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.
August 5th, 2010 at 7:13 pm
Since we’re disscussing the benefits of Aflac’s Ethics in Action: Pay for Performance—Keep Stakeholders Informed | Ethisphereâ„¢ Institute, Well we knew our car insurance premium were always on the up but the results of the latest Insurance Premium Index reveal that rates have actually reached an all time high.
August 5th, 2010 at 8:49 am
Since we are discussing Aflac’s Ethics in Action: Pay for Performance—Keep Stakeholders Informed | Ethisphereâ„¢ Institute, When a life insurance policy is in force for a number of years (normally a minimum of three years) it would acquire a cash value. The cash value is the “savings” portion of a life policy. It is derived when your premium payments are more than the cost of insurance, whereby the excess goes into a cash value account and draws interest.
July 28th, 2010 at 8:07 am
Aflac made billions off sweat of 1099ers – what do they get- NO court system for small biz—> Arbitration Fairness Act of 2009 — NOW! Small biz owners have no protection? NO 7th Amendment for 1099ers !
July 3rd, 2010 at 8:01 pm
My response will be to take Mr. Amos’s statement and Mr. Munck’s response in tandem.
First, Mr. Amos’s point requires commendation. There are some executives with an attitude of entitlement and clear disinterest in being subject to the judgments of any circle which might contravene their views of their bonuses due. There are any number we might name whose rewards far outstrip their intrinsic value. On the other hand, there also is in play during any “open” discussion a very powerful potential adverse impact for the one, two, or more who would suggest that the “first motion” for a bump, sometimes an ally who is a “plant,” ought not to be “seconded.” This is a reality that can haunt even the best bullet pointed, fact-based contrary opinion.
Second, Mr. Munck’s point, if perhaps a little pointed (!), also has validity. For example, in any sales production force–and now we think about the derivatives and other instruments markets–pressure to rack up “performance sales” often, quite often, can hide an entire series of self-interested representations, failure to listen to customer data that might, from an ethical point of view, lead to alternative suggestions than sale, including delay. Therefore, to link pay to performance often can produce a concatenation of methods, closings, and manipulation of data, to lead to the annual private goal–the third home or sporty new Mercedes, to replace the one two years old.
Nevertheless, when Mr. Amos’s point is tied strongly to top-down executive ethics that instructs against profits at any cost, and when Mr. Munck’s point also is tempered with an affirmation for executives even willing to discuss objective means of restraints for packages clearly improper–and harmful to team and organizational unity–then we can see how both are needed at this time. JDW
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June 28th, 2010 at 10:33 pm
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March 26th, 2010 at 5:25 am
Sir,
I am sure that Aflac is worthy of its ethical ranking yet the Pay for Performance policy surely provides an inducement for unethical conduct to boost personal revenue. This conflict is not unique to Aflac.
Remunerating as a percentage of revenue raised does encourage revenue performance but what safe guard is there against unethical behavior to this end.
Accepting that your agents genuinely want to help customers benefit from your products, the value of sales they generate should be irrelevant to them. In my submission the ethical remuneration policy is to pay a set figure for the number of hours worked or other relevant benchmark, in performance of a job of work. Their reward will be what they have agreed is fair compensation for their effort and if their foregoing testamonials are to be believed, the ever increasing numbers of grateful customers will be their further personal, though non financial, reward. This avoids ethical dilemmas in the sales context at least.
Profitability will improve as overheads fall. Investors win and the reputation and value of stock rises. This has a cumulative effect in terms of Brand value and reputation and is guaranteed to keep Aflac high into the ethical rankings.
If you maintain a Pay for Performance policy, then what post sales policies are in place to review each sale to determine that it is indeed ethical. Every sale is capable of being objectively measured for its ethicality. This assessment must be independent of revenue bias either for the individual or the company. I can expand on these matters if you want to explore them.
Overall, my intention is not to criticize your article and claims. Rather I have a simple question: Do you want Aflac (and yourselves) to be ethical or just to appear to be ethical?
Respectfully,
April 16th, 2009 at 8:10 am
The business model that Aflac stands by and my core belief in integrity, honor and character, has made my decision to partner as an independent agent with Aflac one of the most rewarding moves in my career. To provide actual real life solutions to people when they need it most.
If anyone would further like to discuss the way this model of doing business as well as a way of living, I would be honored to further educate myself and help spread this right course to the future.
John P. Stewart
April 14th, 2009 at 7:06 am
As an independent agent representing Aflac, it is a joy to provide people policies from a company that I know from experience makes good on its promises and quickly and freely pays policyholders the money they are due. Dan Amos and the other Aflac officers do what ALL corporate management: set the ethical standards for all in the company.