DEF 14A of Alignment Healthcare, Inc.
Filed Apr 26, 2024 · FY20230001193125-24-116055
Our Director Nominees
Our Director Nominees You are being asked to vote on the election of the four Class III Directors listed below. For additional information about each nominee’s background and experience, please see “Proposal 1 – Election of Directors—Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting” beginning on page 13.
Our Director Nominees
| Name | Age | Director Since | Independent | Selected Skills &Qualifications | Committees | | Yon Jorden | 69 | 2022 | Yes | ● Executive Leadership ● Health Care Industry Experience ● Audit Committee Experience ● Accounting/Finance Expert | Audit | | John Kao | 62 | 2014 | No | ● Executive Leadership ● Health Care Industry Experience | — | | Joseph Konowiecki, Chairman | 70 | 2014 | No | ● Executive Leadership ● Health Care Industry Experience ● Legal/Securities Regulatory Compliance | — | | Margaret McCarthy, Lead Independent Director | 70 | 2020 | Yes | ● Executive Leadership ● Health Care Industry Experience ● Audit Committee Experience ● Technology/Business Processes | Audit |
Executive Compensation Highlights
| What We Do | | What We Don’t Do | | | ✓ | Emphasize variable pay over fixed pay, with a significant portion focused on long-term value creation | × | No guaranteed or uncapped incentive payouts in our annual bonus plan | | ✓ | Disclose our corporate performance goals and achievements relative to these goals | × | No repricing or exchange of underwater options without stockholder approval | | ✓ | Use an independent compensation consultant | × | No option or stock appreciation rights granted below fair market value | | ✓ | Maintain anti-hedging and anti-pledging policies | × | No significant perquisites | | ✓ | Conduct an annual advisory vote on the compensation of our NEOs. | × | No tax gross-ups, other than for certain relocation expenses |
PROPOSAL 1 – ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS Our Board recommends that the nominees below be elected as Class III members of the Board at the Annual Meeting for a term expiring at the 2027 Meeting of Stockholders:
PROPOSAL 1 – ELECTION OF DIRECTORS
| Name | Age | Director Since | Independent | Committees | Other Public Company Boards | | Yon Jorden | 69 | 2022 | Yes | Audit | ● Cohu, Inc. ● Capstone Green Energy Corp. | | John Kao | 62 | 2014 | No | — | — | | Joseph Konowiecki, Chairman | 70 | 2014 | No | — | — | | Margaret McCarthy, Lead Independent Director | 70 | 2020 | Yes | Audit | ● American Electric Power Co. Inc. ● First American Financial Corp. ● Marriott International |
PROPOSAL 1 – ELECTION OF DIRECTORS
Each nominee was recommended for re-election by the NCGCC for consideration by the Board and our stockholders. If, before the Annual Meeting, any nominee becomes unable to serve, or chooses not to serve, the Board may nominate a substitute. If that happens, the persons named as proxies on the proxy card will vote for the substitute. Alternatively, the Board may either let the vacancy stay unfilled until an appropriate candidate is identified or reduce the size of the Board to eliminate the unfilled seat, subject to the Stockholders Agreement (as defined below).
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
| Yon Jorden | Ms. Jorden has served as a member of our Board since January 2022. Ms. Jorden has served as a director and audit committee member of Cohu, Inc., a manufacturer of semiconductor equipment, since May 2021, and as a director of Capstone Green Energy Corp., a microturbine manufacturer, since April 2017. Additionally, she has served as a director and finance committee member of Methodist Health System, a not-for-profit Texas-based hospital system, since 2008. Prior to her current roles, Ms. Jorden served as director and a member of the audit committee for Maxwell Technologies, a manufacturer of energy storage and power delivery solutions, from 2008 to 2017. In addition, she also served as director and chairperson of the audit committee of Magnatek, Inc., a manufacturer of digital power control systems, U.S. Oncology, a privately held oncology services company, and BioScrip, a national provider of infusion and home care management solutions. During her business career, she served as chief financial officer of four publicly traded companies, including as Executive Vice President and Chief Financial Officer of AdvancePCS, a pharmacy benefits management company, from 2002 to 2004. Previously she was chief financial officer of Informix Corp. (now Ascential Software Corp.), a provider of information management software, Oxford Health Plans, a provider of managed health care services, and WellPoint, Inc., a managed care company. Earlier in her career, she was a senior auditor with Arthur Andersen & Co., where she became a Certified Public Accountant (inactive) in the State of California. Ms. Jorden is a Board Leadership Fellow of the National Association of Corporate Directors. She |
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
| | received her Bachelor of Science degree in Accounting from the California State University, Los Angeles. Ms. Jorden is a valuable member of our Board because of her extensive experience as a chief financial officer, her financial expertise and her experience as a director of multiple public and private companies. | | John Kao | Mr. Kao has served as our Chief Executive Officer and as a member of our Board since 2014. Mr. Kao is our founder, and he was appointed as our Chief Executive Officer and to serve on our board of directors because of his extensive experience in managing organizations in the health care industry. Mr. Kao previously served as president of CareMore Medical Enterprises, Inc. (“CareMore”), which Mr. Kao and his partners acquired in 2006. In August 2011, CareMore was acquired by Wellpoint, Inc. Mr. Kao has also served as executive vice president at The TriZetto Group, and has served as president and CEO of the Ventures Division of PacifiCare Health Systems. While at PacifiCare, Mr. Kao was the chief financial officer at Secure Horizons USA. His earlier work included mergers and acquisitions with FHP International and investment banking with BancAmerica Securities, Inc. Mr. Kao received his Bachelor of Science degree from Santa Clara University and his MBA from the UCLA Anderson Graduate School of Management, where he was honored as a Venture Capital Fellow. Mr. Kao is qualified to serve on our Board because of his executive leadership experience and his extensive experience in the health care industry. | | Joseph Konowiecki | Mr. Konowiecki has served as chairman of the Board since 2014. From October 2022 to December 2023, he served in an executive role with the Company, leading strategic network and business development. Since 2009, Mr. Konowiecki has served as managing partner of Moriah Partners, LLC and is the founder and CEO of Advanced Sports Media Group. Mr. Konowiecki previously served as Chairman and CEO of Apollo Enterprise Solutions, Inc. Mr. Konowiecki was previously CEO of Future Solutions with UnitedHealth Group’s Ovations division. Mr. Konowiecki has also held the positions of general counsel and executive vice president corporate affairs at PacifiCare Health Systems, Inc. In addition, he is a founding partner of the law firm Konowiecki & Rank and serves as a member of the RAND Healthcare Advisory Board. Mr. Konowiecki received a Bachelor of Arts degree in Political Science from the University of California, Los Angeles and a JD from Hastings College. Mr. Konowiecki was appointed to serve on our board of directors because of his extensive experience in managing organizations as an executive officer and representing organizations in the health care industry. |
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
| Margaret McCarthy | Ms. McCarthy has served as a member of our Board since December 2020 and as our Lead Independent Director in October 2022. Ms. McCarthy retired in June 2019 as executive vice president of CVS Health following the completion of CVS Health’s acquisition of Aetna in 2018. She served as Executive Vice President of Operations and Technology for Aetna from 2010 until 2018, where she was responsible for innovation, technology, data security, procurement, real estate and service operations. Prior to joining Aetna in 2003, she served in information technology-related roles at Cigna and Catholic Health Initiatives, among others. Ms. McCarthy also worked in technology consulting at Accenture and was a consulting partner at Ernst & Young. She has served as a director of Marriott International since March 2019, of First American Financial since June 2015, and of American Electric Power Co. Inc. since April 2019. She was director at Brighthouse Financial from November 2018 until June 2021. She also served on various advisory boards, councils and private-company boards. Ms. McCarthy holds a bachelor’s degree from Providence College and a master’s degree in public health, hospital administration from Yale University. Given her extensive experience managing large groups of employees, complex processes and enterprise-critical technology, Ms. McCarthy brings to the board valuable insights into areas of critical import to our operations. |
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
A plurality of the votes cast by the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon is required to elect each nominee named herein. This means that the four nominees receiving the highest number of votes at the Annual Meeting will be elected, even if those votes do not constitute a majority of the votes cast. Shares not present at the Annual Meeting and broker non-votes have no effect on the election of directors. Abstentions are not applicable to this vote.
Director Nominees to Serve for a Three-Year Term Expiring at the 2027 Annual Meeting
| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE ABOVE DIRECTOR NOMINEES. |
Continuing Directors
Continuing Directors The following table summarizes key facts regarding the members of our Board whose terms are continuing beyond the Annual Meeting:
Continuing Directors
| Name | Class | Age | Director Since | Term Expires | Independent | Committees | Other Public Company Boards | | Thomas Carella | I | 49 | 2017 | 2025 | Yes | Compensation | — | | Mark McClellan | I | 60 | 2014 | 2025 | Yes | — | ● Cigna Corporation ● Johnson & Johnson | | Robbert Vorhoff | I | 45 | 2014 | 2025 | Yes | Compensation (Chair) | ● Oak Street Health, Inc. | | Jody Bilney | II | 62 | 2022 | 2026 | Yes | NCGCC | ● Chuy’s Holdings, Inc. ● Masonite International Corp. ● Cracker Barrel Old Country Store, Inc. | | David Hodgson | II | 67 | 2014 | 2026 | Yes | NCGCC (Chair) | ● TriNet Group, Inc. ● Royalty Pharma plc | | Jacqueline Kosecoff | II | 74 | 2017 | 2026 | Yes | Compensation NCGCC | ● Houlihan Lokey, Inc. ● Steris plc ● TriNet Group, Inc. | | Jeffrey Margolis | II | 60 | 2014 | 2026 | Yes | Audit (Chair) | ● NextGen Healthcare, Inc. |
Continuing Directors
| Thomas Carella | Mr. Carella has served as a member of our Board since 2017. Mr. Carella has served as a Managing Director at Warburg Pincus since September 2016 where he is Head of the Healthcare group. Prior to joining Warburg Pincus, Mr. Carella was a Partner in the Merchant Banking Division of Goldman Sachs and Global Head of the division’s private equity activities in the health care sector. While at Goldman Sachs, he led, or was actively involved in several investments across life sciences, health care services and health care information technology. Mr. Carella currently serves on the board of directors of private health care companies including Aetion, Bond Vet, Polyplus, Quantum Health, Ensemble Health Partners, Pareto Health, Simtra BioPharma Solutions and WebPT. Mr. Carella previously served on the board of public companies SOC Telemed, Inc. from October 2020 to April 2022 and Outset Medical, Inc. from April 2019 to January 2021. He also previously served on the board of private companies Summit Health/City MD from 2017 to 2023, and Vertice Pharma from 2020 to 2022. Mr. Carella holds a B.A. from Harvard College and an M.B.A. from Harvard Business School. Mr. Carella serves on our Board because of his private equity experience and his experience on other health care companies’ boards. |
Continuing Directors
| Mark McClellan | Dr. McClellan has served as a member of our Board since 2014. Dr. McClellan became the inaugural Director of the Duke-Robert J. Margolis, MD, Center for Health Policy and the Margolis Professor of Business, Medicine and Policy at Duke University in January 2016. He is also a faculty member at Dell Medical School at The University of Texas in Austin. Previously, he served from 2007 to 2015 as a Senior Fellow in Economic Studies and as Director of the Initiatives on Value and Innovation in Health Care at the Brookings Institution. Dr. McClellan served as Administrator of the Centers for Medicare & Medicaid Services (“CMS”) for the U.S. Department of Health and Human Services from 2004 to 2006 and as Commissioner of the U.S. Food and Drug Administration from 2002 to 2004. He served as a Member of the President’s Council of Economic Advisers and as Senior Director for Healthcare Policy at the White House from 2001 to 2002 and, during the Clinton administration, held the position of Deputy Assistant Secretary for Economic Policy for the Department of the Treasury. Dr. McClellan previously served as an Associate Professor of Economics and Medicine with tenure at Stanford University, where he also directed the Program on Health Outcomes Research. Dr. McClellan was the founding chair and currently serves as an advisor to the Reagan-Udall Foundation. He is also a member of the National Academy of Medicine, chairs the Academy’s Leadership Consortium: Collaboration for a Value and Science-Driven Learning Health System, and co-chairs the Guiding Committee of the Health Care Payment Learning and Action Network. He sits on the boards of directors of various nonprofit organizations including ResearchAmerica!, National Alliance for Hispanic Health, Institute for Accountable Care, PrognomIQ and United States of Care, as well as two public companies, Cigna Corporation and Johnson & Johnson. Dr. McClellan received his Bachelor of Arts degree from the University of Texas, his Masters of Public Administration and Medical Doctorate from Harvard University and his Doctor of Philosophy in Economics from Massachusetts Institute of Technology. Dr. McClellan is a valuable member of our Board because of his extensive experience in public health policy, his academic experience and background as both a regulator and government advisor. | | Robbert Vorhoff | Mr. Vorhoff has been a member of our Board since 2014. Mr. Vorhoff is a Managing Director, Management Committee member, Investment Committee member and the Head of Global Healthcare at General Atlantic, an investment management firm, in New York City. Before joining General Atlantic in 2003, Mr. Vorhoff worked at Greenhill & Co., an investment bank, first in the mergers & acquisitions and restructuring advisory group, then in the private equity group, Greenhill Capital Partners. Mr. Vorhoff is currently a member of several private health care companies, including Equality Health, Included Health, Marathon Health, NationsBenefits, Suvida Helathcare, Author Health and WelbeHealth, as well as several other private companies and nonprofit organizations. Mr. Vorhoff previously was a member of the boards of Align Networks, Alternate Solutions Health Network, A Place for Mom, eviCore Healthcare, Landmark Health, Oak Street Health, OneOncology and MedExpress. Mr. Vorhoff received a B.S. in Commerce with a concentration in Finance from the McIntire School of Commerce at the University of Virginia. Mr. Vorhoff is a valuable member of our Board because of his private equity experience and his experience on other health care companies’ boards. |
Continuing Directors
| Jody Bilney | Ms. Bilney has served as a member of our Board since January 2022. Ms. Bilney served as the Chief Consumer Officer of Humana, Inc., a health insurance provider, from April 2013 until her retirement in March 2020. Prior to that, she served in various senior executive marketing roles with Bloomin’ Brands, Inc. from 2006 through March 2013, most recently serving as Executive Vice President and Chief Brand Officer. Prior to joining Bloomin’ Brands, she held senior executive positions with Openwave Systems, Inc., Charles Schwab & Co., Inc., and Verizon Communications, Inc. Ms. Bilney has served as a director of Chuy’s Holdings, Inc. since 2021, Masonite International Corp. since 2014 and Cracker Barrel Old Country Store, Inc. since 2022. She earned a Bachelor of Science degree in Economics, with a minor in Marketing, from Clemson University. Ms. Bilney is a valuable member of our Board because of her leadership and industry-specific and marketing experience. | | David Hodgson | Mr. Hodgson has served as a member of our Board since 2014. Mr. Hodgson is a Managing Director and Vice Chairman of General Atlantic. He joined General Atlantic in 1982 and has over 30 years of experience identifying and assisting portfolio companies worldwide in all areas of their development. Currently, Mr. Hodgson is Chair of the board of directors of TriNet Group, Inc., a public human resources provider, and is a member of the board of directors of Royalty Pharma plc, a public pharmaceutical company. Mr. Hodgson has an MBA from Stanford Graduate School of Business (1982) and a Bachelor of Arts in Mathematics and Social Sciences from Dartmouth College (1978). Mr. Hodgson is a valuable member of our Board because of his private equity experience and his experience on other health care companies’ boards. | | Jacqueline Kosecoff | Dr. Kosecoff has served as a member of our Board since 2017. Since 2012, Dr. Kosecoff has served as a Managing Partner of Moriah Partners and also a Senior Advisor of Warburg Pincus. From 2002 to 2012, Dr. Kosecoff was a senior executive inside UnitedHealth Group-PacifiCare, which she joined as part of the acquisition of PacifiCare Health Systems in 2005, where she served as Executive Vice President. Upon joining UnitedHealth Group, Dr. Kosecoff was appointed Chief Executive Officer of Prescription Solutions (now known as OptumRx). Prior to joining UnitedHealth Group-PacifiCare, Dr. Kosecoff was founder, President and Chief Operating Officer of Protocare. Currently Dr. Kosecoff sits on the board of directors of Steris, plc, TriNet Group, Inc. and Houlihan Lokey, Inc. Additionally, Dr. Kosecoff served on the boards of directors of GoodRx Holdings, Inc. from May 2016 to June 2023; of Sealed Air Corporation from May 2005 to May 2021; and of athenahealth, Inc. from July 2012 to February 2019. Dr. Kosecoff holds a B.A. from the University of California, Los Angeles, an M.S. in Applied Mathematics from Brown University, and a doctorate from the University of California, Los Angeles. Dr. Kosecoff was appointed to serve on our board of directors because of her knowledge of Medicare Advantage and Medicare Part D, extensive experience in managing organizations and her experience serving on public company boards. |
Continuing Directors
| Jeffrey Margolis | Mr. Margolis has served as a member of our Board since 2014. He currently serves as Vice Chairman of TriNetX, Inc., and as a director of Get-Grin Inc. , Brightside Health, and DNAnexus, and as a senior advisor to Blackstone. Mr. Margolis served as Chairman of NextGen Healthcare, Inc. from November 2015 through November 2023 and has served as a member of the NextGen board since May 2014. He previously served as Chairman of Welltok, Inc. from October 2011 until November 2021, where he also served as CEO from April 2013 through April 2020. Mr. Margolis is Chairman Emeritus of TriZetto Corporation, where he served as the founding CEO beginning in 1997, served as Chairman and CEO until 2010, and continued as Chairman until October 2011. He also served as Senior Executive Advisor to the Oliver Wyman Health Innovation Center during 2012 and 2013. From 1989 to 1997, Mr. Margolis served as Senior Vice President and Chief Information Officer of FHP International Corp. Earlier in his career, Mr. Margolis served in various positions with Andersen Consulting (now Accenture) including his final position as Manager, Healthcare Consulting. Mr. Margolis currently serves on the board of directors of Hoag Hospital from 2010 through 2022 and was the inaugural Chairman of the Hoag Clinic from 2020 to 2022 in Newport Beach, California. He currently serves on the Advisory Boards of the University of California at Irvine’s Center for Healthcare Management & Policy and Center for Digital Transformation. A published author of two books the topics of health care information technology and systems, Mr. Margolis earned a bachelor’s degree in business administration/management information systems with high honors from the University of Illinois in 1984 and holds CPA certificates (currently inactive) in Colorado and Illinois. Mr. Margolis is a NACD Board Leadership Fellow and holds a Certified Global Management Accountant designation with the American Institute of Certified Public Accountants. Mr. Margolis is a valuable member of our Board because of his extensive experience as a chief executive officer in the health care information technology sector, his financial expertise and his experience as an executive officer and director of multiple public and private companies. |
Nomination Criteria and Director Experience
Nomination Criteria and Director Experience
Identifying Nominees for Directors
Identifying Nominees for Directors The Board has delegated an established screening process for director nominees to the NCGCC, with counsel from our Chairman, our Lead Independent Director, our Chief Executive Officer, and outside consultants as appropriate. The goal of the screening process is to assemble a group of potential board members with deep, varied experience, sound judgment, and commitment to the Company’s success. The NCGCC regularly assesses the appropriate size of the Board, the areas of expertise required to effectively contribute to the Board process, and whether any vacancies are anticipated. It also annually assesses the director qualification criteria to ensure the Board has appropriate skill composition consistent with the Company’s long-term business, operations goals, growth strategy and risks. This includes (i) qualifications or characteristics that are expected and befitting of all directors and (ii) specific skills, experience or qualifications that should be represented collectively on our Board. As a result of its analysis, the NCGCC may recommend to the Board a need for an additional director, Board refreshment for certain requisite skills and qualifications, and/or the replacement of an existing director for other credible reasons. The self-identification process may also incorporate responses, as appropriate, from the Board’s annual individual self-evaluations. Such evaluations require each director to honestly reflect upon and recount their personal contributions to the Board in the prior year and to provide feedback regarding their performance, the overall Board performance and the performance of certain other key Board positions. See “Corporate Governance—Board Evaluation Practices.” The NCGCC will consider qualified candidates for director nominees suggested by the Company’s stockholders. Stockholders can suggest qualified candidates for director nominees by writing to the Chief Legal & Administrative Officer of the Company at 1100 W. Town & Country Rd., Suite 1600, Orange, CA 92868. Submissions should include the information about the director candidate and the stockholder making the submission that would otherwise be required by Article II, Section 11(b) of our Bylaws if the stockholder was nominating the individual for election to our Board. Submissions received that include such information, and provided that the recommended candidate meets the criteria described above, are forwarded to the NCGCC for further review and consideration. The committee may also request additional information concerning the director candidate that it deems reasonably required to determine the eligibility and qualification of the director candidate to serve on our Board. Stockholders suggesting director candidates for consideration by our Board in connection with the 2025 annual meeting of stockholders should provide their submission pursuant to the deadlines described above under “Commonly Asked Questions and Answers About the Annual Meeting.” The NCGCC does not intend to evaluate candidates proposed by stockholders any differently from other candidates. As part of the process of identifying appropriate director candidates, the NCGCC formally reviews each director’s continuation on the Board every three years. As part of its formal review of directors, the NCGCC considers all factors which it deems appropriate, including director performance, any other directorships held by the director, whether the director undertook continuing director education and any other criteria approved by the Board.
Compensation Committee
| • | conducting the independence assessment outlined in applicable rules with respect to any compensation consultant, legal counsel or other advisor retained by the compensation committee; |
Compensation Committee
| • | reviewing and making recommendations to our Board with respect to director compensation; and |
2023 Compensation Highlights
| ● | Annual Cash Incentives. Based on our financial performance in 2023, the Compensation Committee determined that corporate goals under the Annual Incentive Plan were achieved at 134.4% of each NEO’s applicable bonus target (for NEOs other than the CEO, corporate goals determine 75% of the overall payout; for the CEO, corporate goals determine 100% of the overall payout). The Compensation Committee also made determinations regarding the achievement of individual performance goals for our NEOs, which ranged from 100% to 200% (individual goals determine 25% of overall payout for NEOs other than the CEO, whose payout is not influenced by individual goal performance). |
2023 Compensation Highlights
| ● | Long-Term Equity Incentives. In September 2023, the Compensation Committee recommended, and the Board approved, long-term equity grants to executive officers entirely in the form of performance-based restricted stock units (“September 2023 PSUs”). In arriving at its recommendation to grant equity in PSUs, the Compensation Committee considered our team’s continued strong performance amidst the challenging macroeconomic environment since our IPO in 2021, particularly as compared to certain peer Medicare Advantage companies, as well as several other critical factors: |
2023 Compensation Highlights
| o | The diminution of the intended target value of the equity awards granted at our IPO in 2021 and in 2022. |
2023 Compensation Highlights
With respect to the September 2023 PSUs, our NEOs can earn between 0% to 150% of their target award depending on the Company’s achievement of certain performance metrics over a one-year period (i.e., fiscal year 2024). The Compensation Committee chose to measure performance for this grant using a one-year performance period, although the Compensation Committee intends to adopt PSUs contingent upon longer performance measurement cycles as the Company’s long-term incentive strategy evolves with respect to future grants. For more information, see “—2023 Executive Compensation Program in Detail—Long-Term Equity Incentives.”
Compensation Best Practices & Policies
| What We Do | | What We Don’t Do | | | ✓ | Emphasize variable pay over fixed pay, with a significant portion focused on long-term value creation | × | No guaranteed or uncapped incentive payouts in our annual bonus plan | | ✓ | Disclose our corporate performance goals and achievements relative to these goals | × | No repricing or exchange of underwater options without stockholder approval | | ✓ | Use an independent compensation consultant | × | No option or stock appreciation rights granted below fair market value | | ✓ | Maintain anti-hedging and anti-pledging policies | × | No significant perquisites | | ✓ | Conduct an annual advisory vote on the compensation of our NEOs. | × | No tax gross-ups, other than for certain relocation expenses | | ✓ | Maintain stock ownership guidelines for our executive officers and Board of Directors. | | | | ✓ | Maintain a Clawback Policy consistent with the SEC and Nasdaq listing standards. | | |
The Role of the Independent Consultant
The Role of the Independent Consultant The Compensation Committee engages an independent compensation consultant to provide expertise on competitive pay practices, program design, and an objective assessment of any inherent risks of any programs. Pursuant to authority granted to it under its charter, the Compensation Committee has hired Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent consultant. Pearl Meyer reports directly to the Compensation Committee and does not provide any additional services to management. The Compensation Committee has conducted an independence assessment of Pearl Meyer in accordance with Nasdaq rules.
The Role of Peer Group Companies
The Role of Peer Group Companies The Compensation Committee strives to set a competitive level of total compensation for each NEO as compared with executive officers in similar positions at peer companies. For purposes of setting 2023 compensation levels, in conjunction with the recommendation of Pearl Meyer, the Compensation Committee considered publicly available data for a group of peer companies (the “2023 Compensation Peer Group”) listed below, along with industry specific survey data, where appropriate. Selection criteria for determining/reviewing the 2023 Compensation Peer Group, used to establish the competitive market for the NEOs, generally include companies within the “Health Care Services” and “Health Care Technologies” industry groups and last twelve-month revenues ranging from approximately 1/5 times to 3 times Alignment Healthcare’s revenues (i.e., ~$282 million -$3.2billion) as of June 1, 2023.
The Role of Peer Group Companies
| • 1Life Healthcare, Inc. | • HealthEquity, Inc. | | • agilon health, inc. | • Oak Street Health | | • Amedisys, Inc. | • Omnicell, Inc. | | • Bright Health Group, Inc. | • Phreesia, Inc. | | • Cano Health, Inc. | • Privia Health Group, Inc. | | • Evolent Health, Inc. | • Signify Health, Inc. | | • Health Catalyst, Inc. | • Veradigm, Inc. |
The Role of Peer Group Companies
Given the significant growth of the Company over the course of the year and consolidation in the healthcare space, the peer group was revisited in mid-2023 to better fit the current size and operating complexities of the Company for purposes of setting pay levels for 2024. Selection criteria used to establish the competitive market for the NEOs generally included companies within the “Health Care Services,” Life and Health Insurance,” “Health Care Facilities,” “Health Care Equipment,” and “Health Care Technologies” industry groups, with last twelve-month revenues ranging from approximately one-fifth to three times that of Alignment Healthcare’s revenues (i.e., ~$653 million - $4,482 million) as of June 1, 2023.
The Role of Peer Group Companies
| • Addus HomeCare Corporation | • NextGen Healthcare, Inc. | | • Agiliti, Inc. | • Oak Street Health, Inc. | | • agilon health, inc. | • Omnicell, Inc. | | • Amedisys, Inc. | • Oscar Health, Inc. | | • Evolent Health, Inc. | • Pediatrix Medical Group, Inc. | | • LifeStance Health Group, Inc. | • Privia Health Group, Inc. | | • Molina Healthcare, Inc. | • RadNet, Inc. | | • National HealthCare Corporation | • Veradigm Inc. |
The Role of Peer Group Companies
It is important to note that this market data is not the sole determinant in setting pay levels for the NEOs. Actual pay levels can be above or below the targeted levels depending on factors such as experience, individual or company performance, tenure, employee potential, unique skills, criticality of the position to the Company and other factors. In general, the Compensation Committee desires to balance general internal and external equity and reserves the right to use discretion to deviate when necessary to recruit employees and/or retain the right talent.
Annual Incentives
Annual Incentives The 2023 Annual Incentive Plan provided our NEOs the opportunity to earn a performance-based annual cash bonus. Actual payouts depend on the achievement of pre-determined, strategic and/or financial corporate performance objectives (which represent 100% of the award for the CEO and 75% of the award for the other NEOs), as well as individual performance (which represent 25% of the award for the NEOs other than the CEO). Based on results, payouts can range from 0% to 200% of target award amounts. In addition, a modifier (-25% to +50%) is applied to the total bonus payout based on the Company’s CMS Star Ratings (see further description below). The modifier ensures there is a direct connection and significant focus on quality and the experience our members are receiving. Target annual bonus opportunities are expressed as a percentage of base salary and were established based on the NEO’s level of responsibility and their ability to impact overall results. The Committee also considers market data in setting target award amounts. Payouts under the 2023 Annual Incentive Plan occur as follows: (i) 75% of each NEO’s total annual incentive payout based on corporate and individual performance was paid in March 2024; and (ii) the remaining 25% of each NEO’s total annual incentive payout is held back and is expected to be paid in the fourth quarter of 2024, subject to achievement of CMS Star Ratings-related performance measures. See “—2023 Annual Incentive Plan Payouts —Adjustment for CMS Star Ratings” below. Target bonus opportunities for 2023 for each of the NEOs are summarized in the table below:
Annual Incentives
| Name | 2023 Base Salary Rate ($) | Target Bonus Opportunity (%) | 2023 Target Bonus Opportunity ($) | | John Kao | 800,000 | 100 | 786,539(1) | | Thomas Freeman | 560,000 | 85 | 462,269(1) | | Dawn Maroney | 560,000 | 85 | 476,000 | | Hakan Kardes | 425,000 | 85 | 361,250 | | Hyong (Ken) Kim, M.D. | 140,000 | 85 | 119,000 |
Annual Incentives
| (1) Target bonus opportunity is based on weighted average of each NEO’s base salary during the year. Base salary increased for Messrs. Kao and Freeman were effective in March 2023 and target bonus opportunities are adjusted accordingly. |
Annual Incentives
| (2) Mr. Kim was appointed Chief Medical Officer effective September 25, 2023. Base salary rate and target bonus opportunity reflect the applicable portion of the 2023 year. |
Annual Incentives
2023 Corporate Performance Metrics, Weightings and Results In 2023, we used health plan membership, adjusted gross profit and adjusted EBITDA as the corporate performance metrics in the Annual Incentive Plan. We chose these metrics for the following reasons in the Annual Incentive Plan:
Annual Incentives
| • | Health plan membership growth shows that we are increasing our customer base and is a leading indicator of long-term revenue and profitability growth for Alignment Healthcare. |
Annual Incentives
| • | Adjusted gross profit keeps us focused on efficient delivery and execution. |
Annual Incentives
| • | Adjusted EBITDA provides a clear view of our total operational profitability—it focuses on growth, while continuing to provide strong accountability for returns. |
Annual Incentives
The table below sets forth the relative weighting of the metrics selected for our 2023 Annual Incentive Plan, the results achieved for each metric, as determined by the Compensation Committee, and the resulting aggregate percentage achieved with respect to our corporate objectives:
Annual Incentives
| | 2023 Performance Metrics and Levels | | | | | Health Plan Membership as of January 1, 2024 | Adjusted Gross Profit(1) | Adjusted EBITDA(1) | | | (50% Weighting) | (30% Weighting) | (20% Weighting) | | Threshold | 124,545 | $202M | ($37.8M) | | Target | 129,960 | $217M | ($-22.8M) | | Maximum | 140,790 | $232M | ($0M) | | Actual Results(2) | 200% of Target | 74% of Target | 61% of Target | | Funded Amount(3) | 134.4% of Target | | |
Annual Incentives
| (1) Adjusted gross profit and adjusted EBITDA are non-GAAP measures. For a reconciliation to the most directly comparable GAAP measures, please see the Appendix to this proxy statement. For these measures, performance is measured from “Target” to “Maximum” on a linear basis excluding incremental additional accruals for Annual Incentive Plan payouts for performance above “Target.” |
Annual Incentives
| (2) The actual percent of target achieved is calculated based on straight-line interpolation between incremental goal levels established between threshold and target and target and maximum. |
Annual Incentives
| (3) Represents percentage of corporate objectives achieved. Actual payouts to NEOs were adjusted to reflect level of achievement of individual objectives, which ranged from 100% to 200% (which the exception of our CEO, whose payout is entirely based on achievement of corporate objectives). |
Annual Incentives
2023 Annual Incentive Plan Payouts Based on the above performance results, the funding of the Annual Incentive Plan was set at 134.4% of each NEO’s applicable target based on the achievement of corporate objectives and subsequently adjusted based on each NEO’s individual performance (excluding the CEO whose bonus entirely based on achievement of corporate objectives). Target bonus opportunities for the 2023 year and payout amounts reflect the weighted average of the target bonus opportunity percentages applicable to each NEO for each applicable period throughout the year. The table below sets forth the actual awards earned by the NEOs in 2023 (and paid in 2024):
Annual Incentives
| Name | 2023 Bonus Target (%) | 2023 Target Bonus Opportunity ($) | Corporate Performance Results (%) | Individual Performance Results (%) | Actual Payout Amount(1) ($) | Actual Payout as Percent of Target (%) | | John Kao | 100 | 786,539 | 134.4 | n/a | 1,057,108 | 134.4 | | Thomas Freeman(1) | 85 | 462,269 | 134.4 | 200% | 697,102 | 150.8 | | Dawn Maroney(1) | 85 | $476,000 | 134.4 | 200% | 717,809 | 150.8 | | Hakan Kardes(1) | 85 | $361,250 | 134.4 | 150% | 434,913 | 120.4 | | Hyong (Ken) Kim, M.D.(1)(2) | 85 | 119,000 | 134.4 | 100% | 149,702 | 125.8 |
Annual Incentives
| (1) Represents potential payout based on achievement of corporate objectives established at 134.4% and individual objectives as shown in the table. Actual payout in March 2024 was 75% of these amounts, with the remaining 25% held back and potentially payable in the fourth quarter of 2024, subject to the modifier based on the Company’s CMS Star Ratings. See “—2023 Annual Incentive Plan Payouts—Adjustment for CMS Star Ratings” below. Does not include additional discretionary bonus amounts awarded for 2023. See “Executive and Director Compensation—Summary Compensation Table.” |
Annual Incentives
| (2) Mr. Kim’s payout is pro-rated to reflect his hire date with the Company on September 25, 2023. |
Annual Incentives
Adjustment for CMS Star Ratings. As described above, 25% of each NEOs total 2023 Annual Incentive Plan payout based on corporate and individual performance will not be paid until the fourth quarter of 2024. The amount of the holdback that is paid to each NEO is subject to an adjustment based on the CMS Star Rating achieved by the Company’s Medicare Advantage plans. Each rated health plan has an “Overall” quality rating of 1 to 5 stars (5 is highest), which accounts for member experience, medical care, and health plan administration. A plan’s overall rating is based on three general categories:
Annual Incentives
| • | Member experience: Based on surveys of member satisfaction including: |
Annual Incentives
o Their health care and doctors o Ease of getting appointments and services
Annual Incentives
| • | Medical care: Based on how well the plan’s network providers manage member health care, including: |
Annual Incentives
o Providing regular screenings, vaccines, and other basic health services o Monitoring some conditions
Annual Incentives
| • | Plan administration: Based on how well the plan is run, including: |
Annual Incentives
o Customer service o Access to needed information o Network providers ordering appropriate tests and treatment All health plan ratings are calculated the same way, using the same information sources. When the prior fiscal year’s results are available in the fourth quarter of 2024, the NEO’s final payouts will be adjusted as follows:
Annual Incentives
| ● | 3.5 stars or lower will result in a 25% decrease in each NEO’s aggregate bonus (i.e., no payment of the 25% holdback will occur); |
Annual Incentives
| ● | 4.0 stars will result in a 5% decrease in each NEO’s aggregate bonus; |
Annual Incentives
| ● | 4.5 stars will result in a 40% increase in each NEO’s aggregate bonus; and |
Annual Incentives
| ● | 5.0 stars will result in a 50% increase in each NEO’s aggregate bonus. |
Annual Incentives
In addition to the annual incentive payouts indicated above and as a result of the significant overperformance on the Health Plan Membership metric (actual result of 155,500 members vs. maximum goal of 140,790 members), the Compensation Committee determined that an additional discretionary bonus to executives (other than the CEO) was warranted. Discretionary bonus amounts are as follows and are further explained in the Summary Compensation Table.
Annual Incentives
| Officer | Discretionary Bonus | | Thomas Freeman | $105,000 (total payout = 174% of target) | | Dawn Maroney | $205,000 (total payout = 194% of target) | | Hakan Kardes | $90,000 (total payout = 167% of target) | | Hyong (Ken) Kim, M.D.: | $20,000 (total payout = 143% of target) |
Annual Incentives
As indicated by the percentages of target above, total bonus payout for 2023 performance did not exceed the plan cap of 200% of target for any individual.
Long-Term Equity Incentives
Long-Term Equity Incentives The Company’s long-term equity incentive program is designed to provide a portion of our executives’ compensation opportunity in equity-based instruments. We believe that long-term equity compensation is key to assuring our executives’ interests are aligned with those of our stockholders. 2023 Equity Awards In September 2023, the Compensation Committee and Board approved the award of the September 2023 PSUs to the NEOs under the Company’s 2021 Equity Incentive Plan (the “Plan”). In determining the nature and amount of long-term equity grants during 2023, the Compensation Committee considered our team’s continued strong performance amidst the challenging macroeconomic environment since our IPO in 2021 and its direct impact on our industry. In light of the diminution of the intended target value of the equity awards granted at our IPO in 2021 and in 2022, and the Company’s retention objectives given competition for talent in the health care space, together with the preference of our stockholders to see a stronger focus on performance-based equity compensation, the Compensation Committee approved long-term incentive grants for 2023 using 100% PSUs. With respect to the September 2023 PSUs, the NEOs are eligible to vest in a number of PSUs ranging from 0% to 150% of the target number of PSUs granted, based on the aggregate achievement by the Company of certain performance metrics during the performance period from January 1, 2024 to December 31, 2024 (the “Measurement Period”), with threshold, target and maximum goals for each performance metric set by the Compensation Committee. The Compensation Committee chose to measure performance for this grant using a one-year performance period, although the Compensation Committee intends to adopt PSUs contingent upon longer performance measurement cycles as the Company’s long-term incentive strategy evolves with respect to future grants. To the extent earned, shares will vest fifty percent (50%) upon certification of results by the Committee (expected on or about February 28, 2025) and fifty percent (50%) on December 31, 2025, subject to the applicable grantee’s continued employment on such date. The table below shows the target long-term incentive awards granted for fiscal year 2023 for each of the NEOs:
Long-Term Equity Incentives
| Name | PSUs at Target (#) | PSUs at Target ($ Value) | | John Kao | 2,177,333 | 12,497,891 | | Thomas Freeman | 873,667 | 5,014,849 | | Dawn Maroney | 873,667 | 5,014,849 | | Hakan Kardes | 406,000 | 2,330,440 | | Hyong (Ken) Kim, M.D.(1) | 50,000 | 287,000 |
Long-Term Equity Incentives
| (1) Pursuant to the terms of his Employment Agreement, on September 25, 2023, Mr. Kim received a one-time, new hire RSU award with a grant date fair value equal to $2.5 million. Such RSUs will vest in equal installments of twenty-five percent (25%) on each the first four anniversaries of the grant date, subject to the Mr. Kim’s employment on the applicable vesting date. |
Long-Term Equity Incentives
The achievement of PSUs relative to the approved target awards is based on the following performance metrics and relative weighting:
Long-Term Equity Incentives
| Performance Metric | Weighting | | Health Plan Revenue Growth Percentage | 60% | | At-Risk Returning Member Medical Benefits Ratio | 20% | | Adjusted EBITDA, less Capital Expenditures | 20% |
Long-Term Equity Incentives
| (1) “Health Plan Revenue Growth Percentage” means the percentage increase in the consolidated premium revenue of the Company’s regulated health plan entities between the fiscal year ended December 31, 2023 and the fiscal year ended December 31, 2024, subject to any adjustments deemed appropriate by the Committee. For the avoidance of doubt, premium revenue does not include (i) capitation revenue or (ii) investment income from securities accounts held by health plan entities. “Capitation revenue” means capitated fees for medical care services provided by the Company under arrangements with third-party payors and from CMS related to the ACO REACH program. |
Long-Term Equity Incentives
| (2) “At-Risk Returning Member Medical Benefit Ratio” means the Medical Benefit Ratio during the Measurement Period for Returning Members, excluding the Medical Benefit Ratio associated with Returning Members under global capitation arrangements. “Medical Benefit Ratio” means total medical expenses for the Measurement Period, excluding depreciation and equity-based compensation, divided by total revenues for the Measurement Period, in each case measured on an incurred basis for dates of service during the Measurement Period, subject to any adjustments deemed appropriate by the Committee. “Returning Member” means a member that was enrolled in any of the Company’s regulated health plans during the 2023 plan year. This metric excludes Medical Benefit Ratio related to the ACO REACH program. |
Long-Term Equity Incentives
| (3) “Adjusted EBITDA” means net loss before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses, gains or losses from subleases and equity-based compensation expense for the Measurement Period, subject to any adjustments deemed appropriate by the Committee. “Capital Expenditures” means long-lived tangible assets used to create and distribute the entity’s services, as reflected in the Company’s financial statements, incurred during the Measurement Period, including without limitation (a) leasehold improvements, (b) computer equipment, (c) furniture and fixtures and (d) capitalized software. |
Long-Term Equity Incentives
Following the completion of the Measurement Period, the Compensation Committee will certify the Company’s achievement of each of the performance metrics, as a percentage of the target established for each metric (the date of such certification, the “Certification Date”). If any financial metric is attained at a level above the threshold goal but below the target goal, or above the target goal but below the maximum goal, percentage achievement for such metric will be determined on a straight-line basis between the applicable goals. The Committee will then determine, based on the relative weighting of the performance metrics and the percentage achievement of each metric, the aggregated percentage achievement of the performance metrics. The number of PSUs that each NEO earns is determined by multiplying his or her target award by the aggregated percentage achievement of the performance metrics. Fifty percent (50%) of such total number of earned PSUs will become fully vested on or about March 1, 2025, subject to each NEO’s continued service to the Company through such date, and the remaining fifty percent (50%) of such earned PSUs will become vested as of December 31, 2025, subject to each NEO’s continued service to the Company through such date. Any PSUs that do not become earned and vested on such dates will be cancelled and forfeited for no consideration.
Employment Agreements
Employment Agreements The terms of the employment agreements applicable to each NEO are described under “Executive and Director Compensation—Employment Agreements” below. In addition to the terms described therein, the employment agreements provide for certain severance payments and benefits following a termination of employment under certain circumstances. For details on the severance payment and benefits under each NEO’s respective employment agreement and the 2021 Plan, see “Executive and Director Compensation—Potential Payments Upon Termination or Change in Control.”
EXECUTIVE AND DIRECTOR COMPENSATION
EXECUTIVE AND DIRECTOR COMPENSATION Unless we state otherwise or the context otherwise requires, in this “Executive and Director Compensation” section the terms “Alignment,” “we,” “us,” “our” and the “Company” refer to Alignment Healthcare Holdings, LLC for the period up to our IPO, and for all periods following our IPO in March 2021, to Alignment Healthcare, Inc. “Alignment Partners” refers to Alignment Healthcare Partners, LP, a Delaware limited partnership, which, prior to the reorganization undertaken in connection with the IPO, was the sole member of Alignment Healthcare Holdings, LLC. This section discusses the material components of the executive compensation program for our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated officers as of December 31, 2023, who we refer to as our “Named Executive Officers” or “NEOs.” This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from the currently planned programs summarized in this discussion.
Summary Compensation Table
Summary Compensation Table The following table presents summary information regarding the total compensation awarded to, earned by, and paid to our Named Executive Officers for the fiscal years ending December 31, 2023, December 31, 2022, and December 31, 2021, as applicable.
Summary Compensation Table
| | Year | Salary ($) | Bonus ($)(1) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation (4) ($) | All Other Compensation (5) ($) | Total ($) | | John Kao Chief Executive Officer | 2023 | 786,539 | — | 12,497,891 | — | 1,006,837 | 5,209 | 14,296,476 | | | 2022 | 729,827 | — | 30,937,508 | 1,500,002 | 902,835 | 420 | 34,070,592 | | | 2021 | 675,000 | 200,000(5) | 14,835,906 | 29,570,843 | 716,681 | 420 | 45,998,851 | | Thomas Freeman Chief Financial Officer | 2023 | 543,846 | 105,000 | 5,014,849 | — | 624,730 | 13,620 | 6,302,045 | | | 2022 | 486,539 | — | 6,385,854 | 412,500 | 448,501 | 13,703 | 7,747,097 | | | 2021 | 436,539 | 100,000 | 4,275,972 | 5,758,536 | 306,414 | 15,267 | 10,892,727 | | Dawn Maroney President, Markets | 2023 | 560,000 | 205,000 | 5,014,849 | — | 665,635 | 13,515 | 6,458,999 | | | 2022 | 557,308 | — | 8,832,243 | 624,999 | 553,589 | 12,620 | 10,580,760 | | | 2021 | 536,731 | 20,000 | 5,146,254 | 7,781,800 | 468,128 | 12,020 | 13,964,932 | | Hakan Kardes Chief Experience Officer(7) | 2023 | 411,539 | 90,000 | 2,330,440 | — | 375,875 | 13,620 | 3,221,474 | | Hyong (Ken) Kim, M.D. Chief Medical Officer(7) | 2023 | 140,000(7) | 20,000 | 2,787,000 | — | 112,277 | — | 3,059,277 |
Summary Compensation Table
| (1) For 2023, represents discretionary bonuses awarded to certain NEOs, which were payable in the form of immediately vested shares of common stock. Amounts shown reflect the grant date fair value of such stock awards, computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Stock Compensation” (“FASB ASC Topic 718”). |
Summary Compensation Table
For 2021, represents a one-time bonus granted in connection with our IPO.
Summary Compensation Table
| (2) For 2023, represents the grant date fair values associated with the grant of performance share units (“PSUs”) of Alignment to each of the NEOs, computed in accordance with FASB ASC Topic 718. The grant date fair value of the PSU awards reflected in this column is the target payout based on the probable outcome of the performance-based conditions, determined as of the grant date. PSUs awarded in 2023 are earned based on achievement of certain performance goals |
Summary Compensation Table
over fiscal year 2024 and vest in two tranches in or about March 2025 and at December 31, 2025. The maximum potential payout of the PSU awards would be 150% of the target shares awarded on the grant date. These amounts reflect an accounting expense and do not correspond to the actual value that may be realized by the NEOs. See the “Grants of Plan-Based Awards” table for more information about the PSUs granted in 2023. For 2023, for Dr. Kim, the amount also includes the grant date fair value of restricted stock units (“RSUs”) granted upon commencement of his employment with the Company in the amount of $2,500,000. For 2022, represents the grant date fair values associated with the grant of RSUs of Alignment to each of the NEOs, computed in accordance with FASB ASC Topic 718. For 2021, the amounts reported include the accounting costs associated with the March 25, 2021 modification in connection with the conversion of performance-based incentive units (for Mr. Kao, Mr. Freeman and Ms. Maroney) and SARs (for Mr. Freeman) as a part of the pre-IPO equity conversion discussed in further detail in “Compensation Discussion and Analysis - 2022 Executive Compensation Program in Detail - Long-Term Equity Incentives - Pre-Initial Public Offering Awards” as follows: John Kao - $9,237,366; Thomas Freeman - $3,185,730; and Dawn Maroney - $3,672,954. Such accounting costs do not correspond to the actual economic value that may be ultimately realized by the Named Executive Officers for such awards. The remainder of the amounts reported for 2021 include the grant date fair values associated with the grant of RSUs of Alignment to each of the NEOs, computed in accordance with FASB ASC Topic 718 as follows: John Kao – $5,598,540; Thomas Freeman – $1,090,242; and Dawn Maroney – $1,473,300. Assumptions used in computing the amounts reported herein are set forth in Note 10 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Summary Compensation Table
| (3) Represents the grant date fair value of non-qualified stock options granted to the individuals on (i) March 8, 2022 and (ii) March 25, 2021 in connection with the closing of our IPO, in each case calculated in accordance with FASB ASC Topic 718. Assumptions used in computing the amounts reported herein are set forth in Note 10 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. |
Summary Compensation Table
| (4) For 2023, represents 75% of the NEO’s 2023 bonus payment under the Company’s annual incentive plan, which was paid in March 2024, and the following portions of the 2022 bonus payments that were paid to each NEO in October 2023: John Kao - $214,006; Thomas Freeman - $101,904; Dawn Maroney - $127,279; Hakan Kardes - $49,690; and Hyong (Ken) Kim, M.D. - $0. Portions of the 2023 annual incentive plan awards were paid to NEOs in the form of immediately vested stock grants having the following grant date fair values: John Kao - $0; Thomas Freeman - $348,551; Dawn Maroney - $179,452; Hakan Kardes - $260,948; and Hyong (Ken) Kim, M.D. - $74,851. The remaining 25% of the 2023 bonus payment is not included and will be paid, if at all, in September or October of 2024, based on certain performance criteria (an additional payment may also be made at such time, based on performance). |
Summary Compensation Table
For 2022, represents 80% of the NEO’s 2022 bonus payment under the Company’s annual incentive plan, which was paid in March 2023, and the following 20% 2021 bonus payments that were paid to each NEO in October 2022: John Kao - $174,305; Thomas Freeman - $61,962; and Dawn Maroney - $120,300. For 2021, represents 80% of the NEO’s 2021 bonus payment under the Company’s annual incentive plan, which was paid in March 2022, and the following 20% 2020 bonus payments that were paid to each NEO on November 5, 2021: John Kao - $154,406; Thomas Freeman - $64,050; and Dawn Maroney - $80,063. Certain NEOs received increases to base salaries and target and maximum bonus opportunities during applicable years. Target bonus opportunities for the full year reflect the weighted average of the target bonus opportunity percentages applicable to each NEO for each applicable period throughout the year. See “Compensation Discussion and Analysis—2023 Executive Compensation Program in Detail—Annual Incentives” above for further discussion of our Annual Incentive Plan.
Summary Compensation Table
| (5) For 2023, represents: for Mr. Kao – $420 internet stipend and imputed income for domestic partnership insurance of $4,789; for Mr. Freeman – $420 internet stipend and Company 401(k) matching contributions of $13,200; for Ms. Maroney – $315 internet stipend and Company 401(k) matching contributions of $13,200; and for Mr. Kardes – $420 internet stipend and Company 401(k) matching contributions of $13,200. |
Summary Compensation Table
For 2022, represents: for Mr. Kao – $420 internet stipend; for Mr. Freeman – $420 internet stipend, imputed income for domestic partnership insurance of $1,083 and Company 401(k) matching contributions of $12,200; and for Ms. Maroney – $420 internet stipend and Company 401(k) matching contributions of $12,200. For 2021, represents: for Mr. Kao – $420 internet stipend; for Mr. Freeman – $420 internet stipend, imputed income for domestic partnership insurance of $3,247 and Company 401(k) matching contributions of $11,600; and for Ms. Maroney – $420 internet stipend and Company 401(k) matching contributions of $11,600.
Summary Compensation Table
| (6) Dr. Kim and Mr. Kardes were not Named Executive Officers for 2021 or 2022. |
Summary Compensation Table
| (7) Represents base annual salary earned for the portion of the 2023 after Dr. Kim joined the Company. |
Grants of Plan-Based Awards for Fiscal Year 2023
Grants of Plan-Based Awards for Fiscal Year 2023 The following table presents the plan-based awards granted to the Named Executive Officers in 2023.
Grants of Plan-Based Awards for Fiscal Year 2023
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) (i) | All Other Option Awards: Number of Securities Underlying Options (#) (j) | Exercise or Base Price of Option Awards ($/Sh) (k) | Grant Date Fair Value of Stock and Option Awards(2) ($) (l) | | (a) | (b) | Threshold ($) (c) | Target ($) (d) | Maximum ($) (e) | Threshold (#) (f) | Target (#) (g) | Maximum (#) (h) | | | | | | John Kao | | | | | | | | | | | | | AIP(1) | — | 393,269 | 786,539 | 1,573,077 | — | — | — | — | — | — | — | | PSU Award(2) | 9/14/2023 | — | — | — | 1,088,667 | 2,177,333 | 3,266,000 | — | — | — | 12,497,891 | | Thomas Freeman | | | | | | | | | | | | | AIP(1) | — | 231,135 | 462,269 | 924,539 | — | — | — | — | — | — | — | | PSU Award(2) | 9/14/2023 | — | — | — | 436,833 | 873,667 | 1,310,500 | | — | — | 5,014,849 | | Dawn Maroney | | | | | | | | | | | | | AIP(1) | — | 238,000 | 476,000 | 952,001 | — | — | — | — | — | — | — | | PSU Award(2) | 9/14/2023 | — | — | — | 436,833 | 873,667 | 1,310,500 | | — | — | 5,014,849 | | Hakan Kardes | | | | | | | | | | | | | AIP(1) | — | 157,236 | 314,471 | 628,942 | — | — | — | — | — | — | — | | PSU Award(2) | 9/14/2023 | | | | 203,000 | 406,000 | 609,000 | | | | 2,330,440 | | Hyong (Ken) Kim, M.D. | | | | | | | | | | | | | AIP(1) | — | 59,500 | 119,000 | 238,000 | — | — | — | — | — | — | — | | PSU Award(2) | 9/14/2023 | | | | 25,000 | 50,000 | 75,000 | | | | 287,000 | | RSU Award(2) | 10/4/2023 | — | — | — | — | — | — | 340,136 | — | — | 2,500,000 |
Grants of Plan-Based Awards for Fiscal Year 2023
| (1) Awards designated “AIP” represent the threshold, target and maximum amounts of performance-based awards that our NEOs might have earned during 2023 under our Annual Incentive Plan, dependent upon our 2023 performance. Maximum payouts assume that the Annual Incentive Plan was funded at maximum levels based on applicable Company and/or business unit performance and individual performance was also achieved at maximum levels. Awards actually earned are shown above in the “Non-Equity Incentive Plan Compensation” column of the 2023 Summary Compensation Table. Payouts depend on the achievement of pre-determined, strategic and/or financial corporate performance objectives (75% of the award), as well as individual performance (25% of the award). Based on results, base payouts can range from 0% to 200% of target award amounts. In addition, a modifier (-25% to +50%) is applied to the total bonus payout based on the Company’s CMS Star Ratings. During 2023, the base salaries and target and maximum bonus opportunities were increased for certain CEOs. Target bonus opportunities for the full 2023 year reflect the weighted average of the target bonus opportunity percentages applicable to each NEO for each applicable period throughout the year. Executive officers had the option to elect to settle all or a portion of their actual AIP payouts in shares of common stock. See “Compensation Discussion and Analysis—2023 Executive Compensation Program in Detail—Annual Incentives” above for further discussion of our Annual Incentive Plan. |
Grants of Plan-Based Awards for Fiscal Year 2023
| (2) The actual value to be realized by a named executive officer depends upon the appreciation in value of the Company’s stock and the length of time the award is held. The grant date fair value of each PSU award was computed in accordance with FASB ASC Topic 718 based on assumptions discussed in Note 10 “Stock-Based Compensation” to the Company’s consolidated financial statements in the Form 10-K for the year ended December 31, 2023, as filed with the SEC, assuming target-level achievement. Threshold, target, and maximum awards are equal to 50%, 100%, and 150%, respectively, of the number of PSUs granted. The PSUs are earned based on achievement of certain performance goals over fiscal year 2024 and vest, to the extent achievement metrics are met, in two equal installments on or about March 2025 and December 31, 2025. The grant date fair value of each RSU award was computed in accordance with FASB ASC Topic 718 based on the closing stock price on the grant date. RSU awards to employees are generally subject to four-year vesting provisions. |
Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table
Narrative Disclosure to Summary Compensation Table and Grant of Plan-Based Awards Table
Outstanding Equity Awards at 2023 Fiscal Year End
Outstanding Equity Awards at 2023 Fiscal Year End The following table summarizes, for each of the Named Executive Officers, the number of shares of our common stock underlying outstanding equity awards held as of December 31, 2023.
Outstanding Equity Awards at 2023 Fiscal Year End
| | | Option Awards | | | | | Stock Awards | | | | | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (1) | Market Value of Shares or Units of Stock That Have Not Vested(2) | | Name | Grant Date | (#) Exercisable | (#) Unexercisable | (#) | ($) | | (#) | ($) | | John Kao | 9/14/2023 | | | | | | 2,177,333 | 18,746,837 | | | 9/12/2022 | — | — | — | — | — | 1,639,027 | 14,112,022 | | | 3/8/2022 | 91,241 | 273,723 | — | 9.06 | 3/8/2032 | — | — | | | 3/8/2022 | — | — | — | — | — | 372,516 | 3,207,363 | | | 3/25/2021 | 1,958,334 | 1,958,334 | — | 18.00 | 3/25/2031 | — | — | | | 3/25/2021 | — | — | — | — | — | 155,514 | 1,338,976 | | | 9/25/2020(3) | — | — | — | — | — | 227,142 | 1,955,693 |
Outstanding Equity Awards at 2023 Fiscal Year End
| | | Option Awards | | | | | Stock Awards | | | | | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (1) | Market Value of Shares or Units of Stock That Have Not Vested(2) | | Name | Grant Date | (#) Exercisable | (#) Unexercisable | (#) | ($) | | (#) | ($) | | Thomas Freeman | 9/14/2023 | | | | | | 873,667 | 7,522,273 | | | 9/12/2022 | — | — | — | — | — | 319,179 | 2,748,131 | | | 3/8/2022 | 25,092 | 75,273 | — | 9.06 | 3/8/2032 | — | — | | | 3/8/2022 | — | — | — | — | — | 102,411 | 882,017 | | | 3/25/2021 | 381,360 | 381,360 | — | 18.00 | 3/25/2031 | — | — | | | 3/25/2021 | — | — | — | — | — | 30,283 | 260,737 | | | 9/25/2020(4) | — | — | — | — | — | 61,127 | 526,303 | | Dawn Maroney | 9/14/23 | — | — | — | — | — | 873,667 | 7,522,273 | | | 9/12/2022 | — | — | — | — | — | 431,323 | 3,713,691 | | | 3/8/2022 | 38,017 | 114,051 | — | 9.06 | 3/8/2032 | — | — | | | 3/8/2022 | | | | | | 155,215 | 1,336,401 | | | 3/25/2021 | 515,352 | 515,350 | — | 18.00 | 3/25/2031 | — | — | | | 3/25/2021 | — | — | — | — | — | 40,924 | 352,356 | | | 9/25/2020 | — | — | — | — | — | 81,503 | 701,741 | | Hakan Kardes | 9/14/2023 | — | — | — | — | — | 406,000 | 3,495,660 | | | 9/12/2022 | | | | | | 44,482 | 382,990 | | | 3/8/2022 | 9,124 | 27,372 | — | 9.06 | 3/8/2032 | — | — | | | 3/8/2022 | — | — | — | — | — | 37,251 | 320,731 | | | 4/9/2021 | — | — | — | — | — | 33,000 | 284,130 | | | 3/25/2021 | 34,630 | 34,629 | — | 18.00 | 3/25/2031 | — | — | | | 3/25/2021 | — | — | — | — | — | 2,750 | 23,678 | | | 9/25/2020 | — | — | — | — | — | 10,188 | 87,719 | | Hyong (Ken) Kim, M.D. | 10/4/2023 | — | — | — | — | — | 340,136 | 2,928,571 | | | 9/14/2023 | — | — | — | — | — | 50,000 | 430,500 |
Outstanding Equity Awards at 2023 Fiscal Year End
| (1) Represents unvested options, RSUs, PSUs, restricted shares converted from service-based incentive units and SARs (which remain subject to the same vesting schedules as in effect prior to our IPO) and restricted shares converted from performance-based incentive units and SARs (which vest (i) 50% on the later of (x) the fourth anniversary of the initial vesting date and (y) the first anniversary of our IPO and (ii) 50% on the later of (x) the fourth anniversary of the initial vesting date and (y) the second anniversary of our IPO, in each case, subject to continued employment or service on each such vesting date). PSUs disclosed above assume target-level achievement. Actual shares delivered under PSU awards are subject to performance conditions in respect of fiscal year 2024 and therefore may vary from the target units reported here. The vesting schedules of the options, RSUs, PSUs and restricted shares are as follows (subject to the named executive officer’s continued employment through each applicable vesting date): |
Outstanding Equity Awards at 2023 Fiscal Year End
| Name | Grant Date | Grant Type | Service-based Vesting Schedule | | John Kao | 9/14/2023 | PSUs | Vests, if earned, 50% on the performance certification date and 50% on 12/31/25 | | | 9/12/2022 | RSUs | Vests 819,514 shares on 9/7/2025 and 819,513 shares on 9/7/2026 | | | 3/8/2022 | RSUs | Vests 25% per year over 4 years with approximately 124,172 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/8/2022 | Options | Vests 25% per year over 4 years with 91,241 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/25/2021 | Options | Vests 25% per year over 4 years with 979,167 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 3/25/2021 | RSUs | Vests 25% per year over 4 years with approximately 77,758 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 9/25/2020 | Restricted Shares | Vests over 3 years with approximately 227,143 vesting on each of 8/1/2022, 2023, and 2024 | | Thomas Freeman | 9/14/2023 | PSUs | Vests, if earned, 50% on the performance certification date and 50% on 12/31/25 | | | 9/12/2022 | RSUs | Vests 159,590 shares on 9/7/2025 and 159,589 shares on 9/7/2026. | | | 3/8/2022 | RSUs | Vests 25% per year over 4 years with approximately 34,147 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/8/2022 | Options | Vests 25% per year over 4 years with approximately 25,091 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026. | | | 3/25/2021 | Options | Vests 25% per year over 4 years with 190,680 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 3/25/2021 | RSUs | Vests 25% per year over 4 years with approximately 15,143 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 9/25/2020 | Restricted Shares | Vests over 3 years with 61,127 vesting on each of 8/1/2022, 2023, and 2024 | | Dawn Maroney | 9/14/2023 | PSUs | Vests, if earned, 50% on the performance certification date and 50% on 12/31/25 | | | 9/12/2022 | RSUs | Vests 215,662 shares on 9/7/2025 and 215,661 shares on 9/7/2026 | | | 3/8/2022 | RSUs | Vests 25% per year over 4 years with approximately 51,739 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/8/2022 | Options | Vests 25% per year over 4 years with 38,017 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/25/2021 | Options | Vests 25% per year over 4 years with approximately 257,676 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 3/25/2021 | RSUs | Vests 25% per year over 4 years with approximately 20,463 vesting on each of 3/25/2022, 2023, 2024, and 2025 |
Outstanding Equity Awards at 2023 Fiscal Year End
| Name | Grant Date | Grant Type | Service-based Vesting Schedule | | | 9/25/2020 | Restricted Shares | Vests over 3 years with 81,503 vesting on each of 8/1/2022, 2023, and 2024 | | Hakan Kardes | 9/14/2023 | PSUs | Vests, if earned, 50% on the performance certification date and 50% on 12/31/25 | | | 9/12/2022 | RSUs | Vests 11,121 shares on each of 9/7/2025 and 9/7/2026 | | | 3/8/2022 | Options | Vests 25% per year over 4 years with 9,124 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/8/2022 | RSUs | Vests 25% per year over 4 years with approximately 12,417 vesting on each of 3/8/2023, 3/8/2024, 3/8/2025 and 3/8/2026 | | | 3/25/2021 | Options | Vests 25% per year over 4 years with 17,315 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 3/25/2021 | RSUs | Vests 25% per year over 4 years with approximately 1,375 vesting on each of 3/25/2022, 2023, 2024, and 2025 | | | 9/25/2020 | Restricted Shares | Vests over 3 years with 10,188 vesting on each of 8/1/2022, 2023, and 2024 | | | 9/30/2019 | Restricted Shares | Vests over 2 years with 40,928 vesting on 7/15/2022 and 82,268 vesting on 7/15/2023 | | | 5/2/2019 | Restricted Shares | Vests over 2 years with 118,326 vesting on 1/21/2022 and 118,325 vesting on 1/21/2023 | | | 1/21/2019 | Restricted Shares | Vests over 2 years with 59,164 vesting on 3/30/2022 and 59,162 vesting on 3/30/2023 | | Hyong (Ken) Kim, M.D. | 10/4/23 | RSUs | Vests 25% per year over 4 years with 70,090 vesting on each of 10/4/24, 2025, 2026, and 2027 | | | 9/14/2023 | PSUs | Vests, if earned, 50% on the performance certification date and 50% on 12/31/25 |
Outstanding Equity Awards at 2023 Fiscal Year End
| (2) The dollar amounts shown in this column are determined by multiplying the number of shares or units reported in the “Number of Shares or Units of Stock That Have Not Vested” column by $8.61, the closing price of our common stock on the last trading day of 2023. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (3) Held by JEK Trust, dated February 8, 2021, of which Mr. Kao is the trustee. |
Outstanding Equity Awards at 2023 Fiscal Year End
| (4) 15% of each grant is held by Mr. Freeman directly and 85% of each grant is held by FCO Holdings LLC, a limited liability company owned by FCO Holdings Trust One, an irrevocable trust. |
Exercises and Stock Vested During Fiscal Year 2023
Exercises and Stock Vested During Fiscal Year 2023 The following table shows information about exercises and vesting of RSUs, restricted shares and stock options during fiscal year 2023.
Exercises and Stock Vested During Fiscal Year 2023
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | John Kao | — | — | 718,265(2) | 4,435,357 | | Thomas Freeman | — | — | 274,749(3) | 1,622,893 | | Dawn Maroney | — | — | 362,376(4) | 2,136,752 | | Hakan Kardes | — | — | 132,482(5) | 1,010,924 | | Hyong (Ken) Kim, M.D. | — | — | — | — |
Exercises and Stock Vested During Fiscal Year 2023
| (1) The dollar amounts shown in the “Value Realized on Vesting” column are determined by multiplying (i) the number of shares that vested, by (ii) the per-share closing market price of our common stock on the vesting date. |
Exercises and Stock Vested During Fiscal Year 2023
| (2) Represents (a) 77,758 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.20; (b) 124,173 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.88; (c) 245,653 restricted shares with a value realized on vesting based on a per-share closing market price of $6.23; (d) 43,539 restricted shares with a value realized on vesting based on a per-share closing market price of $5.35; and (e) 227,142 restricted shares with a value realized on vesting based on a per-share closing market price of $5.88. |
Exercises and Stock Vested During Fiscal Year 2023
| (3) Represents (a) 15,143 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.20; (b) 34,148 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.88; (c) 63,035 restricted shares with a value realized on vesting based on a per-share closing market price of $6.23; (d) 101,296 restricted shares with a value realized on vesting based on a per-share closing market price of $5.35; and (e) 61,127 restricted shares with a value realized on vesting based on a per-share closing market price of $5.88. 183,555 restricted shares which vested are held by FCO Holdings LLC, a limited liability company owned by FCO Holdings Trust One, an irrevocable trust. |
Exercises and Stock Vested During Fiscal Year 2023
| (4) Represents (a) 20,463 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.20; (b) 51,739 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.88; (c) 66,238 restricted shares with a value realized on vesting based on a per-share closing market price of $6.23; (d) 142,433 restricted shares with a value realized on vesting based on a per-share closing market price of $5.35; and (e) 81,503 restricted shares with a value realized on vesting based on a per-share closing market price of $5.88. |
Exercises and Stock Vested During Fiscal Year 2023
| (5) Represents (a) 17,875 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.20; (b) 12,418 shares issued upon vesting of RSUs with a value realized on vesting based on a per-share closing market price of $6.88; (c) 40,768 restricted shares with a value realized on vesting based on a per-share closing market price of $11.05; (d) 20,384 restricted shares with a value realized on vesting based on a per-share closing market price of $6.23; (e) 20,566 restricted shares with a value realized on vesting based on a per-share closing market price of $5.45; (f) 10,188 restricted shares with a value realized on vesting based on a per-share closing market price of $5.88; and (g) 10,283 restricted shares with a value realized on vesting based on a per-share closing market price of $6.54. |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control
Non-Employee Director Compensation
Non-Employee Director Compensation Each of our non-employee directors receives an annual director fee and equity awards in connection with their services. In addition, each director is reimbursed for out-of-pocket expenses in connection with his or her services. While Mr. Kao serves as a director on the Board, he does not receive any compensation for his services as a director and information on his compensation as Chief Executive Officer of the Company is reported in the “Summary Compensation Table.” During 2023, Mr. Konowiecki served in an executive role with the Company and did not receive separate compensation for his service as a director. His employment with the Company terminated as of December 31, 2023. See “Certain Relationships and Related Party Transactions—Related-Party Transactions—Konowiecki Employment Agreement.” For 2024, Mr. Konowiecki will again be compensated under the Policy (defined below). The Board has adopted a non-employee director compensation policy (as amended from time to time, the “Policy”). Under the Policy, newly elected non-employee directors will receive a one-time commencement award of restricted shares or restricted stock units equal to $200,000, with vesting annually over three years. Non-employee directors receive annual compensation with an aggregate annual value of $250,000, consisting of a cash retainer in an amount elected by each director from $0 to $100,000, with the balance of the aggregate compensation value paid as an equity grant of restricted shares or restricted stock units, with vesting on the first anniversary of the grant date. Directors are permitted to defer receipt of their RSU awards until the earlier of (i) three years from the grant date (or, if earlier, separation from service or change of control), (ii) five years from the grant date (or, if earlier, separation from service or change of control), or (iii) separation form service (or, if earlier, change of control). Under the Policy, in addition to the base annual compensation payable to each board member:
Non-Employee Director Compensation
| • | an independent chairman of the Board, if applicable, will receive an annual retainer of $200,000 in restricted stock units or other long-term equity incentives, with vesting on occurring on the first anniversary of the grant date; |
Non-Employee Director Compensation
| • | a Lead Independent Director, if applicable, will receive an annual retainer of $35,000, payable 50% in cash and 50% in restricted stock units or other long-term equity incentives, with vesting on occurring on the first anniversary of the grant date; |
Non-Employee Director Compensation
| • | the chairman of the Audit committee will receive an annual cash retainer of $25,000; |
Non-Employee Director Compensation
| • | members of the Audit Committee will receive an annual cash retainer of $10,000; |
Non-Employee Director Compensation
| • | the chairman of the Compensation Committee and NCGCC will each receive an annual cash retainer of $20,000; and |
Non-Employee Director Compensation
| • | each member of the Compensation Committee and NCGCC will receive an annual cash retainer of $7,500. |
Non-Employee Director Compensation
All cash retainers are paid in quarterly installments in arrears. The following table summarizes, for each of our non-employee directors, the compensation received by such director for the year ended December 31, 2023.
Non-Employee Director Compensation
| | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | All Other Compensation ($) | Total ($) | | Jody Bilney | 57,500 | 200,000 | — | 257,500 | | Thomas Carella | 57,500 | 200,000 | — | 257,500 | | David Hodgson | 20,000 | 250,000 | — | 270,000 | | Yon Jorden | 110,000 | 150,000 | — | 260,000 | | Joseph Konowiecki(3) | — | — | 2,252,608(4) | 2,252,608 | | Jacqueline Kosecoff | 115,625 | 150,000 | — | 265,625 | | Jeffrey Margolis | 100,000 | 175,000 | — | 275,000 | | Margaret McCarthy | 112,917 | 167,500 | — | 280,417 | | Mark McClellan | 100,000 | 150,000 | — | 250,000 | | Robbert Vorhoff | 120,000 | 150,000 | — | 270,000 |
Non-Employee Director Compensation
| (1) Includes fees earned with respect to Board and committee service during calendar year 2023. Non-employee directors receive annual compensation with an aggregate annual value of $250,000, consisting of a cash retainer in an amount elected by each director from $0 to $100,000, with the balance of the aggregate compensation value paid as an equity grant of restricted shares or restricted stock units. Committee fees range from $7,500 to $10,000 annually, with committee chairs receiving $20,000 to $25,000 annually, in each case payable in cash. Certain amounts are prorated for partial-year service. |
Non-Employee Director Compensation
| (2) Represents the grant date fair values associated with the grant of RSUs of Alignment made under the Policy, computed in accordance with FASB ASC Topic 718. For additional information on the assumptions used in computing the amounts reported herein, see Note 10 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. As of December 31, 2023, each of the directors held unvested, outstanding stock awards and stock options as follows: |
Non-Employee Director Compensation
| | Restricted Shares (#) | RSUs (#) | Options (#) | | Jody Bilney | — | 47,994 | — | | Thomas Carella | — | 40,069 | — | | David Hodgson | — | 47,168 | — | | Yon Jorden | — | 40,726 | — | | Joseph Konowiecki(a) | — | 225,644 | 26,862 | | Jacqueline Kosecoff | — | 40,069 | — | | Jeffrey Margolis | — | 32,801 | — | | Margaret McCarthy | — | 32,801 | — | | Mark McClellan | — | 32,801 | — | | Robbert Vorhoff | — | 47,168 | — |
Non-Employee Director Compensation
| (a) Includes awards granted in connection with Mr. Konowiecki’s consulting agreement with the Company dated January 1, 2022 and his employment agreement with the Company dated October 31, 2022. |
Non-Employee Director Compensation
| (3) Mr. Konowiecki serves as our Chairman of the Board and, during 2023, served in an executive role leading strategic network and business development. Effective upon his appointment to an executive role, we began compensating Mr. Konowiecki under the terms of his employment agreement (see “Certain Relationships and Related Party Transactions—Related-Party Transactions—Konowiecki Employment Agreement”) and he ceased to be compensated under the Policy. Amount shown under “All Other Compensation” represent amounts paid under the employment agreement, including (i) base salary of $560,000; (ii) a discretionary bonus of $85,000; (iii) a grant of restricted stock units with a grant date fair value of $1,000,000; (iv) cash annual plan incentive payouts in the amount of $511,120; and (v) 401(k) employer matching contributions of $13,200. Mr. Konowiecki’s employment terminated as of December 31, 2023. For 2024, he continues to serve as Chairman and will be compensated under the Policy. |
Non-Employee Director Compensation
| (4) Includes (a) base salary in the amount of $560,000; (b) a discretionary cash bonus in the amount of $85,000; (c) an RSU with a grant date fair value of $1,000,000, computed in accordance with FASB ASC Topic 718, issued to Mr. Konowiecki pursuant to his employment agreement with the Company; (d) payments under the Company’s cash annual incentive plan in the aggregate amount of $511,120; and (e) 401(k) matching in the amount of $13,200. |
Pay Versus Performance
Pay Versus Performance The following table and supporting graphics below set out information regarding fiscal years ended December 31, 2023, 2022, and 2021 in satisfaction of Item 402(v) of Regulation S-K, which requires disclosure regarding executive “Compensation Actually Paid” or “CAP” (as calculated in accordance with SEC rules) as compared to certain Company performance measures. You should refer to “ ” in this proxy statement for a complete description of how executive compensation relates to Company performance and how the Compensation Committee makes its decisions.
Pay Versus Performance
| | | | | | Year-end value of $100 invested on 3/26/2021 in: | | | | | Year (a) | Summary Comp. Table Total for John Kao (1) ($) (b) | Comp. Actually Paid to John Kao (2) ($) (c) | Average Summary Comp. Table Total for Non- PEO NEOs (3) ($) (d) | Average Comp. Actually Paid to Non-PEO NEOs (4) ($) (e) | ALHC (5) ($) (f) | NASDAQ Health Care Index Total Shareholder Return (6) ($) (g) | Net Income (in millions) (7) ($) (h) | Adj. EBITDA (in millions) (8) ($) (i) | | 2023 | 14,296,476 | (2,674,822) | 4,760,449 | 1,769,823 | 49.74 | 82.87 | (148.17) | (35.3) | | 2022 | 34,070,592 | 25,813,278 | 7,327,470 | 5,661,779 | 67.94 | 77.79 | (149.6) | (26.7) | | 2021 | 45,998,851 | 37,304,187 | 10,891,546 | 10,053,244 | 81.22 | 97.76 | (195.3) | (33.1) |
Pay Versus Performance
| (1) The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Kao (the “PEO”) for each corresponding year in the “Total” column of the Summary Compensation Table (“SCT”) in this proxy statement. |
Pay Versus Performance
| (2) The dollar amounts reported in column (c) represent the amount of “compensation actually paid” (“CAP”) to the PEO computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the PEO during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the PEO’s total compensation for each year to determine the CAP: |
Pay Versus Performance
| | 2023 | 2022 | 2021 | | Total Compensation from SCT | 14,296,476 | $34,070,592 | $45,998,851 | | Less Reported Value of Equity Awards from SCT | 12,497,891 | ($32,437,510) | ($44,406,749) | | Subtotal | 1,798,585 | $1,633,082 | $1,592,102 | | Year-end fair value of any equity awards granted in applicable year that are outstanding and unvested as of the end of the year | $16,247,259 | $27,710,914 | $20,804,877 | | The amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year | ($12,858,959) | ($1,347,517) | $8,950,439 | | For awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value | ($7,861,706) | ($2,183,201) | $5,956,769 | | Net Adjustment to Subtotal | ($4,473,407) | $24,180,196 | $35,712,085 | | Compensation Actually Paid | ($2,674,822) | $25,813,278 | $37,304,187 |
Pay Versus Performance
| (3) The dollar amounts reported in column (d) are the average of the amounts of total compensation reported for the non-PEO NEOs for each corresponding year in the “Total” column of the SCT. For 2023, the Non-PEO NEOs were Thomas Freeman, Dawn Maroney, Hakan Kardes and Hyong (Ken) Kim, M.D. For 2022, the Non-PEO NEOs were Thomas Freeman, Dawn Maroney, Dinesh Kumar and Richard Cross. For 2021, the Non-PEO NEOs were Thomas Freeman, Dawn Maroney, Dinesh Kumar and Rajesh Shrestha. |
Pay Versus Performance
| (4) The dollar amounts reported in column (e) represent the average amount of CAP to the non-PEO NEOs as a group computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the Non-PEO NEOs during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the Non-PEO NEOs for each year to determine the CAP: |
Pay Versus Performance
| | 2023 | 2022 | 2021 | | Average Total Compensation from SCT | $4,760,449 | $7,327,470 | $10,891,546 | | Less Average Reported Value of Equity Awards from SCT | ($3,786,785) | ($6,383,827) | ($9,913,214) | | Subtotal | $973,664 | $943,643 | $978,332 | | Average Equity Award Adjustments | | | | | Year-end fair value of any equity awards granted in applicable yar that are outstanding and unvested as of the end of the year | $4,110,320 | $5,881,206 | $4,532,610 | | The amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year | ($1,755,990) | ($551,977) | $2,876,585 | | For awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value | ($1,558,171) | ($611,093) | $1,665,717 | | Total Net Adjustment to Subtotal | $796,159 | $4,718,136 | $9,074,912 | | Compensation Actually Paid | $1,769,823 | $5,661,779 | $10,053,244 |
Pay Versus Performance
| (5) Cumulative TSR for ALHC is calculated by dividing the sum of the cumulative amount of dividends for each of 2021, 2022 and 2023, assuming dividend reinvestment, and the difference between ALHC’s share price at the end and the beginning of each such year by ALHC’s share price at the beginning of each such year. |
Pay Versus Performance
| (6) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: NASDAQ Healthcare Index. |
Pay Versus Performance
| (7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. |
Pay Versus Performance
| (8) Adjusted EBITDA is a non-GAAP financial measure that is presented as supplemental disclosure, that we define as net loss before interest expense, income taxes, depreciation and amortization expense, transaction-related expenses, acquisition expenses, certain litigation costs and settlements, gains or losses on ROU assets, equity-based compensation expense, and loss on extinguishment of debt. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). There are a number of limitations related to the use of adjusted EBITDA in lieu of net loss, which is the most directly comparable financial measure calculated in accordance with GAAP. An explanation of our non-GAAP measures, how they are calculated and reconciliations to the most directly comparable GAAP financial measures can be found in the Appendix to this proxy statement. |
Descriptions of the Information Presented in the Pay Versus Performance Table
Descriptions of the Information Presented in the Pay Versus Performance Table The illustrations below compare CAP and the following measures:
Descriptions of the Information Presented in the Pay Versus Performance Table
| • | the Company’s cumulative TSR and the NASDAQ Healthcare Index’s cumulative TSR; |
Descriptions of the Information Presented in the Pay Versus Performance Table
| • | the Company’s Net Income; and |
Descriptions of the Information Presented in the Pay Versus Performance Table
| • | the Company’s Adjusted EBITDA. |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information about the relationship between the annual total compensation of our median employee and the annual total compensation of our CEO. Our compensation philosophy is designed to attract and retain high-quality talent and provide total compensation opportunities that support our pay-for-performance objectives. Compensation varies for employees by position and geographic location based on competitive market factors. Our associates’ total compensation may include base pay, incentive pay, overtime and other supplemental pay. We regularly review associate compensation for both internal pay equity and competitiveness within the health care industry. With respect to our CEO and other Named Executive Officers, the Compensation Committee has selected a compensation package composed in large part of variable and at-risk compensation, which the committee believes will appropriately incentivize retention and performance. For more information, please see the “Compensation Discussion and Analysis” section of this proxy statement. For 2023, our CEO pay ratio was 216:1. This ratio was calculated in compliance with the requirements set forth in Item 402(u) of Regulation S-K using the amount of our CEO’s compensation reported in the “Summary Compensation Table” for 2023, which is $14,296,476. However, the required compensation measure used for our Chief Executive Officer and included in the pay ratio does not represent his expected normal annual compensation. In September 2023, in order to recognize our recent strong financial performance and to support our talent retention objectives, certain senior employees, including our NEOs, received a performance-based equity incentive award in the form of PSUs. For our CEO, this award represented approximately 80% of his total annual compensation for 2023. For more information, see “Compensation Discussion and Analysis—2023 Executive Compensation Program in Detail—Long-Term Equity Incentives—2023 Equity Awards.” Solely for informational purposes, if the pay ratio were calculated based on the CEO’s normal annual compensation during 2023 (i.e., after deducting the value of the performance share units), the pay ratio of our CEO to our median employee would be 27:1. Outlined below is the process that was applied for identifying our median associate for our comparative compensation analysis of the median associate to our CEO:
CEO Pay Ratio
| ● | We identified the median associate using 1,583 global full-time, part-time, temporary and seasonal associates employed as of December 31, 2023; |
CEO Pay Ratio
| ● | We consistently applied 2023 W-2 earnings as compensation measure for the median associate; |
CEO Pay Ratio
| ● | We then calculated the median associate’s compensation in the same manner as the Named Executive Officers in the Summary Compensation Table in this proxy statement; and |
CEO Pay Ratio
| ● | Applying this methodology, our median associate’s total compensation was $66,320, which consists of base salary; and |
CEO Pay Ratio
| ● | With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the “Summary Compensation Table” for 2023 on page 55. |
Adjusted EBITDA
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that we define as net loss before interest expense, income taxes, depreciation and amortization expense, reorganization and transaction-related expenses and equity-based compensation expense. Adjusted EBITDA is a key measure used by our management and our Board of Directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of our business. Given our intent to continue to invest in our platform and the scalability of our business in the short to medium-term, we believe Adjusted EBITDA over the long term will be an important indicator of value creation. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA in lieu of net loss, which is the most directly comparable financial measure calculated in accordance with GAAP. Our use of the term Adjusted EBITDA may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is reconciled as follows:
Adjusted EBITDA
| | Year Ended December 31, | | | | 2023 | 2022 | | (dollars in thousands) | | | | Net loss | $(148,173) | $(149,639) | | Less: Net loss attributable to noncontrolling interest | 156 | 92 | | Adjustments: | | | | Interest expense | 21,231 | 18,289 | | Depreciation and amortization | 21,668 | 17,486 | | Income taxes | (22) | 339 | | Equity-based compensation(1) | 66,835 | 81,718 | | Transaction-related expenses(2) | — | 579 | | Acquisition expenses(3) | 977 | 1,614 | | Litigation costs and settlement(4) | 2,298 | — | | (Gain) loss on right of use assets(5) | (289) | 611 | | Loss on extinguishment of debt | — | 2,196 | | Adjusted EBITDA | $(35,319) | $(26,715) |
Adjusted EBITDA
| (1) Represents equity-based compensation related to grants made in the applicable year, as well as equity-based compensation related to the timing of the IPO, which includes previously issued stock appreciation rights (“SARs”) liability awards, modifications related to transaction vesting units, and grants made in conjunction with the IPO. |
Adjusted EBITDA
| (2) Represents legal, professional, accounting and other advisory fees related to a secondary offering that are considered nonrecurring and non-capitalizable. |
Adjusted EBITDA
| (3) Represents acquisition-related fees, such as legal and advisory fees, that are non-capitalizable. |
Adjusted EBITDA
| (4) Represents litigation costs considered outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company’s overall litigation strategy. This includes (a) $0.1 million in legal fees and a $0.9 million reserve for settlement related to a wage and hour class action lawsuit and (b) $1.1 million in legal fees related to legal action initiated by the Company seeking injunctive relief prohibiting member solicitation in violation of CMS regulations. Refer to Note 12, “Commitments and Contingencies” in our consolidated financial statements for more information regarding certain related litigation. |
Adjusted EBITDA
| (5) Represents gain or loss related to right of use (‘ROU”) assets that were terminated or subleased in the respective period. |
Adjusted EBITDA
styleIPC Your vote P.O. BOX 8016, CARY, NC 27512-9903 matters! Have your ballot ready and please use one of the methods below for easy voting: Your control number Have the 12 digit control number located in the box above available when you access the website and follow the instructions. Scan QR for digital voting Alignment Healthcare, Inc. Internet: www.proxypush.com/ALHC • Cast your vote online Annual Meeting of Stockholders • Have your Proxy Card ready • Follow the simple instructions to record your vote For Stockholders of record as of April 9, 2024 Phone: Friday, June 7, 2024 8:00 AM, Pacific Time 1-866-314-3346 • Use any touch-tone telephone Annual Meeting to be held live via the Internet—please visit • Have your Proxy Card ready www.proxydocs.com/ALHC for more details. • Follow the simple recorded instructions Mail: • Mark, sign and date your Proxy Card • Fold and return your Proxy Card in the postage-paid YOUR VOTE IS IMPORTANT! envelope provided PLEASE VOTE BY: 8:00 AM, Pacific Time, June 7, 2024. Virtual: You must register to attend the meeting online and/or participate at www.proxydocs.com/ALHC This proxy is being solicited on behalf of the Board of Directors The undersigned hereby appoints John Kao and Thomas Freeman (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Alignment Healthcare, Inc. which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE Copyright © 2024 BetaNXT, Inc. or its affiliates. All Rights Reserved Proposal_Page—VIFL Alignment Healthcare, Inc. Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR EACH DIRECTOR NOMINEE UNDER PROPOSAL 1 AND FOR PROPOSALS 2, 3, AND 4 BOARD OF DIRECTORS PROPOSAL YOUR VOTE RECOMMENDS 1. Election of Directors FOR WITHHOLD 1.01 Yon Jorden FOR #P2# #P2# 1.02 John Kao FOR #P3# #P3# 1.03 Joseph Konowiecki FOR #P4# #P4# 1.04 Margaret McCarthy FOR #P5# #P5# FOR AGAINST ABSTAIN 2. Approve an amendment to our certificate of incorporation to reflect new Delaware law provisions FOR regarding exculpation of officers. #P6# #P6# #P6# 3. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting FOR firm for the year ending December 31, 2024. #P7# #P7# #P7# 4. Approve, on an advisory basis, the compensation of our Named Executive Officers. FOR #P8# #P8# #P8# You must register to attend the meeting online and/or participate at www.proxydocs.com/ALHC Authorized Signatures—Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held jointly) Date