
Company’s performance and individual performance with respect to certain previously established criteria for cash bonus
and equity awards for 2015, the Board and the Compensation Committee took into account their respective
determinations of the impact that the announcement of the Merger and operation of the Company’s business in light of
the Merger had on the Company’s ability to achieve the various performance goals. In addition, in 2016, we were
restricted by the terms of the Merger Agreement when determining the compensation levels of our named executive
officers under the 2015 MIP and the Company’s 2016 compensation program. Ultimately, it is the judgment of the
Compensation Committee, with input from our Chief Executive Officer, Chief Financial and Operating Officer and/or
Senior Vice President, Organization Effectiveness and Chief People Officer, as applicable, that determines compensation
for our named executive officers other than our Chief Executive Officer and our second-highest paid executive officer.
The Compensation Committee approves the compensation for our Chief Executive Officer and our second-highest paid
executive officer, subject to the approval of the independent members of our Board. The compensation recommendations
for the second-highest paid executive also include input from our Chief Executive Officer.
As indicated above, while the Board and the Compensation Committee use market data as one factor in making
their respective compensation determinations, neither relies solely on market data to make these decisions. Further, as
stated below, based on input received from the Compensation Committee’s independent compensation consultant, the
Board and the Compensation Committee use market data from our “modeled peer group” to address consolidation in our
industry and inconsistencies among our traditional peer group companies. For further discussion on the market data
provided by Semler and how this data affected the Board’s and the Compensation Committee’s 2015 compensation
decisions, see below under “—Competitive compensation analysis for fiscal 2015.”
Emphasis on long-term, performance-based compensation
Consistent with our philosophy to align total compensation paid to our named executive officers with long-term
stockholder interests, the Board and the Compensation Committee generally endeavor to set target total direct
compensation such that more than half of our executive officers’ annual compensation is in the form of long-term equity,
rather than cash, and is oriented to rewarding longer-term performance, as opposed to annual performance. For further
discussion on the pay mix percentages, see above under “—Executive Summary—Linking 2015 Named Executive
Officer Compensation to Performance.”
Consultants and advisors
Since May 2007, Semler has been the Compensation Committee’s exclusive compensation consultant. During that
time, Semler has provided services to the Compensation Committee primarily related to executive compensation and
compensation risk analysis and services to the Governance Committee related to director compensation. Semler did not
provide any other services to Health Net in 2015.
The Compensation Committee utilized its sole discretion to retain Semler in 2015 as its compensation consultant in
order to assist the Compensation Committee in carrying out its responsibilities. Semler reports directly and exclusively to
the Compensation Committee with respect to executive compensation matters and the Compensation Committee is
directly responsible for appointing Semler, determining its compensation levels and overseeing the work performed by
Semler.
During 2015, Semler provided the following services to the Compensation Committee:
• market survey analysis;
• peer group competitive review;
• review of market trends in executive compensation;
• review of recent regulatory requirements related to executive compensation;
• assessment of stockholder advisory firms’ executive compensation policies and implications for the
Company’s practices;
• assessment of the Company’s compensation policies and practices as they relate to risk management practices
and potential risk-taking incentives;
• review of the Compensation Committee charter;