Health Net 2015 Annual Report Download - page 134

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(1) See the discussion above under “—What are the elements of named executive officer compensation and why do we provide each element?—
Annual Performance-Based Incentive Cash Awards” for information regarding how the actual 2015 incentive cash awards were calculated for
each of our named executive officers.
(2) The amounts shown represent the grant date fair value, based on a per share value of $56.49. This is calculated in accordance with FASB ASC
Topic 718 by multiplying the closing price of our Common Stock on the date of grant by the number of units granted. The grant date fair
values shown vary from Target LTI Values. For a description of how Target LTI Values are determined, see above under “—What are the
elements of named executive officer compensation and why do we provide each element?—Long-Term Equity Incentive Compensation—
2014 Equity Grant Guidelines.”
(3) Actual TDC represents the sum of (i) base salary at December 31, 2015, (ii) actual 2015 incentive cash award under the MIP, as paid in 2016,
and (iii) the grant date fair value of the 2015 annual equity awards granted to the named executive officer on February 20, 2015. See footnote
(2) to this table for a description of how grant date fair value is calculated.
(4) The Actual 2015 Equity Award Fair Value on Grant Date for Ms. Hefner excludes her supplemental July 2, 2015 RSU and PSU awards. See
the “Summary Compensation Table” for more information.
Other Key Policies and Practices
Compensation recovery policy. We have a Compensation Recovery Policy, which generally provides for the
recovery of cash- or equity-based incentive compensation and profits realized from the sale of securities (collectively,
“Incentive Compensation”) from our current executive officers (and certain other employees identified by our Board
from time to time) following a “recoverable event.” A “recoverable event” generally means a covered employee’s
engagement in (i) certain fraudulent, intentional, willful or grossly negligent misconduct that ultimately results in our
being required to prepare an accounting restatement due to material noncompliance with any financial reporting
requirement under U.S. Federal securities laws, or (ii) conduct that constitutes “cause” under the covered employee’s
employment agreement. In the event the Board determines that a recoverable event has occurred, the Compensation
Committee, in its sole discretion, may recover from the covered employee any or all Incentive Compensation granted to,
paid or payable to, or received or realized by, the covered employee during (i) the twelve month period following the
date of the first public disclosure of the financial document embodying the financial reporting requirement with respect
to which we were required to restate, or (ii) the twelve month period following the initial occurrence of conduct
constituting “cause.”
The Company intends to update the Compensation Recovery Policy from time to time as may be required by
applicable law, including any rules that may be promulgated under the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
Timing of equity compensation awards. Annual long-term equity incentive awards are granted as part of our
annual compensation review. In addition, the Compensation Committee approves equity grants in the case of new hires,
promotions and supplemental or other grants with respect to our named executive officers and certain other senior
positions over which the Compensation Committee has oversight. Our Board approves any grant of equity awards with
regard to our Chief Executive Officer and our second-highest paid executive. The effective date of such grants is the date
approved by the Compensation Committee or, in the case of our Chief Executive Officer and second-highest paid
executive, the date approved by the Board.
Delegated authority to grant certain equity awards. The Compensation Committee has delegated authority to
the Chief Executive Officer to grant certain equity awards in certain circumstances, including but not limited to, in
connection with new hires and promoted employees at the director level and above who are not within the oversight
authority of the Compensation Committee. The Chief Executive Officer’s delegated authority generally has a maximum
share pool of 300,000 which can be replenished in whole or in part from time to time by the Compensation Committee.
However, the terms of the Merger Agreement restrict the Compensation Committee’s ability to replenish this pool after
July 2, 2015, at which time the number of available shares under the pool was 87,999. New hire grants are generally
effective on the date of hire. However, if the grant has not been approved by the Chief Executive Officer prior to the hire
or promotion date, the grant will be effective on the date such grant is approved.
Equity ownership guidelines. The Compensation Committee believes that the personal financial interests of our
executives should be directly aligned with those of our stockholders. Toward that end, the Compensation Committee
introduced share ownership guidelines for executives in 2002. The guidelines currently require that our Chief Executive
Officer own qualifying shareholdings equal in value to five times his annual base salary. Other executives are required to
own between one and three times their annual base salary in qualifying shareholdings depending on their level.
The Compensation Committee reviews our executive stock ownership guidelines from time to time, including to
determine if they are consistent with market practices. Our executive stock ownership guidelines currently require that
certain executive officers, including the named executive officers, hold 75% of all “net settled shares” received from the
vesting, delivery or exercise of equity awards granted under our equity award plans until the total value of all qualifying
shareholdings held equals or exceeds the executive officer’s applicable ownership threshold, as set forth in the table