8-KLeadership ChangesExhibits & Filings

CENTENE CORP 8-K Report, Executive Changes (Dec 21, 2020)

Filed December 21, 2020For Securities:CNC

Summary

Centene Corporation (CNC) filed an 8-K on December 21, 2020, detailing updates to its executive compensation program. The Compensation Committee adopted new forms of Restricted Stock Unit (RSU), Performance-Based Restricted Stock Unit (PSU), and Long-Term Incentive Plan (LTIP) Agreements. These new agreements were utilized for long-term incentive awards for the 2021-2023 performance cycle, impacting senior management and named executive officers. The company anticipates these forms will be used for future awards, aligning with its compensation philosophy and stockholder interests. The most significant change introduced in these new award agreements is the implementation of a "double trigger" for the acceleration of awards in the event of a Change in Control. This means that acceleration of vesting or payment will only occur if a Change in Control happens AND the executive's employment is terminated within 24 months of that event, either involuntarily without "Cause" or voluntarily for "Good Reason." This structure is designed to protect executive compensation in the context of a significant corporate transaction while also requiring continued service or qualifying termination to trigger benefits, a common practice aimed at aligning executive and shareholder interests during potential M&A scenarios.

Key Highlights

  • 1Centene adopted new forms for Restricted Stock Units (RSUs), Performance-Based RSUs (PSUs), and Long-Term Incentive Plans (LTIPs) for the 2021-2023 performance cycle.
  • 2These updated award agreements were used to grant long-term incentives to senior management, including named executive officers.
  • 3A key change is the introduction of a "double trigger" mechanism for award acceleration upon a "Change in Control."
  • 4Acceleration of RSUs, PSUs, and LTIP awards will now only occur if a Change in Control is followed by a qualifying termination (involuntary without Cause or voluntary for Good Reason) within 24 months.
  • 5For RSUs, accelerated vesting leads to 100% vesting upon termination.
  • 6For PSUs and LTIP awards, accelerated vesting/payout will be at the greater of actual performance at the time of Change in Control or target performance level.
  • 7These changes are intended to support Centene's compensation philosophy and align with stockholder interests, particularly during potential corporate transactions.

Frequently Asked Questions

The primary change is the implementation of a 'double trigger' for award acceleration in the event of a 'Change in Control.' This means that executive awards (RSUs, PSUs, LTIPs) will only vest or be paid out if a Change in Control occurs AND the executive's employment is subsequently terminated within 24 months without Cause or for Good Reason.

The double trigger mechanism is designed to benefit shareholders by ensuring that executives do not receive accelerated compensation simply because a Change in Control event happens. Instead, it requires a qualifying termination following the event, encouraging executives to continue their service during a transition period and aligning their incentives with the successful completion of the transaction and ongoing operations.

If a double trigger event occurs, PSU awards that are not yet vested will vest at the greater of the actual performance achieved at the time of the Change in Control or the target performance level. Similarly, cash LTIP awards will be paid out within 30 days following termination at the greater of the actual performance at the time of the Change in Control or 100% of the target performance level.

These new award agreements were specifically used to make long-term incentive awards for the 2021-2023 performance cycle to certain members of the Company’s senior management team, including the Company's named executive officers. The company anticipates these forms will be used for future awards, likely continuing this focus on senior leadership.