You may know it as the company with the famous duck commercials, but AFLAC has been making headlines for another reason. The CEO of the giant insurance company recently announced AFLAC would become the first company in the nation to let its shareholders vote up or down on the pay packages of its top executives. The announcement comes as public outrage over excessive CEO pay has reached a boiling point, particularly after revelations earlier this month that Home Depot CEO Bob Nardelli collected a $210 million exit check after being fired for poor performance.
Our Business Correspondent Betsy Stark spoke to AFLAC CEO Dan Amos about this and other issues in an exclusive interview for ABCnews.com. Here are her Ten Questions for Dan Amos.
1. You made headlines recently saying you would let AFLAC shareholders cast a vote on executive pay. Why did you do that?
We had a proposal and it was brought about by Boston Common Group (a large institutional shareholder) ...to vote on executive compensation. I took it to our board.... I interviewed some of our large shareholders, both individuals and institutions, and after studying all the issues...we made a decision that since the shareholders wanted it, I felt like we should go ahead and do it.
2. Were you influenced at all by some of the stories that have been in the news about CEO's who have walked away with excessive pay packages and led their companies poorly?
Well, you know, the only person that really influenced me are the shareholders themselves... I think it came to the forefront with a lot of people because of compensation issues at other companies. But I think ultimately that's the way I have to look at things.
3. But are you personally offended by those kinds of stories, of CEO's who lead poorly and leave richly? Does this violate your own personal code of what's moral or fair?
All I can tell you is that the way it works at AFLAC is that it's pay for performance. In fact, it could never happen at AFLAC, you could never have terrible years of performance and walk away with a lot of money.
4. Is extravagant pay OK if extravagant profits come with it? I mean, Lee Raymond (the former CEO of Exxon Mobil) retired with a $357 million pay package but he also on his watch led his company to record profits.
Well, I think that in every area that you deal with, whether it be a janitor or a celebrity or a baseball star or a CEO, I think it goes back to what the job is worth. What is the standard that is out there? What does it take to hire that person or to keep that person and that ultimately is market driven.
5. I hear you making two arguments. One is, what the position is worth. The other is, what the market will bear.
Well, I think it's both...I can give you an example. The South is famous for its college football and the University of Alabama coach just became the highest paid NCC coach....well, I can tell you right now the salaries and bonuses of all the other NCC coaches is going up because they don't want to lose their coach to somewhere else and they're going to hold him. I don't know what the position is worth, I just simply know it's a supply and demand issue.
6. The vote the shareholders cast is going to be non-binding. Does that mean that this is really just a symbolic gesture on your part? Oh, no. If the majority of shareholders said, if they gave a down vote to CEO compensation, I would go back to our shareholders --both the large individual shares and the institutions--and say, you know, what is it you don't like and have our compensation committee involved with all that and find out and then make change accordingly.
7. What was your total compensation in 2006?
It hasn't been released yet.
(note: In 2005 Amos earned $1.2 million in salary; $2.5 million in bonus, and $2.5 million in restricted stock.)
8. What do you say to those who say, OK, I admire what you're doing, but if you really want to put your money where your mouth is, how about making it a binding vote?
Well, they (the shareholders) can't manage the company. What they've got to do is give us their input. The management of the company has to be by the management, and the Board of Directors has to manage the management. Otherwise, why have the Board?
9. AFLAC has also been in the news for another reason. After being associated with one of the most memorable advertising campaigns of all time, you are switching course? I think a lot of people would like to know : is the duck history?
Oh, no! We put out a press release (Wednesday) entitled 'Long Live the Duck.' It was a mistake, a misquote, and nothing could be further from the truth... I've got my duck tie on right now. And that duck's going to be around for a long time because it's working, it's effective.
10. It's political season already. Is there an issue you most hope will come to the fore in this presidential campaign?
You know, 75 percent of our earnings come from Japan. We insure one out of four households there. And I spend so much time worrying about the politics in Japan, much more so than the politics in the United States.