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Section 1: DEF 14A (DEF14A)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.   )
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12
Unum Group
(Name of Registrant as Specified In Its Charter)
 
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We are furnishing proxy materials, including this proxy statement, in connection with the solicitation of proxies on behalf of the Board of Directors, to be voted at the 2020 Annual Meeting of Shareholders of Unum Group and at any adjournment or postponement thereof. Our proxy materials are first being mailed and made available electronically to shareholders on or about April 16, 2020.
 
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A LETTER FROM OUR BOARD OF DIRECTORS

April 16, 2020
Dear Fellow Shareholder:
At Unum, our purpose is to help the working world thrive throughout life's moments. Today, 39 million employees and their families turn to Unum for their financial protection, and the $7.5 billion in benefits we paid last year helped safeguard millions of people during some of the most difficult moments of their lives. We also partner with more than 180,000 companies to protect and retain their employees and navigate today's complex leave laws.
Our commitment to serving the needs of our customers translated into another profitable year at Unum. In 2019, we delivered net income of $5.24 per share and our 14th consecutive year of growth in after-tax adjusted operating earnings per share based on revenue of $12 billion. In the process, we generated significant capital for our core businesses, returned nearly $630 million to our investors and saw shareholder equity grow. These accomplishments have positioned the company well to invest in our long-term success.
Unum is committed to reaching more people with our valuable coverage. Over the last few years, we’ve invested to expand our product offerings and geographic footprint. In the U.S., our dental and vision expansion is deepening our relationships with existing clients and opening doors with new customers. In Europe, we're growing our voluntary business in the U.K. through our new consumer-focused Benni platform and expanding into the Polish market. We continue to make investments in technology and people to enhance the experience for our customers.
We also took the important step earlier this year to appoint a chief operating officer (COO) for the enterprise to help us better navigate the opportunities ahead. Our goal with the COO role is to build on our significant past successes while better leveraging our knowledge and capabilities across the enterprise. We believe this and other changes will better align our resources with strategic goals and enable us to accelerate growth, improve outcomes for customers and strengthen our value proposition.
In spite of delivering consistent profitability over more than a decade, total shareholder return (TSR) lagged our peers and the broader market as we face continued negative investor perceptions surrounding the long-term care (LTC) industry and concerns about the ongoing impact of historically low interest rates on our sector. We believe this does not reflect the continued strong financial and operational performance of our core businesses or the closed LTC block. The leadership team at Unum has and will continue to actively manage our LTC business moving forward based on actuarial assumptions and LTC performance over time.
Through our continued focus on this block and our history of strong performance in our core business operations, we're confident that the market will recognize the significant value of Unum as an investment over the long term.
Like others, we also face uncertainty as the ongoing coronavirus pandemic causes significant disruption to global markets and business. As we have from the start, we continue to prioritize the health and safety of our people while ensuring we meet the heightened needs of our customers. Technology upgrades we have made over the last few years, along with our robust business continuity planning process, have allowed us to quickly adjust to the changing dynamics of the outbreak and continue delivering on our commitments.
As a Board, we're committed to representing the interests of our shareholders and driving Unum's long-term success through good corporate governance. We take a thorough approach to governance that assesses performance and risk, demands regulatory compliance, and provides oversight of compensation, investment activity and other financial matters. Additionally, we conduct a regular outreach and engagement program that ensures we receive valuable feedback from shareholders on a variety of topics.
 
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A LETTER FROM OUR BOARD OF DIRECTORS

More broadly, we - and the entire leadership team at Unum - recognize the obligations we have to all our key stakeholders, including customers, employees, suppliers, communities and shareholders, and we strive to deliver on those commitments. This focus on doing the right thing and making a difference also guides our approach to sustainability and social responsibility. We advocate for greater access to benefits because the need in our society is real. We work to make our local communities better places to live. We reduce the impact we have on our environment because it improves the quality of the world around us.
Operating with integrity and compassion is deeply embedded in our culture. Our We Are Unum principles as well as our Code of Conduct are important guides for how our employees approach their work each day. As a Board, we monitor Unum's culture through feedback from employee engagement surveys, the ethics hotline and other methods to enable us to remain true to our values. We also invest in our people - including striving for inclusion and smart succession planning throughout the organization - because our employees are the ones who deliver on our promises today and in the years ahead.
All told, 2019 was a good year for Unum. Our focus on enhancing our customer experience, improving our operating effectiveness and expanding our reach into new markets delivered strong financial results and supported the capital needs of our business. As a result, we’re confident Unum is well-positioned for the longer term.
On behalf of the 10,000 employees and entire leadership team at Unum, thank you for your continued support of our company.

 
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NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS



NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS
DATE: Thursday, May 28, 2020
TIME: 10:00 a.m. Eastern Daylight Time
VIRTUAL MEETING SITE:
The 2020 Annual Meeting of Shareholders of Unum Group (the "company") will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/UNM2020.
In light of ongoing developments related to the coronavirus (COVID-19) and after careful consideration, the Board of Directors has determined to hold a virtual-only annual meeting to facilitate shareholder attendance and participation by enabling shareholders to participate from any location and at no cost. We believe this is the right choice for the company at this time, as it enables engagement with our shareholders, regardless of size, resources or physical location, while safeguarding the health and wellbeing of our shareholders, employees, and members of the Board and management. We are committed to ensuring shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/UNM2020.
HOW TO ACCESS THE VIRTUAL MEETING:
To attend the virtual meeting, you will need the 16-digit control number included on your Notice Regarding the Internet Availability of Proxy Materials ("Notice"), proxy card, or voting instruction form. The meeting webcast will begin promptly at 10:00 a.m. Eastern Daylight Time on May 28, 2020. We encourage you to access the meeting prior to the start time. Online check-in will begin approximately 15 minutes prior to the start time, and you should allow ample time for the check-in procedures. If you encounter any difficulties accessing the virtual meeting during the check-in or during the meeting, please call the technical support number that will be posted on the virtual meeting log-in page.
WHO CAN VOTE:
Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 30, 2020, are entitled to vote at the meeting and any adjournment or postponement of the meeting.
VOTING ITEMS
Pg. #
Election of Directors         

Advisory Vote to Approve Executive Compensation

Ratification of Appointment of Independent Public Accounting Firm

Approval of the Unum Group 2020 Employee Stock Purchase Plan

Approval of the Unum European Holding Company Limited Savings-Related Share Option Scheme 2021
In addition to the voting items listed above, shareholders will transact any other business that may properly come before the meeting or any adjournment or postponement thereof. There will also be a report on the company's business.
HOW TO VOTE:
Your vote is important. We encourage you to vote your shares as soon as possible, even if you plan to attend the meeting online. By following the instructions below, you may vote via the internet, by telephone, or, if you have received a printed version of these proxy materials, by mail. You will need the 16-digit control number included on your Notice, proxy card, or voting instruction form.
Internet
www.proxyvote.com (if in advance of meeting)
Deadline: 11:59 p.m. Eastern Daylight Time, May 27, 2020

You may also vote your shares during the meeting at www.virtualshareholdermeeting.com/UNM2020.
Telephone  
1-800-690-6903 or the telephone number on your voting instruction form
Deadline: 11:59 p.m. Eastern Daylight Time,May 27, 2020
Mail
Vote Processing c/o Broadridge
51 Mercedes Way, Edgewood, NY 11717
Receipt due by close of business day on May 27, 2020
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 28, 2020: The proxy statement and annual report to shareholders are available at www.proxyvote.com.

 J. Paul Jullienne
 Vice President, Managing Counsel and Corporate Secretary
 April 16, 2020  
 
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A NOTE ABOUT NON-GAAP MEASURES

A NOTE ABOUT NON-GAAP MEASURES
In this proxy statement, we present certain measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP), which we use for purposes of setting executive compensation and evaluating our performance. Non-GAAP financial measures exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP, which are set forth below:
GAAP MEASURES ($ in millions, except per share data)
 
Year Ended December 31
 
2019
2018
2017
Net Income
$1,100.3
$523.4
$994.2
Net Income per share*
$5.24
$2.38
$4.37
Total Stockholders' Equity (book value)
$9,965.0
$8,621.8
$9,574.9
Total Stockholders' Equity (book value) per share
$49.10
$40.19
$43.02
Return on Equity
11.8%
5.8%
10.7%
* Assuming dilution
This proxy statement refers to the following non-GAAP financial measures, which we believe are helpful performance measures and indicators of revenue, profitability and underlying trends in our business:
After-tax adjusted operating income or loss, which excludes realized investment gains or losses, and certain other items, as applicable, which are discussed in “Executive Summary” in Part II Item 7 of our 2019 Annual Report on Form 10-K;
Adjusted operating return on equity, which is calculated using after-tax adjusted operating income or loss and excludes from equity the unrealized gain or loss on securities and net gain on hedges; and
Book value per common share, which is calculated excluding accumulated other comprehensive income (AOCI).
Realized investment gains or losses and unrealized gains or losses on securities and net gains on hedges depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our company. Book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, is an important measure. We also exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals. We exclude these items as we believe them to be infrequent or unusual in nature, but this exclusion is not an indication that similar items may not recur and does not replace the comparable GAAP measures in the determination of overall profitability.
For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A of this proxy statement.
 
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PROXY SUMMARY

PROXY SUMMARY
This summary is intended to highlight certain key information contained in this proxy statement that we believe will assist your review of the business items to be voted on at the 2020 Annual Meeting of Shareholders of Unum Group (the “2020 Annual Meeting”). As it is only a summary, we encourage you to review the full proxy statement, as well as our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), for more complete information about these topics.
Key Corporate Governance and Executive Compensation Items
2019 Say-on-Pay Vote and Shareholder Outreach

Our 2019 shareholder advisory vote to approve executive compensation passed with 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 71% of our outstanding shares. Consistent with prior years, our independent Board Chairman joined several meetings with shareholders. Details of 2019 feedback from our shareholders can be found on page 49.
Corporate Governance and Executive Compensation Practices
Executive Compensation Practices
Board Practices
 A pay-for-performance philosophy

 Annual say-on-pay votes

 Programs that mitigate undue risk taking in
   compensation

 Independent compensation consultant to the
   Human Capital Committee

 No golden parachute excise tax gross-ups

 Minimal perquisites

 No NEO employment agreements

 Double-trigger provisions for severance

 Restrictive covenants in our long-term
   incentive grant agreements

 Clawback provisions

 A balance of short- and long-term incentives

 Robust stock ownership and retention
   requirements

 Relevant peer groups for benchmarking
   compensation

 Robust individual performance assessments
   of executives and directors
 All directors other than the CEO are
   independent, including  theBoard Chairman

 All Board Committees fully independent

 Commitment to diversity at the Board level
   and within the enterprise

 High meeting attendance by directors
   (average attendance of 98% in 2019)

 Limits on outside board and audit committee
   service

Governance Practices
  Annual election of directors

 Majority vote requirement for directors (in
   uncontestedelections)

 Proxy access bylaws

 Shareholder right to call special meetings

 Annual, proactive shareholder engagement

 No supermajority vote requirements

 Anti-pledging and anti-hedging policies
   applicable to executives and directors

 Annual Board, committee, and individual
   director evaluations

 Regular executive sessions of independent
   directors
 
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Performance Highlights
From a financial and operating standpoint, Unum had a profitable year in 2019 as we delivered steady growth across our core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were achieved despite the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and industry concerns about long-term care policies.
Financial Highlights(1)
Below are financial highlights from 2019.
Record earnings
Unum achieved strong earnings per share and record after-tax adjusted operating earnings per share, continuing our recent history of strong financial performance. For 2019, we delivered net income of $1.10 billion and strong after-tax adjusted operating income of $1.14 billion, based on total revenue of $12 billion. Earnings per share (EPS) was $5.24 and adjusted operating EPS was at an all-time high of $5.44, the 14th consecutive year of after-tax adjusted operating EPS growth.

Return on equity
We continued to put shareholder capital to good use. Return on Equity (ROE) was 11.8% and consolidated adjusted operating ROE was 12.8%, while ROE in our core operating segments was 17.2%.

Book value
Our book value per share at the end of 2019 was up 11.2% from 2018 (excluding accumulated other comprehensive income, or AOCI). It was the 11th consecutive year of shareholder equity growth.

(1)
Operating results referenced below include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A of this proxy statement.
Operating Highlights
Unum delivered on our mission of supporting our customers in 2019. We paid approximately $7.5 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high. We're also focused on enhancing the experience of our customers through employee training, process improvements and leveraging technology.
We continue to see steady growth in our core businesses, particularly in premium income, compared with 2018 results. This growth was achieved while maintaining our pricing and risk discipline, and demonstrates that our value story continues to resonate with customers. New offerings such as our
 
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dental and vision coverage and our leave and absence management services are also driving growth and deepening relationships with our clients.
We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with a philosophy emphasizing sound risk management and credit quality.
Long-Term Care Performance
The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care (LTC) policies that we service and support, but no longer actively market. In 2009, we closed our individual LTC business, and in 2012 we closed our group LTC business. We have actively managed these closed blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Through these and other steps – including annual comprehensive reviews – we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
Following our 2018 annual review of the LTC block, we adjusted our risk assumptions and increased our LTC GAAP reserves to reflect our updated best estimate of future benefit obligations. These measures have led to greater stability and predictability in the performance of the LTC block. Just as importantly, these steps have had little impact on our capital plans and overall financial strength.
Operational Realignment
Delivering consistent long-term success in a constantly evolving employee benefits market requires us to continually challenge our approach to how we do business. In February 2020, we appointed Mr. Simonds to serve as chief operating officer (COO) for the enterprise and aligned our core business operations under this role. We believe this change allows us to sharpen our focus on growth opportunities and further enhance the experience for our customers.
This realignment will not change our current financial reporting segments.
Environmental, Social and Governance
We provide a critical financial safety net for millions of people, a fact that drives us to deliver for those who count on us. This focus on doing the right thing guides our approach to sustainability and social responsibility. Unum has a long tradition of engaging with shareholders, customers, employees, suppliers and communities on a variety of environmental, social and governance (ESG) matters.
We have taken a number of steps recently to strengthen governance and disclosure of ESG matters. This includes beginning a materiality assessment in 2019 to better understand ESG issues relevant to our organization. This work continues and is a first step in developing a strategic sustainability program with greater rigor and transparency for all our stakeholders. We also intend to release a more comprehensive report of our progress in the second quarter of 2020. This report will be available on www.unum.com.
See page 37 for more information about ESG.
 
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Capital Generation for Shareholders
Our strong statutory earnings resulted in solid capital generation in 2019, allowing us the opportunity to deploy capital in a number of ways.
We invested in our people, products and technology to drive growth.
We paid out $229.2 million in dividends, including increasing the annual dividend rate by 11.2% compared to the prior year.
We repurchased 12.3 million outstanding shares for $400.4 million.
Our credit ratings are strong and remain at our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.
Total Shareholder Return
Unum once again delivered strong financial results in our core businesses and record adjusted operating earnings per share in 2019. This continues a track record of consistent performance that spans more than a decade. However, while we delivered positive TSR for the year and improved TSR on a year-over-year basis, we trailed our peer groups due to negative investor perceptions surrounding the long-term care industry and concerns about the ongoing impact of historically low interest rates on our sector.
These returns are not indicative of the ongoing strong financial and operational performance of our core businesses. We have delivered record after-tax adjusted operating earnings per share for 14 consecutive years. Premium growth has consistently outpaced our competitors in our U.S. businesses. And we continue to see favorable trends in key indicators, such as expense management and benefit ratios.
We have also actively managed our closed LTC block over the last decade while providing added transparency to enhance shareholder understanding of the block. The need for our products and services remains strong and continues to grow, which we believe when combined with our consistent results has made Unum an excellent long-term investment. We expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value.
TOTAL SHAREHOLDER RETURN
 
1 Year
3 Year
5 Year
Unum
2.6%
(28.53)%
(5.92)%
Proxy Peer Group
31.27
25.57
50.66
S&P 500
31.49
53.17
73.86
S&P Life & Health Index
23.18
13.63
32.92
OPERATING EARNINGS PER SHARE**
(after-tax, adjusted)

CORE SEGMENT PREMIUM GROWTH
(in millions)


  **Non-GAAP measure, see Appendix A for reconciliation.
 
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2019 CEO Compensation Summary
Our approach to CEO compensation aligns directly with our overall executive compensation philosophy and structure (see page 50). Mr. McKenney's targeted total direct compensation is a combination of base pay plus short- and long-term incentives that are tied directly to performance goals. This structure supports the long-term successes of the company and the interests of our shareholders.
Mr. McKenney is subject to robust stock ownership and retention requirements, including a requirement to own six times his base salary in stock. In addition, he must hold 75% of the net shares acquired upon the vesting of performance-based restricted stock units (PBRSUs) and performance share units (PSUs) or the exercise of stock options for a period of at least three years. The combination of these requirements helps to ensure that the long-term value of his compensation directly aligns with shareholders.
For performance goals, the Board, after discussion with Mr. McKenney, annually sets:
Business and financial objectives;
Strategic objectives;
Talent management initiatives; and
Operational effectiveness and efficiency targets.
In addition to carefully reviewing a self-assessment prepared by Mr. McKenney, the Human Capital Committee and Board conduct a thorough evaluation of his performance against all objectives as well as a review of a number of professional and leadership characteristics and behaviors (discussed beginning on page 56).
For 2019, as outlined in the Performance Highlights section earlier in this Proxy Summary, the Human Capital Committee and the Board recognized that Mr. McKenney led the company to deliver steady growth and solid financial performance, drove transformation to position Unum for long-term success and effectively navigated challenges.
The Committee and the Board specifically highlighted Mr. McKenney's leadership in:
Delivering nearly 10% growth in adjusted operating earnings per share and an adjusted return on equity of almost 13%;
Maintaining strong capital generation and deployment that returned value to shareholders of $630 million;
Sharpening our long-term strategic direction by managing key senior leadership transitions, pursuing significant growth opportunities including new lines of business, and planning for the recent realignment of our business operations;
Enhancing our brand and customer experience through ongoing digital transformation, successful integration of several recent acquisitions and fostering change;
Strengthening the company's overall commitment to sustainability and social responsibility while continuing to meaningfully advance inclusion and diversity; and
Overseeing the company's ongoing efforts to actively and responsibly manage its closed block of long-term care policies.
 
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While 2019 proved to be a difficult environment with respect to investor perceptions in the industry surrounding long-term care, which continued to negatively impact our stock price, the Board has full confidence in Mr. McKenney's leadership as CEO.
2019 Compensation Decisions
The following CEO Compensation Summary table depicts how the Human Capital Committee views its decisions concerning Mr. McKenney’s compensation for 2019, relative to his 2018 awards. It differs from the Summary Compensation Table (SCT) (see page 79), which is required by the Securities and Exchange Commission, as follows:
The CEO Compensation Summary table below treats equity awards similar to how annual awards are treated in the SCT (which are based on the performance year to which the award relates). Therefore, the value of the LTI award granted in March 2020 based on performance in 2019 is shown as 2019 compensation. In contrast, the value of LTI awards in the SCT is based on the year in which the equity awards are granted. As a result, 2019 compensation in the SCT includes the value of Mr. McKenney’s LTI award granted in 2019, which was based on performance in 2018.
The SCT includes amounts reported in the “Change in Pension Value & Non-Qualified Deferred Compensation Earnings” and “All Other Compensation” columns. Although regularly monitored by the Committee, these amounts were not considered when it made annual performance-based compensation determinations for 2019 and are therefore not shown in the presentation below.
The CEO Compensation Summary table is not a substitute for the required SCT found on page 79.
CEO COMPENSATION SUMMARY
Component
2018
2019
Base Salary
$1,000,000
$1,000,000
Annual Incentive Payout
1,900,000
1,710,000
Approved LTI Grant
6,175,000
6,370,000
Annual Compensation
$  9,075,000
$  9,080,000
2019 Compensation Decisions
Annual Incentive
Mr. McKenney's 2019 annual incentive payout of $1,710,000 was calculated by applying the company performance achievement under the plan formula (90% for 2019; see page 61) and Mr. McKenney’s individual performance factor (95% for 2019; see page 66).
Although stock price is not a direct criterion for assessing the CEO’s performance, the Committee considered the impact on TSR while weighing Mr. McKenney’s individual achievements and overall performance of the company (see page 66). While the stock price declined in 2019, TSR was positive and improving year-over-year, and the Committee believes that continued active management of our LTC block along with the strong performance of our core businesses will, over time, drive investor perceptions and long-term shareholder value. Given this, and its view that the company is positioned for long-term success, the Committee awarded Mr. McKenney an individual performance percentage of 95%
 
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for his 2019 annual incentive, which resulted in an actual award of $1,710,000. This is a reduction of $190,000 from his 2018 payout.
Long-Term Incentive
For 2019, 70% of Mr. McKenney's pay is in the form of long-term equity incentives (delivered through PBRSUs and PSUs), the value of which is based on the company’s stock price and, for his PSU achievement, is further modified by relative TSR. Given his performance in 2019 as well as the company’s financial performance and other considerations outlined above, the Committee awarded Mr. McKenney an individual performance percentage of 98% for his long-term incentive award granted in March 2020, which resulted in an award of $6,370,000 for 2019 performance. This is an increase of $195,000 over his 2019 award granted for 2018 performance.
The total of Mr. McKenney's annual and long-term incentives for 2019 performance were $8,080,000, an increase of $5,000 from his awards for 2018. This increase was driven by his long-term incentive award, 50% of which includes prospective three-year goals, modified by relative TSR.
The design of our long-term incentive program serves to align the interests of management and shareholders. For example, this impact can be seen in the vesting of Mr. McKenney's historical PSU awards, which are not only valued at the company's lower stock price but also modified based on relative TSR (up to +/- 20%). The table below illustrates how the TSR modifier reduced the number of shares he earned following the vesting of his 2017 PSU award for the performance period ending December 31, 2019 (see additional details on page 64).
PERFORMANCE IMPACT ON 2017-2019 PSU AWARDS
 
Value of Shares
as of 2/25/20(1)
Executive
Target
Share Grant
 
Operating
Performance
Factor
 
Adjusted
Shares
 
TSR
Modifier
 
Earned
Shares
Adjusted
Shares
Earned
Shares
CEO
59,889
x
109%
=
65,279
x
80%
=
52,223
$1,671,142
$1,336,909
(1)
The PSUs achievement was certified by the Human Capital Committee on February 25, 2020. The shares were valued based on the closing stock price of $25.60.
2020 Compensation
As previously disclosed, the Committee has a practice of positioning our executives' pay below median pay of external peers as they are promoted into a role and making adjustments to full competitive norms as performance and experience in the job grows. Mr. McKenney was promoted to President of the company in April 2015 and subsequently promoted to CEO the following month.
In February 2020, the Committee with its consultant, Pay Governance LLC, reviewed Mr. McKenney's total targeted compensation relative to proxy peers and determined that his pay was 17% below median. After considering his experience, his performance in the CEO role, and the leadership that he has shown during the last five years, the Committee decided to make the following adjustments:
Mr. McKenney received a $50,000 (5%) increase to base salary in 2020. This is the first increase since March 2016.
 
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The Committee increased Mr. McKenney’s target annual incentive opportunity from 200% to 210% of his base salary. The last time his annual incentive target was adjusted was in 2018.
The Committee also increased Mr. McKenney’s long-term incentive target opportunity from $6.5 million to $7.0 million. The last time his long-term incentive target was adjusted was in 2018.
These decisions reflect Mr. McKenney's steady leadership and strategic positioning of the company. Even with these adjustments, Mr. McKenney's targeted total direct compensation continues to be below the median of our proxy peer group.
 
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Voting Matters
Voting Item
Board's Recommendation
Page Reference:
Item 1: Election of Directors
FOR each nominee
Eleven director nominees are standing for election this year, each for a one-year term expiring at the 2021 Annual Meeting and until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal from office. The Board and the Governance Committee believe each director nominee possesses the necessary skills and qualifications to provide effective oversight of the business. The director nominees are:
Director Nominee
Director Since
Independent
Current Committees
Theodore H. Bunting, Jr.
2013
Human Capital
Regulatory Compliance (Chair)
Susan L. Cross
2019
Audit
Risk and Finance
Susan D. DeVore
2018
Audit
Risk and Finance
Joseph J. Echevarria
2016
Governance
Risk and Finance (Chair)
Cynthia L. Egan
2014
Human Capital (Chair)
Regulatory Compliance
Kevin T. Kabat, Board Chairman
2008
Governance
Human Capital
Timothy F. Keaney
2012
Audit (Chair)
Risk and Finance
Gloria C. Larson
2004
Governance (Chair)
Regulatory Compliance
​Richard P. McKenney, President and CEO
2015
Ronald P. O'Hanley
2015
Governance
Human Capital
Francis J. Shammo
2015
Audit
Regulatory Compliance
Item 2: Advisory Vote to Approve Executive Compensation
FOR
We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. Although non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when making future compensation decisions.
Item 3: Ratification of Appointment of Independent Registered Public Accounting Firm
FOR
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for 2020, and shareholders are being asked to ratify the appointment.
Item 4: Approval of the Unum Group 2020 Employee Stock Purchase Plan
FOR
The Human Capital Committee has adopted the Unum Group 2020 Employee Stock Purchase Plan, and the shareholders are being asked to approve the plan. The plan would provide employees of Unum Group and its subsidiaries with an opportunity to share in the ownership of the Company by providing them with a convenient means for regular and systematic purchases of shares of the Company’s common stock, par value $0.10 per share, at a discount to market prices.
Item 5: Approval of the Unum European Holding Company Limited Savings-Related Share Option Scheme 2021
FOR
The Human Capital Committee has adopted the Unum European Holding Company Limited Savings-Related Share Option Scheme 2021, and the shareholders are being asked to approve the plan. The plan would enable our eligible employees in the U.K. to purchase shares of our common stock at a 10% discounted price, similar to the Unum Group 2020 Employee Stock Purchase Plan for U.S. employees.
 
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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE
Board Overview
The Board of Directors is elected by shareholders to oversee management and ensure the long-term interests of shareholders are being served. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, performance, ethics, risk tolerance, human capital engagement, and culture, as well as important issues that it faces. These discussions take place with management and with appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.
Board Composition and Refreshment
The Board believes a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to draw upon. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee periodically reviews the composition of the Board to ensure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.
The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons such as evolving needs for Board composition or directors' availability to make sufficient contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected these refreshment practices will continue in the future.
Since the beginning of 2015, we have experienced a healthy level of Board refreshment, with six new directors joining the Board and seven retiring. While some companies have tenure limits on Board service, we believe our balanced approach delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.
 
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CORPORATE GOVERNANCE

Board Qualifications
The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with both our short- and long-term business strategies. These qualifications and attributes are evaluated on an annual basis to determine they continue to serve the best interests of the company. The table below summarizes the qualifications and attributes that are important to Unum and addresses how the composition of our Board, as a whole, meets these needs.
Qualifications
and Attributes
Relevance to Unum
Board Composition(1)
Accounting/Auditing
We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls.

Business Operations
We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions.

Capital Management
We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders.

Corporate Governance/ESG
As a public company and responsible corporate citizen, we expect effective oversight and transparency, and our stakeholders demand it.

Financial Expertise/Literacy
Our business involves complex financial transactions and reporting requirements.

Independence
Independent directors have no material relationships with us and are essential in providing unbiased oversight.

Industry Experience
Experience in the insurance and financial services industry provides a relevant understanding of our business, strategy, and marketplace dynamics.


International
With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges.

Investment Markets
We manage a large and long-term investment portfolio to uphold our promises to pay the future claims of our policyholders.

Recent Public Board Experience
We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies.

Public Company Executive Experience
Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity.

Regulatory/Risk Management
A complex regulatory and risk environment requires us to develop policies and procedures that effectively manage compliance and risk.

Technology/Digital Transformation
We rely on technology to manage customer data, deliver products and services to the market, pay claims, and enhance the customer experience.


(1)
Director nominees only.
 
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CORPORATE GOVERNANCE

Board Tenure
Directors with varied tenure contribute to a range of perspectives and allow us to transition knowledge and experience from longer-serving members to those newer to our Board. We have a mix of new and long-standing directors, with our 11 director nominees averaging 6.4 years of service on our Board as of the 2020 Annual Meeting.
Board Diversity
Our directors represent a range of backgrounds and overall experience. More than half are women or represent a diverse group, which places Unum's Board among the top of our industry in gender and racial/ethnic diversity.
Although the Board does not have a specific diversity policy, it recognizes diverse representation on the Board, including in positions of leadership, serves to improve dialogue, decision-making, and culture in the boardroom. In recent years, our Governance Committee has focused on advancing continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals, including women, who meet the recruitment criteria. From the candidate pools, our Governance Committee selects our director candidates based on their qualifications and attributes as addressed below. Our director nominees range from 51 to 70 years of age, with the average age being 61.2 years, as of the 2020 Annual Meeting.

 
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CORPORATE GOVERNANCE

Board Evaluation Process
A healthy and vigorous Board evaluation process is an essential part of good corporate governance. A thorough evaluation process helps us achieve the right balance of perspectives, experiences and skill sets needed for prudent oversight of the company, including execution on corporate strategy, while also considering the best interests of our shareholders. At Unum, this evaluation process includes annual evaluations of the Board, each committee, and individual directors.
The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or improvement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.
This past year, the evaluation process was conducted in two phases. The first phase focused on the evaluation of the effectiveness of each committee and the Board as a whole. Directors completed questionnaires evaluating the full Board and each committee they served on with topics including culture, composition, structure and engagement. During this process, Board members provided feedback regarding corporate strategy, business resiliency programs, Board composition and structure, succession plans, future agenda items, meeting materials and director education. The second phase involved interviewing individual directors to collect feedback on peer directors' performance. This phase was led by the Governance Committee Chair in advance and in anticipation of the nomination process, with key messages delivered to each director. This two-phased approach generated robust discussions at all levels of the Board, and resulted in changes that have improved Board efficiency and effectiveness. For example, in recent years, these discussions have led to enhancements to Board diversity, meeting materials, director on-boarding, executive sessions, and Board member engagement.

 
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CORPORATE GOVERNANCE

Process for Selecting and Nominating Directors
Director Nominee and Selection
The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. In recent years, the Committee has engaged a third-party search firm to assist with recruitment efforts. During these times, the firm has been asked to identify candidates who meet the criteria of our search, provide requested background and other relevant information regarding candidates, and coordinate arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders.
Shareholders may recommend director candidates for consideration by the Governance Committee by providing the same information that would be required to nominate a director candidate. Submissions must be made in writing to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402. The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.
Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:
Reputation for high ethical conduct, integrity, sound judgment, and accountability;
Current knowledge and experience in one or more key areas identified in the corporate governance guidelines;
Ability to commit sufficient time to the Board and its committees;
Collegial effectiveness; and
Diversity, whether in viewpoints, gender, ethnic background, age, professional experience or other demographics.
The core qualifications and attributes sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of qualifications and attributes currently represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.
In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to serve; past attendance at meetings; contributions to the Board and committees on which the director serves; the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing composition; and the results of the most recent Board, committee and individual director evaluations.
 
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CORPORATE GOVERNANCE

Annual Election of Directors
Directors are elected each year at the Annual Meeting, to hold office until the next Annual Meeting and until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of 72, there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.
Majority Voting Standard
Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an “uncontested election”), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted “for” a nominee must exceed the number voted “against” that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
 
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INFORMATION ABOUT THE BOARD OF DIRECTORS

INFORMATION ABOUT THE BOARD OF DIRECTORS
Below are brief biographies for each of our current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.
Director Nominees
 

Director since 2013
Age at Annual
Meeting 61

Independent Director

Committees
 Human Capital
 Regulatory
    Compliance
    (chair)
Theodore H. Bunting, Jr.
 
Mr. Bunting retired as the Group President, Utility Operations of Entergy Corporation, an integrated energy company, and previously served as Senior Vice President and Chief Accounting Officer for Entergy. He has extensive financial, accounting and operational experience as a senior executive with a public company in a regulated industry. Mr. Bunting is a director at another publicly traded company and is also a certified public accountant.
 
Career Experience
Qualifications
Entergy Corporation
 Group President, Utility Operations
  (2012-2017)
 Senior Vice President and Chief 
      Accounting
Officer (2007-2012)
 Numerous executive roles with Entergy,
      which
he joined in 1983
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
 
 
Public Company Board Experience
NiSource Inc., since 2018
 
 

Director since 2019
Age at Annual
Meeting 60

Independent Director

Committees
 Audit
 Risk and Finance
Susan L. Cross
 
Ms. Cross is the former Executive Vice President and Global Chief Actuary of XL Group Ltd (now AXA XL), a global insurance and reinsurance company. She previously held various chief actuarial positions for operational segments of XL. Ms. Cross brings more than three decades of financial, actuarial, insurance and risk experience as a senior executive with an international company in a regulated industry. She also qualifies as an audit committee financial expert under SEC regulations.
 
Career Experience
Qualifications
XL Group Ltd.
 Executive Vice President and Global
  Chief Actuary (2008-2018)
 Senior Vice President and Chief Actuary,
  XL Group (2006-2008)
  XL Reinsurance (2000-2006)
  XL America (1999-2000)
Significant consulting experience
with Willis Towers Watson in the U.S.
     and
Bermuda
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Industry Experience
International
Public Company Executive Experience
Regulatory/Risk Management
 
 
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Director since 2018
Age at Annual
Meeting 61

Independent Director

Committee
 Audit
 Risk and Finance
Susan D. DeVore
 
 
Ms. DeVore has served as the Chief Executive Officer of Premier, Inc., a leading health care improvement company, since its initial public offering in 2013. She previously served as President of Premier from 2013 to April 2019, and before that served as President and Chief Executive Officer for its predecessor company, Premier Healthcare Solutions, Inc. She also previously served as the Chief Operating Officer for a number of affiliated Premier entities. Prior to joining Premier, Ms. DeVore had two decades of finance, strategy and health care consulting experience. She also qualifies as an audit committee financial expert under SEC regulations.
 
Career Experience
Qualifications
Premier, Inc.
 CEO (since 2013)
 President (2013-April 2019)
Premier Healthcare Solutions, Inc.
 President and CEO (2009-2013)
 COO (2006-2009)
Significant consulting experience
 with Ernst & Young LLP, including
 service as a
Partner, Executive
 Committee member and
Senior
 Healthcare Industry
Management
Practice Leader
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation
 
Public Company Board Experience
Premier, Inc., since 2013
 
 

Director since 2016
Age at Annual
Meeting 63

Independent Director

Committees
 Governance
 Risk and Finance
  (chair)
Joseph J. Echevarria
 
Mr. Echevarria retired as the Chief Executive Officer of Deloitte LLP, a global provider of professional services, prior to which he served in increasingly senior leadership positions with Deloitte. He brings to the Board significant experience in finance, accounting, global operations, executive management and corporate governance. Mr. Echevarria has experience as a director at other publicly traded companies and is also a certified public accountant.
 
Career Experience
Qualifications
Deloitte LLP
 CEO (2011-2014)
 Various executive positions during
  his 36 years with the company
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Regulatory/Risk Management
Public Company Board Experience
Xerox, since 2017
Bank of New York Mellon Corporation,
 since 2015 (Non-Executive Chairman
 since September 2019)
Pfizer, since 2015
 
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INFORMATION ABOUT THE BOARD OF DIRECTORS

 


Director since 2014
Age at Annual
Meeting 64

Independent Director

Committees
  Human Capital
     (Chair)
 Regulatory  
     Compliance
Cynthia L. Egan
 
 
Ms. Egan retired as the President of T. Rowe Price Retirement Plan Services, Inc., a subsidiary of the global investment management firm T. Row Price Group, Inc. Prior to her work at T. Rowe Price, she held various executive positions at Fidelity Investments. She has significant operational experience in delivering complex financial products and services on a large scale, as well as experience in using technology to lead businesses through growth and operational transitions. Ms. Egan is and has been a director at other publicly traded companies.
 
Career Experience
Qualifications
U.S. Department of the Treasury
Senior Advisor on the development of a
    Treasury-sponsored
retirement 
     savings program
(2014-2015)
T. Rowe Price Retirement Plan  Services, Inc.
 President (2007-2012)
Fidelity Investments
 Various leadership and executive
     positions, including
President of the  
     Fidelity Charitable Gift Fund
   
     (1989-2007)
Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation
Public Company Board Experience
BlackRock Fixed Income Funds,
 since 2016

The Hanover Insurance Group, Inc.,
 since 2015

Envestnet, Inc. (2013-2016)
 

Director since 2008
Age at Annual
Meeting 63

Independent Director

Chairman of the Board of Directors

Committees
 Governance
 Human Capital
Kevin T. Kabat
 
Mr. Kabat is the Chairman of Unum’s Board of Directors, and the retired Chief Executive Officer and Vice Chairman of Fifth Third Bancorp, a diversified financial services company. He also served in numerous executive positions with Fifth Third. He has executive leadership experience, extensive financial, operating and strategic planning expertise and understands the importance of risk management and the challenges of managing a business in a highly regulated industry. Mr. Kabat also has experience serving on boards of publicly traded companies.
 
Career Experience
Qualifications
Fifth Third Bancorp
 CEO (2007-2015)
 President (2006-2012)
 Other executive roles, including with
    predecessor companies
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
 
Public Company Board Experience
E*TRADE Financial Corporation,
since 2016
(Lead Independent Director
since 2016)
​NiSource Inc., since 2015 (Chairman
 since May 2019)

Fifth Third Bancorp (2007-2016,
 including Executive
Chairman from
     2008-2010 and
Executive Vice 
     Chairman
from 2012-2016)
 
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Director since 2012
Age at Annual
Meeting 58

Independent Director

Committees
 Audit (chair)
 Risk and Finance
Timothy F. Keaney
 
Mr. Keaney retired as the Vice Chairman of the Bank of New York Mellon Corporation (BNY Mellon), a global investments company, prior to which he held various executive positions within the organization. He possesses significant operational, investment and financial experience with a public company in a highly regulated industry, including lengthy periods of executive leadership service in the U.K. Mr. Keaney is considered an audit committee financial expert under SEC regulations.
 
Career Experience
Qualifications
The Bank of New York Mellon
Corporation
 Vice Chairman (2010-2014)
 CEO, Investment Services (2013-2014)
 CEO and co-CEO, Asset Servicing
 (2007-2012)
Other executive roles
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management
 
 

Director since 2004
Age at Annual
Meeting 70

Independent Director

Committees
 Governance (chair)
 Regulatory
 Compliance
Gloria C. Larson
 
Ms. Larson retired as the President of Bentley University, one of the leading business schools in the U.S. Prior to her tenure at Bentley, she held numerous leadership positions in the legal, public policy and business fields. She possesses extensive experience in public service and regulatory issues, corporate governance and advising clients in the course of practicing law. Ms. Larson also has experience serving on boards of publicly traded companies.
 
Career Experience
Qualifications
Harvard University Graduate School of Education
 President in Residence (2018-2019)
Bentley University
 President (2007-2018)
Foley Hoag LLP
 Law firm partner and Co-Chair of
     Governmental
Practices Group
Other leadership positions with the
 Commonwealth of
Massachusetts
 (Secretary of Economic
Affairs) and the
 Federal
Trade Commission (Deputy
 Director of
Consumer Protection)
Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Other Public Company Board Experience
Regulatory/Risk Management
 
 
Public Company Board Experience
Boston Private Financial Holdings, Inc.,
 since 2015
 
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INFORMATION ABOUT THE BOARD OF DIRECTORS

 

Director since 2015
Age at Annual
Meeting 51

Director

President and CEO
Richard P. McKenney
 
Mr. McKenney is the President and Chief Executive Officer of Unum, previously having served as Executive Vice President and Chief Financial Officer. He has significant executive management, financial and insurance industry experience through his prior service as CFO of Unum and other public insurance companies, and through his current service as CEO. He has an intimate knowledge of all aspects of our business and industry, including operational, risk management and public policy, and close working relationships with senior management. Mr. McKenney also has experience serving on boards of publicly traded companies.
 
Career Experience
Qualifications
Unum Group
 President and CEO (since 2015)
 Chief Financial Officer (2009-2015)
Sun Life Financial, Inc.
 Executive Vice President and Chief
 Financial Officer
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Public Company Board Experience
U.S. Bancorp, since 2017
 

Director since 2015 Age at Annual
Meeting 63

Independent Director

Committees
 Governance
 Human Capital
Ronald P. O'Hanley
 
Mr. O’Hanley is the Chairman, President and Chief Executive Officer of State Street Corporation, a provider of financial services to institutional investors worldwide, having previously served as the President and Chief Operating Officer. Prior to that he served as the President and CEO of State Street Global Advisors, the investment management arm of State Street Corporation. He has deep executive management and operational experience within the financial services industry, both domestically and internationally, as well as experience leading investment, financial and risk functions at large, global organizations.
 
Career Experience
Qualifications
State Street Corporation
   Chairman, since 2020; President and
 CEO
, since 2019 President and COO
 (2017-2018)
Vice Chairman (during
 2017)
President and CEO, State Street
 Global Advisors (2015-2017)

Fidelity Investments
   President of Asset Management and
     Corporate Services, and
member of
     Executive
Committee (2010-2014)
Other senior leadership positions with
 The Bank of New
York Mellon
     Corporation
and McKinsey &
     Company, Inc.
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Public Company Board Experience
State Street Corporation, since 2019, Chairman since 2020
 
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Director since 2015
Age at Annual
Meeting 59

Independent Director

Committees
 Audit
 Regulatory
 Compliance
Francis J. Shammo
 
Mr. Shammo joined private equity firm Stonepeak Infrastructure Partners as a consultant in 2019. He retired in 2016 as Executive Vice President and Chief Financial Officer of Verizon Communications, Inc., a leading communications provider, prior to which he held increasingly senior leadership positions. He has significant executive management, financial, operational and risk management experience in the technology-heavy telecommunications industry, and has led business units with responsibility for sales, marketing and customer service for customers worldwide. He is also a certified public accountant and qualifies as an audit committee financial expert under SEC regulations.
 
Career Experience
Qualifications
Stonepeak Infrastructure Partners
Consultant since 2019
Verizon Communications, Inc.
EVP and CFO (2010-2016)
President and CEO, Verizon Telecom
 and
Business (2010) President –
 Wireline (2009-2010)
Other executive
 positions with
Verizon and its
 predecessor,
which he joined in 1989
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation
Public Company Board Experience
Avis Budget Group, since 2018
 
 
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INFORMATION ABOUT THE BOARD OF DIRECTORS

Summary of Director Qualifications and Experience
This table provides a summary view of the qualifications and attributes of each director nominee.

*Tenure and age calculated as of the 2020 Annual Meeting.
 
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Director Independence
Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines.
The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (i.e., where the other business obtains insurance policies from us or we receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal year or in which the director's interest arose only from his or her position as a director of the other business. In addition, each of Ms. DeVore, Ms. Larson and Mr. O'Hanley, or one their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionary matching contributions) of less than $120,000 in any one fiscal year.
Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined Mr. Bunting, Ms. Cross, Ms. DeVore, Mr. Echevarria, Ms. Egan, Mr. Kabat, Mr. Keaney, Ms. Larson, Mr. O’Hanley and Mr. Shammo are independent directors, and that Mr. Caulfield was an independent director prior to retiring from the Board in 2019.
Mr. McKenney, our President and CEO, is not an independent director.
Director Compensation
The Human Capital Committee (the “Committee”) reviews our non-employee director compensation annually and makes recommendations for any adjustments to the Board as appropriate.
Benchmarking
With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation.
Our non-employee director compensation is compared to that of companies in two groups: (1) the Proxy Peer Group described beginning on page 52 of this proxy statement; and (2) a general industry sample, which consisted of 139 companies for the Committee review held in December 2018. The Committee believes the companies in the general industry sample provide appropriate comparisons given that their market capitalizations and revenues are well aligned with those of the company (data below as of December 2017):
Market capitalizations ranging from $5.9 billion at the 25th percentile to $16.9 billion at the 75th percentile (compared to Unum market capitalization of $12.3 billion); and
 
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Revenues ranging from $4.3 billion at the 25th percentile to $12 billion at the 75th percentile (compared to Unum revenues of $11.3 billion).
The use of two groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these groups as a reference point for setting director compensation. At the time of the review in December 2018, both the annual cash retainer and annual restricted stock award for non-employee directors were below the Proxy Peer Group median.
Based on its annual analysis of non-employee director compensation, the Committee’s consultant recommended an increase to bring compensation levels more in line with the market median. After discussion in December 2018, the Committee deferred consideration of any potential action until May 2019, when additional peer data would be available.
The Committee resumed discussion and consideration in May and decided to increase the fees to align compensation levels with market median. Given the competitive landscape for board members, the Committee believes it is important to stay aligned with market to ensure the company can continue to attract the talent needed as board retirements and refreshments occur.
The changes, which were effective in May 2019, are outlined in the table below, and include: (1) increasing the annual retainer to $120,000; (2) increasing the restricted stock unit award value to $160,000; (3) increasing all Committee Chair fees to $25,000, other than for the Audit Chair which remained at $25,000; and (4) increasing the Board Chair additional retainer to $225,000 and changing the form of payment to 50% cash and 50% equity.
Elements of Non-Employee Director Compensation in 2019
Non-employee directors receive cash retainers and equity awards as outlined in the following table:
NON-EMPLOYEE DIRECTOR COMPENSATION
 
2018 Pay
2019 Pay
All Directors:
Annual cash retainer
$110,000
$120,000
Annual restricted stock unit award
150,000
160,000
Committee Chairs:
Additional annual cash retainer - Audit Committee
25,000
25,000
Additional annual cash retainer - Human Capital Committee
20,000
25,000
Additional annual cash retainer - Risk and Finance Committee
20,000
25,000
Additional annual cash retainer - Governance Committee
15,000
25,000
Additional annual cash retainer - Regulatory Compliance Committee
15,000
25,000
Board Chairman:
Additional annual cash retainer (paid 50% in cash and 50% in equity for 2019)
200,000
225,000
 
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For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in company common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable.
Directors’ expenses for attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to nonprofit organizations. Beginning in 2019, Directors can elect to deduct a contribution to the Unum Political Action Committee (PAC) from their annual fees earned. For those who choose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a matching contribution to the qualifying charity of the Board member's choice up to the $10,000 matching gift limit.
Mr. McKenney is employed by the company and receives no additional compensation for his Board service.
2019 Compensation
Our Board compensation year starts at the Annual Meeting each year and runs to the next Annual Meeting. The annual Board and committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman was previously paid quarterly in advance; however, beginning with the 2019-2020 board year, both the timing and form of payment were changed as outlined above. The following table provides details of the compensation of each person who served as a non-employee director during 2019.
NON-EMPLOYEE DIRECTOR COMPENSATION
Name
Fees Earned
or Paid in Cash(1)
Stock Awards(2)
All Other
Compensation(3)
Total
Theodore H. Bunting, Jr.
$145,000
$160,010
$305,010
E. Michael Caulfield
10,000
10,000
Susan L. Cross
119,982
160,010
5,000
284,992
Susan D. DeVore
120,000
160,010
280,010
Joseph J. Echevarria
144,968
160,010
304,978
Cynthia L. Egan
145,000
160,010
10,000
315,010
Kevin T. Kabat
220,479
272,497
492,976
Timothy F. Keaney
145,000
160,010
305,010
Gloria C. Larson
145,000
160,010
10,000
315,010
Ronald P. O'Hanley
119,974
160,010
10,000
289,984
Francis J. Shammo
120,000
160,010
5,000
285,010
(1)
Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in 2019, either in cash or deferred shares, for 2019/2020 Board service.
Board members were given the opportunity to make a contribution to the Unum PAC from their fees earned. If the Board member elected to make a Unum PAC contribution, it was deducted from their cash fees and the remainder was paid in cash or converted to deferred share rights, based on the Board member's election. For those who chose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a
 
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matching contribution to the qualifying charity of the Board member's choice up to the $10,000 matching gift limit. For those who elected to have their Unum PAC contribution matched, the match will be made in the next calendar year (i.e., in 2020 for the 2019 contribution).
Ms. Cross, Mr. Echevarria and Mr. O'Hanley each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table.
(2)
On May 24, 2019, each then-serving non-employee director was granted 4,808 restricted stock units (RSUs) under our Stock Incentive Plan of 2017. The amounts shown are the grant date fair market values of these units. Mr. Caulfield retired from the Board at the 2019 Annual Meeting and did not receive a grant of RSUs for the 2019/2020 Board year.
We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718 “Compensation - Stock Compensation” (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Form 10-K for the year ending December 31, 2019.
The following table provides details of the unvested RSUs, including dividend equivalent units, held by each non-employee director as of December 31, 2019. Given his retirement, Mr. Caulfield did not hold any unvested Unum equity awards as of such date.
Director Name
Number of Restricted
Stock Units Held at
Fiscal Year End
Director Name
Number of Restricted
Stock Units Held at
Fiscal Year End
Theodore H. Bunting, Jr.
4,906
Kevin T. Kabat
8,355
Susan L. Cross
5,888
Timothy F. Keaney
4,906
Susan D. DeVore
4,906
Gloria C. Larson
4,906
Joseph J. Echevarria
4,906
Ronald P. O'Hanley
4,906
Cynthia L. Egan
4,906
Francis J. Shammo
4,906
(3)
The amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. The amount for Mr. Caulfield also includes a $5,000 charitable contribution made by the company in his name in recognition of his retirement from the Board.
Director Stock Ownership and Retention Requirements
Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current ownership requirement of $600,000). New directors have five years from the date of their election to meet the ownership requirement.
In addition, each non-employee director is required to retain 60% of the shares underlying their annual restricted stock unit award for at least one year from the time such awards vest, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board.
The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2019, seven of the 10 non-employee directors serving on the Board at that time had met the ownership requirement. The three directors who had not met the ownership requirement at year-end 2019 joined the Board within the past five years and are expected to meet the ownership requirement within the applicable time period provided.
 
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BOARD AND COMMITTEE GOVERNANCE
Corporate Governance Guidelines
The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director selection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are available on our investor relations website under the “Corporate Governance” heading at www.investors.unum.com. The Governance Committee regularly reviews developments in corporate governance and recommends updates to the corporate governance guidelines and other documents as necessary or appropriate in response to regulatory requirements and evolving practices.
Board Leadership Structure
Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the company. As the non-executive Chairman, Mr. Kabat is also deemed the Lead Independent Director and, as such, has the responsibilities outlined in our corporate governance guidelines, including:
Presiding at all meetings of the Board, including executive sessions of the non-management and independent directors;
Communicating actions/issues arising from executive sessions to the CEO, as appropriate;
Authority to call meetings of the independent directors;
Authority to approve meeting schedules, agendas and information provided to the Board;
Advising the Board on Board development, including Board and committee leadership succession planning;
Unless otherwise determined by the Board, meeting with each director to evaluate the Board and committees and reporting this evaluation to the Governance Committee;
When requested by the independent directors, hiring advisors to the independent directors, to be paid by the company;
Receiving, through the Corporate Secretary, communications from shareholders seeking to communicate with the Board;
Serving as a liaison to the independent directors; and
If requested by major shareholders, ensuring he is available for consultation and direct communication.
The Board believes the current leadership structure provides significant independent oversight of management, as Mr. McKenney (our CEO and an employee of the company) is the only member of the Board who is not an independent director. The Board holds executive sessions, without management present, at each regularly scheduled in-person Board meeting. In 2019, the independent directors met alone in executive session five times, and each session was chaired by Mr. Kabat.
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company and shareholders at a given time. The independent directors of the Board will
 
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continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the best interests of the company and shareholders.
Board Meetings and Attendance
The Board of Directors met six times during 2019. Depending upon committee assignments, a director generally would have had 14 to 22 meetings to attend in 2019. Average director attendance at Board and committee meetings was 98%, and each incumbent director attended at least 91% of the total number of meetings of the Board and committees on which he or she served during the period of the director’s service in 2019.
Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 2019 Annual Meeting attended that meeting.
Committees of the Board
The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter available on our investor relations website under the “Corporate Governance” heading at www.investors.unum.com. In addition to the duties contained in their respective charters (some of which are listed under “Committee Responsibilities” below), each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.
BOARD MEMBERS AND COMMITTEES
Name
Term
Expires
Audit
Risk &
Finance
Governance
Human
Capital
Regulatory
Compliance
Theodore H. Bunting, Jr.
2020
Chair
Susan L. Cross
2020
Susan D. DeVore
2020
Joseph J. Echevarria (1)
2020
​Chair
Cynthia L. Egan
2020
Chair
Kevin T. Kabat
2020
Timothy F. Keaney (2)
2020
Chair
Gloria C. Larson
2020
Chair
Richard P. McKenney
2020
Ronald P. O'Hanley
2020
Francis J. Shammo
2020
2019 Committee Meetings
8
8
4
5
4
(1)
Mr. Echevarria was named Chair of the Risk and Finance Committee in May 2019.
(2)
Mr. Keaney stepped down as Chair of the Risk and Finance Committee, but continued to serve as a member in May 2019. He was named Chair of the Audit Committee at that time as well.
 
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COMMITTEE RESPONSIBILITIES
Listed below are certain areas of responsibilities for the Board's committees. For a complete listing of each committee's responsibilities, please refer to their charters located on our investor relations website under the “Corporate Governance” heading at www.investors.unum.com.
 Audit Committee(1)
Assists the Board in oversight of financial statement and disclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk.
Has the sole authority to appoint, oversee and, if necessary, replace the company’s independent auditors.
A complete description of the responsibilities of the Audit Committee is included in the Report of the Audit Committee on page 41.
 Governance Committee(2)
Assists the Board in implementation and oversight of our corporate governance policies. The Governance committee identifies qualified candidates for the Board and recommends the individuals to be nominated by the Board for election as directors.
Develops and recommends to the Board our corporate governance guidelines.
Oversees the process for Board and committee evaluations.
Advises the Board on corporate governance matters, including with respect to the size, composition, operations, leadership, succession plans and the needs of the Board and its committees.
Reviews reports concerning environmental, governance and corporate social responsibility matters of significance to the company.
 Human Capital Committee(3)
Assists the Board in oversight of our compensation and benefit programs, and related risks to support business plans, attract and retain key executives, and tie compensation to performance.
Establishes our general compensation philosophy, principles and practices.
Takes into consideration the results of the company’s most recent say-on-pay vote.
Evaluates and approves compensation and benefit plans.
Annually reviews performance and approves compensation of the CEO and other executive officers.
Reviews and recommends to the Board the form and amount of director compensation.
Oversees the company's development and implementation of, and monitors the effectiveness of, the company's policies and strategies relating to its human capital management function, talent management, workforce diversity, and workplace and employment practices.
 Regulatory Compliance Committee(4)
Assists the Board in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations.
Monitors the effectiveness of our compliance efforts concerning applicable regulatory and legal requirements and internal policy.
Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations.
Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations.
 
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 Risk and Finance Committee(5)
Assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee.
Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities.
Oversees implementation of and compliance with investment strategies, guidelines and policies.
Authorizes loans and investments of the company.
Reviews, assesses and reports on the impact of various finance activities on our debt ratings.
Monitors, evaluates and makes recommendations regarding matters pertaining to our Closed Block segment, including long-term care business, that could have meaningful impact upon any of the matters for which the Risk and Finance Committee has oversight responsibility.
(1)
All members of the Audit Committee meet the independence requirements of the SEC and the NYSE and our corporate governance guidelines. All five members of the Audit Committee are “audit committee financial experts” under SEC regulations, and are “financially literate” as required by the NYSE.
(2)
All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines.
(3)
All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code.
(4)
All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines.
(5)
All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines.
Limits on Board and Audit Committee Service
While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee.
The Board’s Role in Risk Oversight
The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program and receives a report on these activities at least quarterly. The Risk and Finance Committee is also responsible for overseeing risks associated with investments and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. The Audit Committee is responsible for oversight of financial risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committee and Risk and Finance Committee also meet jointly as appropriate to oversee certain risks for which they have overlapping responsibility, including operational risks relating to data privacy, cybersecurity and business continuity. The full Board also takes an active role in overseeing cybersecurity risk, and during 2019 held
 
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a progressive, cyber incident tabletop exercise with senior management and third-party experts to increase preparedness for a potential data breach. The Human Capital Committee is responsible for overseeing the management of risks relating to our compensation plans and programs and, as more fully described below, receives an annual report from the company’s chief risk officer about these risks. The Regulatory Compliance Committee oversees management of risks related to regulatory, compliance, policy and legal matters, both current and emerging and whether of a local, state, federal or international nature. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks in addition to the risk information it receives directly.
Compensation Risk
Each year, the company’s chief risk officer, in consultation with the Human Capital Committee, undertakes a risk assessment of our compensation programs and practices. This year’s process included the following steps:
Review of the overall design and philosophy of the company’s incentive compensation programs.
Review and assessment of the 2019 annual incentive program and long-term incentive program performance measures for alignment between actual results and achievement payout levels.
Identification of fundamental principles to test, including the SEC’s non-exclusive list of situations where compensation programs may have the potential to raise material risks to the company.
Assessment of the incentive programs in light of the company’s primary risks (as disclosed in the company’s 2019 Form 10-K) and the company’s annual financial and capital plans.
Based on this assessment, the following conclusions were reached by the chief risk officer and presented to the Human Capital Committee:
The company’s incentive program targets, thresholds, caps, metric weightings and payout curves are effective control mechanisms.
The incentive plans are balanced and align the long-term interests of stakeholders and management.
The program’s goals are effectively balanced and consistent with the risk levels embedded in the company’s financial and capital plans.
All potential awards are subject to Human Capital Committee discretion and the company has a recoupment policy in place in the event of a material earnings restatement.
Accordingly, our chief risk officer and the Human Capital Committee do not believe the company’s compensation programs create risks reasonably likely to have a material adverse effect on the company, and the programs fall within the range of the company's risk appetite.
Director Retirement Policy
Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her 72nd birthday.
 
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Compensation Committee Interlocks and Insider Participation
During 2019, Ms. Egan and Messrs. Bunting, Kabat, and O'Hanley each served as a member of our Human Capital Committee. None of the members has served as an officer of the company, and during 2019 none of the members was an employee of the company. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee.
Related Party Transactions and Policy
The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A “related party” means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest.
Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally.
The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships.
Transactions with Related Persons
The company employs Charlene Glidden, who serves as Vice President, Transformation Leader and is a sister-in-law of Michael Q. Simonds, the company's Executive Vice President, Chief Operating Officer. She received compensation of approximately $450,121 for 2019 and participated in compensation and benefit arrangements generally applicable to similarly situated employees. Ms. Glidden does not report within Mr. Simonds’ organization, and he is not involved in decisions concerning her compensation.
 
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Codes of Conduct and Ethics
The Board has adopted a Code of Conduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also implemented a separate Code of Ethics applicable to our CEO and certain of our senior financial officers.
We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the “Corporate Governance” heading at www.investors.unum.com.
 
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OTHER GOVERNANCE MATTERS

OTHER GOVERNANCE MATTERS
Shareholder Engagement
In line with our commitment to open communication and transparency, a robust shareholder engagement process occurs throughout the year.
In the late summer and early fall, we begin our
shareholder engagement efforts by contacting each of
our top 50 investors, which in 2019 represented more than 71% of our outstanding shares. The focus of these meetings is to discuss our business strategy and our governance and compensation practices, as well as to learn about any other topics that are important to our shareholders. During 2019, our independent Board Chairman joined management for several of the shareholder meetings. In the late fall, we also met with two proxy advisory firms to provide an update on our shareholder engagement efforts and gain further insight into their views of our compensation and governance practices and proxy disclosures. These communications promote greater engagement with our shareholders on various corporate governance issues and provide an open forum to share perspectives on our policies and practices. 
During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investors to address any issues.
For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 49.
 
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Environmental, Social and Governance
We provide a critical financial safety net for millions of people, a fact that drives us to deliver for those who count on us. This focus on doing the right thing guides our approach to sustainability and social responsibility. Unum has a long tradition of engaging with shareholders, customers, employees, suppliers and communities on a variety of environmental, social and governance (ESG) matters.
We have taken a number of steps recently to strengthen governance and disclosure of ESG matters. In 2018, the Board amended the charter of the Governance Committee to provide Board-level oversight of ESG matters and greater alignment with key issues. In 2019:
The Board discussed with management a refreshed corporate strategy for elevating the company's ESG profile, including plans for dedicated resourcing, prioritizing opportunities, and building awareness;
A Sustainability Working Council of leaders across key functions and business areas throughout the enterprise was established to recommend and oversee sustainability issues; and
We began a materiality assessment to better understand ESG issues relevant to our organization. This work continues and is a first step in developing a strategic sustainability program with greater rigor and transparency for all our stakeholders.
We also intend to release a more comprehensive report of our progress in the second quarter of 2020. This report will be available on www.unum.com.
The Board's Role in ESG
As part of their oversight of the company's strategic direction and risk management, Board members monitor progress on Unum's ESG strategies and initiatives. Discussions with senior management focus on the rapidly changing landscape, opportunities for leadership, and execution against strategic goals and priorities. The Board and committees are regularly engaged on issues related to corporate social responsibility, significant public policy, inclusion and diversity, and corporate culture. The Board also seeks to understand investor and stakeholder expectations, and the impact of Unum's business operations on these and other issues related to ESG.
Good Governance and Responsible Business
We maintain a sound governance framework rooted in a culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices on page 3.
Code of Conduct
Integrity and doing the right thing are embedded in our culture. Our Code of Conduct is a roadmap of nine principles for doing the right thing every time for our company, our customers, our colleagues and ourselves. It guides employees on how to abide by Unum's principles and access the resources available to address any ethical issues that may arise. We Are Unum is a collection of guiding statements that outline our expectations of employees and the commitments we make to them in return.
 
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Responsible Investing
Investment decisions on our $46 billion portfolio represent a significant component of our societal impact. Intensive research, disciplined processes and focused portfolio construction are foundational to our commitment to reliable investing. Our philosophy is to deliver consistent long-term investment returns while keeping risks at appropriate levels so we can deliver on our promises to policyholders and stakeholders. We strive to be responsible stewards of our assets within a framework of strong governance and transparency. As part of this effort, we are working to formally integrate ESG factors into all investment decisions. Our research analysts have a strong understanding of the companies in which we invest and attempt to take into account all relevant factors that contribute to an informed investment decision.
Privacy and Cybersecurity
Unum protects the confidentiality of personal information our customers entrust to us. Ongoing smart investments keep our information security program, including cybersecurity, highly effective, providing the physical, technical and administrative controls required by industry best practices.
Customer Experience
We are currently ranked first in ease of doing business, employer trust and meeting the needs of our customers in comparison to competitors. We continue to make investments in technology and our people to enhance the experience of our customers, and our goal is continue delivering the best experience for those who rely on us for their employee benefit needs.
Social Impact
Engaging with employees, community partners and in the public discourse are key ways we work to create better places to live and work.
Our Culture and Human Capital Management
The wellbeing of our employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day.
In 2019, we continued a multi-year modernization of our main home offices. This investment is transforming our workspaces to spark greater collaboration and innovation, and introduce upgraded food service and fitness amenities for employees. Our commitment to workplace modernization helps us attract and retain talent and ensures our employees are well-prepared to deliver best-in-class customer service and work flexibly when required.
Work-life balance is a core value of ours, and we provide access to benefits and resources employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, onsite fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues as well as generous retirement benefits.
Our company has a strong focus on training and professional development. All employees participate in an annual curriculum of training on our Code of Conduct (which covers a variety of topics including ethics, anti-harassment, regulatory compliance and our business practices), privacy, and information security. We also provide employees and managers a variety of training and development programs tailored to their specific roles and support the professional development of our employees through our tuition assistance program.
 
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We’re proud to have been recognized as a great place to work by several independent organizations and we will continue to make investments in our people and our culture to create a world-class workplace.

Inclusion and Diversity
We are committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflects our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set inclusion and diversity performance goals for the CEO and senior leadership team. Our Office of Inclusion & Diversity sets our strategic direction and coordinates the work of our employee resource groups. A variety of programming and training opportunities are available for all employees to learn about issues such as unconscious bias and inclusion in the workplace. During 2020, we have committed to creating and sharing a strategic inclusion and diversity plan and key goals.

Positively Impacting Our Communities
We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educational opportunities, promote health and wellness, and support the arts. We encourage employee engagement in community outreach by providing time off for volunteer activities and matching employee giving to qualified organizations. We partner with dozens of local charities every year and provide significant support in the U.S. to public education, health and wellness, and arts and culture. For more information about our community outreach, visit our website.
 
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OTHER GOVERNANCE MATTERS


Advocating for Financial Protection Benefits
We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This issue continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined.
Our engagement in these issues includes:
Funding research on disability trends, the economic impact of financial protection benefits and consumer insurance purchasing habits;
Sponsoring state legislation to encourage greater participation in financial protection benefits through employee auto-enrollment, with the option to opt out;
Providing expertise to federal and state agencies related to disability benefits; and
Active participation in industry associations such as the American Council of Life Insurers.
Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in.
Being Good Stewards of the Environment
We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to understand and effectively manage our impact on the environment. Within our facilities, we have made significant strides in several areas to measure our impact and improve efficiencies to reduce our carbon footprint, including driving energy efficiencies, paper reduction and more efficient use of space. Through technology such as videoconferencing and remote access, and workplace flexibility initiatives, we also reduce employee travel to and from the office, and between our various locations. Ongoing employee education and engagement is driven through grassroots volunteer groups.
 
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REPORT OF THE AUDIT COMMITTEE

REPORT OF THE AUDIT COMMITTEE
The Audit Committee (in this report, the “Committee”) is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website under the heading “Corporate Governance” at www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are “financially literate” as required by the NYSE, and the Board has determined that all four current members are “audit committee financial experts” under SEC regulations. In February 2019, Susan L. Cross became a member of the Committee upon her election to the Board. In May 2019, Committee member, Timothy F. Keaney, was named the Committee chair upon the retirement of the Committee’s previous chair, E. Michael Caulfield, at the 2019 Annual Meeting.
The primary purpose of the Committee is to assist the Board in its oversight of the:
Integrity of the company’s financial statements and related disclosures;
Effectiveness of the company’s internal control over financial reporting;
Compliance by the company with legal and regulatory requirements;
Qualifications, independence and performance of the company’s independent auditor;
Responsibilities and performance of the company’s internal audit function; and
Management of the company’s financial risks.
The Committee is also responsible for discussing guidelines and policies for how the company undertakes risk assessment and management. The Committee receives regular enterprise risk management (ERM) reports presented to the Risk and Finance Committee, as well as the Own Risk and Solvency Assessment (ORSA) summary report. The ORSA summary report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions used in assessing our risks, and prospective solvency assessments under both normal and stressed conditions. The Committee also jointly oversees cyber-related operational risk with the Risk and Finance Committee.
Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an independent audit of the financial statements and of the effectiveness of the company’s internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). The independent auditor reports directly to the Committee, which is responsible for the appointment, compensation, retention and oversight of the work performed by the independent auditor.
The Committee met eight times during 2019. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.
In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; preapproved all audit services and permissible nonaudit services performed by the company’s independent auditor; reviewed and discussed with management the responsibilities
 
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and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management, as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for maintaining compliance with legal and regulatory requirements. In carrying out this responsibility, the Committee also monitors whether there is appropriate external and internal auditor focus each year on the company’s IT environment and controls, which in 2019 included above-benchmark internal audit plan coverage of cyber audits, information security and privacy risk as a common scope element of all audits, and an annual SOC 2 assessment. Cyber-related matters were also covered in regular reports to the Committee from the chief risk officer and the general counsel.
The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning, the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting.
The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31, 2019, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions that could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor concerning, among other matters, management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. Under new PCAOB standards requiring discussion of critical audit matters (CAMs) in auditor reports, beginning with the report on the company's 2019 financial statements, the independent auditor discussed with the Committee a CAM relating to the company's reserves for long-term care policy and contract benefits. During 2019, the Committee also discussed with management and the independent auditor emerging accounting standards and associated implementation plans. The Committee received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. In addition, the Committee discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of nonaudit services to the company is compatible with the auditor’s independence.
The Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider rotating the engagement to a different audit firm. In doing so, the Committee took into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. Additionally, in conjunction with the mandated rotation of the independent auditor’s lead engagement partner, the Committee and its chair are directly involved in the selection of the independent auditor's lead engagement partner, including the current partner who assumed this role in 2019. In advance of the rotation, Committee members held discussions with the then-current partner, the proposed candidate, and company management concerning the candidate's experience and qualifications for the role.
 
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Based on its evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2020. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee recommended that the Board of Directors seek shareholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.
Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31, 2019 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
2019 Audit Committee:
Timothy F. Keaney, Chair
Susan L. Cross
Susan D. DeVore
Francis J. Shammo
 
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COMPENSATION DISCUSSION AND ANALYSIS

COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout this section as the “Committee”) arrived at its compensation decisions for the below named executive officers (NEOs) for 2019.
Richard P. McKenney, President and Chief Executive Officer
Steven A. Zabel, Executive Vice President, Chief Financial Officer
Michael Q. Simonds, Executive Vice President, Chief Operating Officer
Timothy G. Arnold, Executive Vice President, Voluntary Benefits and President, Colonial Life
Lisa G. Iglesias, Executive Vice President, General Counsel
John F. McGarry, Retired Former Executive Vice President, Chief Financial Officer
As previously announced, Mr. McGarry retired as Chief Financial Officer, effective July 2019. Beginning in July, Mr. McGarry moved into a role supporting a smooth transition until his retirement at the end of October 2019. Mr. Zabel, who served as the President of Unum's closed block of business, assumed the responsibilities of Chief Financial Officer, effective July 2019. Mr. Simonds, who served as President and Chief Executive Officer of Unum US during 2019, was appointed to his current position effective February 1, 2020.
Business and Performance Review
Our Business
We are a leading provider of financial protection benefits in the United States, United Kingdom and Poland. Our insurance products include disability, life, accident, critical illness, hospitalization, dental and vision insurance, and are primarily offered through the workplace to help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life. Our growing leave and absence management services help employers effectively manage leave planning and preparation, while ensuring employees understand their leave benefits and effectively transition back into the workplace and productivity.
In 2019, our business operations were divided into three primary segments. Our Unum US and Colonial Life segments market products and services in the U.S., while the Unum International segment comprises our Unum UK and Unum Poland businesses in Europe. Separately, our Closed Block segment includes products, such as long-term care insurance, that we service and support but no longer actively market.
 
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2019 Performance
From a financial and operating standpoint, Unum had a profitable year in 2019 as we delivered steady growth across our core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were achieved despite the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and industry concerns about long-term care policies.
Financial Highlights(1)
Record earnings
Unum achieved strong earnings per share and record after-tax adjusted operating earnings per share, continuing our recent history of strong financial performance. For 2019, we delivered net income of $1.10 billion and strong after-tax adjusted operating income of $1.14 billion, based on total revenue of $12 billion. Earnings per share (EPS) was $5.24 and adjusted operating EPS was at an all-time high of $5.44, the 14th consecutive year of after-tax adjusted operating EPS growth.

Return on equity
We continued to put shareholder capital to good use. Return on Equity (ROE) was 11.8% and consolidated adjusted operating ROE was 12.8%, while ROE in our core operating segments was 17.2%.

Book value
Our book value per share at the end of 2019 was up 11.2% from 2018 (excluding accumulated other comprehensive income, or AOCI). It was the 11th consecutive year of shareholder equity growth.

(1)
Operating results referenced here include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A of this proxy statement.
 
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Operating Highlights
Unum delivered on our mission of supporting our customers in 2019. We paid approximately $7.5 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high. We're also focused on enhancing the experience of our customers through employee training, process improvements and leveraging technology.
We continue to see steady growth in our core businesses, particularly in premium income, compared with 2018 results. This growth was achieved while maintaining our pricing and risk discipline, and demonstrates our value story continues to resonate with customers. New offerings such as our dental and vision coverage and our leave and absence management services are also driving growth and deepening relationships with our clients.
We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with a philosophy emphasizing sound risk management and credit quality.
Long-Term Care Review
The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care (LTC) policies that we service and support, but no longer actively market. In 2009, we closed our individual LTC business, and in 2012 we closed our group LTC business. We have actively managed these closed blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Through these and other steps – including annual comprehensive reviews – we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
Following our 2018 annual review of the LTC block, we adjusted our risk assumptions and increased our LTC GAAP reserves to reflect our updated best estimate of future benefit obligations. These measures have led to greater stability and predictability in the performance of the LTC block. Just as importantly, these steps have had little impact on our capital plans and overall financial strength.
Operational Realignment
Delivering consistent long-term success in a constantly evolving employee benefits market requires us to continually challenge our approach to how we do business. In February 2020, we appointed Mr. Simonds as Chief Operating Officer (COO) for the enterprise and aligned our core business operations under this role. We believe this change allows us to sharpen our focus on growth opportunities and further enhance the experience for our customers.
This realignment will not change our current financial reporting segments.
 
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Business Highlights
The following are 2019 performance highlights within our primary business segments and other key areas of the company:
Unum US

Our Unum US segment, representing 64.2% of our consolidated premium income in 2019, continued its trend of profitable growth. The business delivered healthy premium increases and strong persistency while maintaining strong margins and industry-leading return on equity. Combined with the ongoing integration of new products and growth in our segment, Unum US delivered record adjusted operating income.
Unum International

Our Unum International segment, representing 6.7% of our consolidated premium income in 2019, continued to adjust to the ongoing headwinds from the uncertain environment in Europe due, in part, to Brexit. While adjusted operating income was down year-over-year, the addition of Unum Poland and growth of voluntary benefits in the U.K. helped drive premium and sales growth in our International segment.
Colonial Life

Our Colonial Life segment, representing 18.0% of our consolidated premium income in 2019, strengthened the business through adjustments to its distribution strategy and enhancements to its capabilities. Growth improved in the latter half of the year as these changes drove positive sales and premium trends. Consistent with past years, Colonial Life continues to generate solid margins and returns.
Closed Block
Our Closed Block segment, representing 11.0% of our consolidated premium income in 2019, delivered stable performance, with an increase in adjusted operating income of 9.7%. We continue to see consistent results, largely as a result of our active oversight of this block of business and ongoing investments in management resources and capabilities.
Investments
Our investment results remained solid, generally in line with our plan benchmarks. The portfolio was well-managed through market volatility in 2019 and continues to provide a consistent source of income for our business. Our asset quality remains strong.
 
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Capital Generation for Shareholders
Our strong statutory earnings resulted in solid capital generation in 2019, allowing us the opportunity to deploy capital in a number of ways.
We invested in our people, products and technology to drive growth.
We paid out $229.2 million in dividends, including increasing the annual dividend rate by 11.2% compared to the prior year.
We repurchased 12.3 million outstanding shares for $400.4 million.
Our credit ratings are strong and remain at our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.
Total Shareholder Return
Unum once again delivered strong financial results in our core businesses and record adjusted operating earnings per share in 2019. This continues a track record of consistent performance that spans more than a decade. However, while we delivered positive TSR for the year and improved TSR on a year-over-year basis, we trailed our peer groups due to negative investor perceptions surrounding the long-term care industry and concerns about the ongoing impact of historically low interest rates on our sector.
These returns are not indicative of the ongoing strong financial and operational performance of our core businesses. We have delivered record after-tax adjusted operating earnings per share for 14 consecutive years. Premium growth has consistently outpaced our competitors in our U.S. businesses. And we continue to see favorable trends in key indicators, such as expense management and benefit ratios.
We have also actively managed our closed LTC block over the last decade while providing added transparency to enhance shareholder understanding of the block.
The need for our products and services remains strong and continues to grow, which we believe when combined with our consistent results has made Unum an excellent long-term investment. We expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value.
TOTAL SHAREHOLDER RETURN
 
1 Year
3 Year
5 Year
Unum
2.6%
(28.53)%
(5.92)%
Proxy Peer Group
31.27
25.57
50.66
S&P 500
31.49
53.17
73.86
S&P Life & Health Index
23.18
13.63
32.92
OPERATING EARNINGS PER SHARE**
(after-tax, adjusted)

CORE SEGMENT PREMIUM GROWTH
(in millions)


  **Non-GAAP measure, see Appendix A for reconciliation.
 
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2019 Say-on-Pay Vote and Shareholder Outreach
Our 2019 shareholder advisory vote to approve executive compensation passed with 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing more than 71% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders.

Five investors, representing approximately 21% of our outstanding shares, accepted our invitation for engagement and we met with each of them. Another seven investors, representing approximately 19% of our outstanding shares, responded that a meeting was not necessary.

During the meetings, shareholders provided feedback on a variety of topics; however, we did not receive any suggestions for changes to our compensation programs. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs, which is also evidenced by our most recent say-on-pay votes (approximately 95% in 2019 and 2018, and 96% in 2017). During the 2019 outreach, we received specific positive comments related to:
Our compensation design and pay structure for executives as well as our proxy disclosure;
Alignment of our incentive plan goals and the focus on those things important to the company; and
Our alignment with shareholders by using a TSR modifier.
Following consideration of the results of our 2019 say-on-pay vote and feedback we received through these meetings, we did not make any changes to our executive compensation programs. However, our discussions identified continuing opportunities to enhance our proxy statement disclosure and regarding other governance topics including:
Continuation of the use of the CEO Compensation Summary (see page 7);
Continuing to enhance disclosure related to our Environmental, Social and Governance journey and related initiatives (see page 37); and
Expanding board gender diversity including leadership representation (see page 14).
In addition to our meetings with shareholders, we also met with two proxy advisory firms to provide an update on our shareholder engagement efforts and gain further insight into their views on our compensation and governance practices and disclosures.
Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the company’s willingness to consider their input on both executive compensation and governance practices.
 
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Compensation Program Structure
Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder returns, attract and retain talented individuals, and promote a culture of ownership and accountability in the company. We do this by:
Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience, and performance of employees;
Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and
Aligning the long-term interests of management and shareholders by offering performance-based equity compensation opportunities and requiring senior officers to own a specified value of shares and retain equity awards for a specified period of time after vesting.
Elements of Pay
There are five primary elements of pay in our executive compensation program, which are summarized in the following table.
 
 
 
 
 
 
 
 
SHORT-TERM
LONG-TERM
 
 
BASE PAY
ANNUAL
INCENTIVE
PERFORMANCE-
BASED RSUs
PSUs
RETIREMENT &
WORKPLACE BENEFITS
 
Primary Purpose
Reflects the market for similar positions as well as individual skills, abilities & performance
Rewards short-term performance(1)
Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(1)
Addresses health, welfare & retirement needs
Performance Period
Ongoing
1 year
1 year (vests over 3 years)(2)
3 years prospective
N/A
Form
<--------------- Cash --------------->
<--------------- Equity --------------->
N/A
Payment/Grant Date
Ongoing
<----- In March based on prior year performance ----->
Ongoing
(1)
For details on performance measures see “Annual and Long-Term Incentive Programs” beginning on page 57.
(2)
A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are earned.
Those pay elements that are “at risk,” or contingent upon individual or corporate performance, are noted in the charts below. Our NEOs, as the most senior officers of the company, have a substantial majority of their targeted total direct compensation (fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2019, 89% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 72% of their aggregate targeted total direct compensation was at risk.
 
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Roles of the Committee, Chief Executive Officer and Consultant
The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO and compensation consultant, has the final authority to:
Evaluate, design, and administer a compensation program for our executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value;
Establish performance goals and certify whether they have been attained;
Review the performance of the CEO, with input from the full Board, and determine his compensation; and
Determine compensation for each of the other NEOs.
The CEO provides to the Committee:
A self-assessment outlining his own performance for the year;
Performance assessments and compensation recommendations for executives who report directly to him, which included all of the other NEOs during 2019; and
His perspective on the business environment and the company’s performance.
The CEO does not participate in any decisions related to his own compensation.
Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings.
 
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The Committee has adopted a policy requiring its compensation consultant be independent. During 2019, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors:
Compliance with the Committee’s independence policy;
Other services, if any, provided to the company by the consultant;
The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues;
Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and
The policies and procedures the consultant has in place to prevent conflicts of interest, which include a prohibition against stock ownership in the company.
Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 2019 totaled $147,211.
Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work has not raised any conflict of interest.
The company’s finance, human resources, and legal staff, including the Chief Financial Officer, support the Committee in its work, interacting with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff members may make recommendations, the final decision on all executive compensation matters rests solely with the Committee.
Compensation Benchmarking
The Committee compares the compensation of our NEOs to the median pay of executives in similar positions at peer companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are company performance, individual performance, the executive’s level of responsibility and tenure, internal equity considerations, the creation of shareholder value, our executive compensation philosophy, and the results of the most recent shareholder say-on-pay vote and feedback received from engagement with shareholders.
The two sources used by the Committee for benchmarking executive compensation are:
For CEO and CFO compensation, a proxy peer group comprising insurance and financial services companies that are either our business competitors or primary competitors for talent (the “Proxy Peer Group”). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below; and
 
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For the compensation of our other NEOs, the Willis Towers Watson Diversified Insurance Study of Executive Compensation (the “Diversified Insurance Study”). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group.
In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the “PSU Peer Group”) for purposes of measuring relative TSR for our PSU awards (see page 62 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum.
The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2019, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at approximately 83% of the revenue median (as of the 12 months ended July 31, 2019). Additionally, 10 of the 12 peers (83%) selected Unum as a peer for compensation benchmarking purposes in their 2019 proxy statements.
During its annual Proxy Peer Group analysis in August 2019, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined to add Equitable Holdings to the Peer Group for 2020. While Equitable Holdings is not a direct business-line competitor, they operate in similar capacities to other current peers, meet the appropriate size criteria, and have included Unum in their peer group. The effect of these changes to the Proxy Peer Group was a 4% reduction in median CEO targeted total direct compensation.
Annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2019, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation. An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors (such as compensation and revenue size) and is commonly used to adjust compensation data to remove the effects of company size. A regression analysis that considered the correlation between revenue and compensation yielded a corresponding targeted total direct compensation that was 12% less than the median. Based on these tests, the Committee determined that the 2020 Proxy Peer Group is appropriate.
 
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The following table lists the companies in the Diversified Insurance Study (“DIS”), PSU Peer Group and Proxy Peer Group.
BENCHMARKING EXECUTIVE COMPENSATION
 
 
 
 
Proxy Peer Group Indicators
 
Company
DIS
Survey
Participant(1)
PSU
Peer
Group(2)
2019
Proxy
Peer
Group(3)
Life &
Health
GICS
0.4x to 2.5x
Unum
Revenues
0.4x to 2.5x
Unum
Assets
0.5x to 5.0x
Unum
Market
Capitalization
List Unum as a Peer
Aflac
AIG
Allstate
AXA Group
Brighthouse Financial
Cigna
CNO Financial Group
Genworth Financial
Globe Life (f/k/a Torchmark)
Guardian Life
Hartford Financial Services Group
John Hancock
Lincoln Financial Group Corporation
Massachusetts Mutual