In the hours before executives announced Aetna’s plan to acquire Humana, the leaders of the Louisville-based health care giant sweetened the compensation package for Humana CEO Bruce Broussard, ensuring he’d be well cared for after the company sold.
Humana revised an employment agreement to accelerate Broussard’s equity awards and remove restrictions on exercising certain stock options if he were fired or resigned within two years of the Aetna takeover, according to government documents.
Broussard, who joined Humana in 2011 and earned more than $10 million in salary, bonuses, stock options and deferred compensation last year, is certain to depart Humana or Aetna a very wealthy man anyway.
He was unavailable for a phone interview Wednesday, Humana spokesman Tom Noland said by email.
The company reported in March that if there was a change in ownership and Broussard were let go, he would receive a total of $16.9 million. Other top executives also are in line for so-called golden parachutes worth millions of dollars.
But the company notified federal regulators that it wanted to revise key provisions of what is called the Broussard Agreement to address a “mutual” mistake in the pact and to clarify Broussard’s treatment “under certain termination scenarios.”
This month, the companies announced Aetna would acquire Humana for roughly $35 billion in stock and cash, subject to approval by shareholders and regulators.
The filing on Broussard’s compensation came July 2, the day before the companies announced the acquisition proposal and plans for Aetna CEO Mark Bertolini to become the combined company’s CEO and chairman.
Neither Humana nor Aetna officials have said anything more about Broussard’s future. When asked about the changes to Broussard’s compensation, Noland cited the same wording from the SEC document and didn’t elaborate.
One former provision of the Broussard Agreement held that he would forfeit all unvested stock options granted to him after the end of 2013. The July 2 change says that all of Broussard’s time-based stock options will become vested and exercisable on the date he’s terminated.
Also, rather than delay vesting on performance-based equity awards going to Broussard, the company wrote that those stock options would be vested and exercisable “as if the performance level had been attained.”
The change in the unvested terms means big bucks. SEC records show Broussard held unexercised options on 89,146 shares of stock at various prices and various dates to exercise the options. At the end of last year, their estimated combined value was $12.8 million — when each share of Humana stock was well below its $230 value (in cash and Aetna stock) under the acquisition.
The company had revised the Broussard Agreement in February 2014 in response to stockholders’ concerns and a review of his compensation compared with other top executives. In the July 2 document, Humana restored some provisions that had been deleted, according to a review of the company’s SEC filings.
The golden parachutes for Broussard and other executives include a “double trigger” provision, a trend in high-level severance where a package is paid if the person is terminated after the time the company has entered into a sale agreement that results in a change of control.
Humana would pay James E. Murray, the executive vice president and chief operating officer, $19.7 million, exceeding Broussard’s $16.9 million. Timothy Huval, chief human resources officer, would receive $11.3 million.
Steven McCulley, head of Medicare operations, is in line for $6.6 million; while chief financial officer Brian Kane would receive $5.9 million and Christopher Hunter, chief strategy officer, $5.5 million, records show.
How much does the Jones family still own in Humana stock? Co-founder David A. Jones Sr., as well as a family limited partnership, two companies to which he’s connected and separate trusts in his name and that of his wife Betty, held nearly 7 million shares in April 2005 before Jones left as chairman.
He was replaced by his son David Jones Jr., who in addition to leading venture capital firm Chrysalis Ventures, serves on the JCPS school board.
Once off the Humana board, and without holding beneficial ownership of more than 5 percent of the publicly traded securities, the elder Jones was no longer required to report transactions.
The younger Jones, who serves on the board and is subject to disclosure requirements, held 140,773 shares as of January 2015 and about 127,050 after transactions in late February. The value if the sale is consummated would be $29.3 million.
Golden Parachutes
For Humana executives:
• James E. Murray, executive VP and COO, $19.7 million
• Bruce Broussard, CEO, $16.9 million plus other compensation from accelerated stock options
• Timothy Huval, chief human resources officer, $11.3 million
• Steven McCulley, head of Medicare operations, $6.6 million
• Brian Kane, CFO, $5.9 million
• Christopher Hunter, chief strategy officer, $5.5 million
Date: July 23, 2015