By // Dan Amos
Disclaimer: The opinions and viewpoints expressed in this article are those of the author and do not necessarily reflect the opinions or viewpoints of the management or editors of Ethisphere.
These are challenging times for Americans and for America’s business community. Global stock volatility and headline-making economic issues have touched everyone from Wall Street to Main Street.
Aflac is no exception as we have not been immune to the uncomfortable ebbs and flows that come with unpredictable markets. While we are confident that our company has passed these tests, we realize more than ever the importance of informed stakeholders who understand our business practices. They remain our greatest assets.
Aflac routinely sets the bar high when it comes to ethics and transparency. These standards have served us well during the clearest of times, but it is in times like this, when the landscape is blurry, that we rely on the principled business foundations upon which our company was built and which have served us well for more than 50 years.
Aflac specializes in developing and marketing insurance products that give consumers the opportunity to direct cash where it is needed when a life-interrupting medical situation presents financial challenges. In essence, we sell a promise, and we rely upon the fulfillment of that promise, as do our customers. For every promise kept, we enhance our ability to reach out to potential consumers and employers. A trust broken could close those same doors, which is why we place such a high standard on keeping our stakeholders informed and our principles intact.
We are a unique company in that Aflac was founded by three brothers who were not “insurance men.” They were entrepreneurs with a dream and the determination to see it through. As the son of one of the founders, at a young age I heard repeatedly the credo, “If you take care of the employees, they will take care of the business.” Since becoming CEO in 1990, I have never forgotten that most important lesson and have expanded that sentiment to include all of our stakeholders.
Our goal is to be a profitable company, which we have been for decades. Today, our market cap is at $19.5 billion compared to $1.3 billion when I became CEO in 1990. Our stock price has produced significant returns for shareholders over the past 20 years—often exceeding the S&P 500 and the Dow. Our calling, on the other hand, is to be an ethical partner to our stakeholders—one that plays by the rules and demonstrates leadership in the arena of business ethics. Our many awards and recognitions for transparency, including those from Ethisphere, best illustrate our desire to grow our business and explore new opportunities while employing a strong ethical compass.
IF YOU TAKE CARE OF THE EMPLOYEES, THEY WILL TAKE CARE OF THE BUSINESS.
As the chief executive officer, I believe that the concept of transparency extends to me, as well as the balance of the organization. In November, I told Aflac’s board of directors that I will forgo certain elements of my compensation package related to an unexpected severance from the company. While I am not planning on leaving anytime soon, I have long felt that in the event of my departure I would not seek to implement a “golden parachute.” I would simply retire. I also do not want shareholders thinking that if they wanted to replace me they would have to pay a price for that decision. As I have said many times, Aflac is a pay-for-performance company, and the CEO is no exception.
I was taught that you have to be responsive to people, and as CEO of Aflac, that means employees, policyholders, sales associates and our shareholders. That’s why at Aflac, we set high standards for civility and ethics, and we pay for performance. In fact, every employee at Aflac, from the CEO to the chief financial officer to the call center operator, and every sales agent in our field force, is rewarded for performance. That’s why in 2006, when we received a proposal from Boston Common Asset Management—an Aflac shareholder—for a Say-on-Pay vote enabling shareholders to provide feedback about our compensation practices, we weren’t sure why the request was made. But in February 2007, our board of directors unanimously decided to adopt the proposal.
AFLAC IS A PAY-FOR-PERFORMANCE COMPANY, AND THE CEO IS NO EXCEPTION.
Holding a Say-on-Pay vote at Aflac was the appropriate thing for us to do because it clearly demonstrated our commitment to transparency. Yet throughout the fanfare of the historic vote I was repeatedly asked if I thought it should be adopted by all companies. My answer is that management should listen to their shareholders. Our shareholders own the company, and they wanted this vote to occur. I am proud to say that in the end, our compensation policies were overwhelmingly endorsed by shareholders, which I believe reflects an overall approval of how we run this company.
Aflac has consistently earned high marks for our transparent approach to investor and shareholder relations. Over and above our SEC requirements, we voluntarily disclose information including an annual 100-page financial analyst briefing book that details the inner workings of our business in the United States and Japan. To our shareholders, consumers, employees, and all stakeholders, we would rather provide more information than not enough. This has never harmed our business: In fact, I believe a strong case can be made that in the toughest of economic times, an informed stakeholder is more likely to react with prudence in the appropriate framework of having been informed.
We are proud to have been included in Ethisphere’s list of the World’s Most Ethical Companies for two years. We are uplifted to see that the Reputation Institute judged Aflac to be the most respected company in the global insurance industry in 2008. We have earned several “best places to work” honors as well. These independent validations have been inspirational, and we are equally proud to have further demonstrated that a company may increase shareholder returns at the same time it earns a desirable image as an ethical business practices leader.
Dan Amos is the Chairman & CEO of Aflac.
