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Bloomberg

Aflac's Amos Promises a ‘Fix’ If Investors Reject Pay 
By Andrew Frye
April 18 (Bloomberg) -- Aflac Inc. Chief Executive Officer Dan Amos said shareholders can expect changes to the insurer's executive compensation process if they reject his pay package in the only U.S. ``say-on-pay'' vote this year.

Results of a shareholder vote on the $14.8 million in total compensation paid to Amos last year are to be announced May 5. Amos is betting Aflac's 36 percent share surge in 2007 will sway investors in a year when stock declines and subprime losses at financial companies prompted lawmakers to investigate CEO pay.

If ``it's broke, you gotta fix it,'' Amos said yesterday in a teleconference about the ballot question. ``If the `no' vote is 51 percent or more, then we have to go back and change things.''

The worst U.S. housing slump in 25 years prompted $245 billion in losses and writedowns mostly tied to toxic mortgages. In March, a House committee questioned former CEOs Charles O. ``Chuck'' Prince of Citigroup Inc. and Stan O'Neal of Merrill Lynch & Co., and Countrywide Financial Corp. CEO Angelo Mozilo about their pay.

``Pay for failure is a big problem'' in the U.S., said Stephen Davis of the Yale School of Management's Millstein Center for Corporate Governance and Performance, in New Haven, Connecticut. In countries ``where say-on-pay exists, it has proven to be a catalyst for dialogue between boards and investors.''

Columbus, Georgia-based Aflac, the world's largest seller of supplemental health insurance, was the best performer in the 24- member KBW Insurance Index last year as net income climbed 10 percent. Amos, 56, has produced a 22 percent annual return since taking over as CEO in 1990, double the rate of the S&P 500 index, Bloomberg data show. The shares advanced 48 cents to $67.88 at 4:15 p.m. in New York Stock Exchange composite trading.

Vote Can't Change Amos's Pay
Amos, whose father helped create Aflac in 1955, doesn't risk losing any of his 2007 compensation, which rose 5 percent from $14.1 million in the previous year.

``The money's already been given to him,'' company spokeswoman Laura Kane said in an interview. The ``fix'' Amos referred to is a modification in the compensation committee's processes, she said. Amos also serves as chairman.

Executive pay as a share of U.S. corporate profits has doubled over the last 15 to 20 years, according to Rich Clayton, research director at CtW Investment Group.

Shareholders in at least 90 U.S. companies, including Citigroup, will vote on a proposal this year asking boards to adopt say-on-pay, said Robert McCormick, who oversees proxy research at Glass, Lewis & Co. in San Francisco.

A majority of Apple Inc. investors already approved a petition. A say-on-pay initiative won 37 percent of shareholder votes at Morgan Stanley, where CEO John Mack went without a bonus after recording a fourth-quarter loss.

Other Votes Coming
While Aflac investors are the only ones with a say this year, Verizon Communications Inc., Blockbuster Inc., RiskMetrics Group Inc. and Par Pharmaceutical Cos. will hold an advisory vote next year, McCormick said.

Many companies will probably resist installing say-on-pay, arguing it may make it harder to attract the best managers, Yale's Davis said.

``I don't think many will adopt it voluntarily,'' he said. ``If it's voluntary, you're going to get the good companies that say, `Sure we'll do it.' But they're not the ones who really need it.''