At this particular time, Human Resource functions were split between two separate departments—UNUM America HR (payroll, and all HR functions for non-executive personnel), and Enterprise HR (HR functions relevant to the CEO, Jim Orr III and the top 26 Senior Vice Presidents.) I worked for Enterprise HR and was an employee of Unum America.
As an Executive Assistant to the Vice President of Corporate Compensation, and in the course of performing my duties and responsibilities, I became aware of most senior executive and employee compensation and incentive plan programs designed for the top 26 Senior Vice Presidents employed by UNUM Life Insurance Company. I assisted The Vice President of Compensation with the preparation of materials submitted to the Compensation Committee of the Board of Directors wherein annual bonuses were awarded on a yearly basis to all corporate employees. These bonuses ranged from 4-10% of the employees annual salary and were payable on February 15 for all full and part time employees hired by 10/1 of the year previous.
During my tenure in Enterprise HR I participated in and assisted with the tally and measurement of the 1998 People Goal Program initiated by Chairman Jim Orr III to provide employee incentives to achieve at least 75% proficiency in office procedures and customer service, internally and externally. At year-end, each employee was asked to complete a survey and indicate the extent to which they felt progress had been made toward company goals. Enterprise HR received the survey results, which I had an opportunity to read. The 1998 People Goal program encouraged employees to work “as hard as they could” to achieve the unit and departmental goals.
Employees worked many hours of overtime and were promised much by the executive management if the 75% achievement goal was met. Expectations of the employees included financial reward, a companywide celebration to be held at the Civic Center, and increased incentives. The 1998 People Goals Survey was taken for the year 1994, and was expected for 1995, but was cancelled. Employees wondered why the 1998 People Goal Survey was not administered in 1995, but we were not told, until it became evident UNUM Life Insurance would be merging with Paul Revere and the Provident Companies sometime in 1998. The market value of the UNUM Life Insurance Common Stock continued to climb during this period from approximately $45 per share to $60 per share as employees dedicated their work efforts in anticipation of achievement of goals. The common stock price per share remained stable between $56-$59 per share at the time of the announcement of the merger with Provident.
I cannot express the disappointment of employees companywide, when instead of announcing the achievement of the 75% People Goals, UNUM’s management announced the merger with the Provident Companies, which by this time had already merged with Paul Revere. It soon became obvious to employees they had been used by UNUM’s management as a tool via hard work and personal sacrifice, to keep the current market value of the common stock high while negotiating a merger with another company. As employees discovered the 1998 People Goal Program to be a misrepresentation, many employees made the decision to leave the company.
During my term of employment in Enterprise HR, I also observed the retirement of Steve Center, UNUM America President and the hiring of Robert Malik, who transitioned the UNUM Life Insurance Company “Communications Center” to Columbia, SC. I also observed the recruitment of Robert Crispin as the anticipated replacement for Jim Orr III upon retirement. I personally arranged for the payment of two checks each in the amount of $200,000 for the sign on bonus of Robert Crispin, which also included large blocks of common stock options and treasury stock. (See separate article regarding Robert Crispin.)
During the recruitment of Robert Crispin, and shortly thereafter, Enterprise HR began the “putting together” of the severance package of Jim Orr III, late 1995-early 1996. Jim’s retirement package included 2 company paid life insurance polices (with his children as beneficiaries), salary continuation, stock options, treasury stock, and continuation of miscellaneous executive fringe benefits such as the Executive Financial Counseling Program, which I developed and initiated. Subsequently, Robert Crispin mysteriously resigned when it became known UNUM was negotiating a merger with Provident.
In 1995 and in 1st Quarter 1996, there was an urgency to “put together” the golden parachutes for the 26 Senior Vice Presidents, and have them approved by the Board of Directors and Legal Department. These 26 parachutes also included salary continuation for specified periods of time, stock option and treasury stock awards, executive incentives, deferred compensation and many other benefits I can no longer recall. These severance packages were often referred to by my manager as “golden parachutes”, and there was an extreme effort to finalize and complete the ‘chutes as of a specific date. The reason for the urgency to finalize the ‘chutes was not make known to me, however, I personally saw and reviewed all 26 of the severance packages prepared for the executives at that time.
As a Compensation Specialist with responsibility for negotiating stock option transactions for the 26 top executives, I was contacted in 1st Q 1996 by several field account executives requesting me to negotiate large blocks of stock options transactions for cash conversion. After several transactions were negotiated, I became suspicious largely because of the size of the stock option blocks requested to be transacted. It became clear to me that perhaps inside information may have become known to these field sales executives.
I personally spoke to each one of the field executives and they indicated a haste and urgency to sell large blocks of their stock options. I informed my manager of the requested transactions and spoke with UNUM’s legal counsel who advised me to inform the field executives they would need to wait the 60 days required by the SEC for insider trading. The executives were furious since the price per share of common stock was $60 and their stock option shares had been granted at the base rate of approximately $15-18 per share. It was never known to me the source or the details of internal information these executives had, however, during 1st Q 1996 many executives exercised their common stock options while the price of the stock was between $55-$60 per share. The gains realized on these stock transactions were considerable.
During this period of time, UNUM employees were awarded stock options with a base price of $32 per share at a time when the common stock was selling for $60 per share. The shares were 1 year vested with a 5-year maturity date. My best recollection was that the options were granted in 1995 or 1996. With a 5-year maturity date, this would place the options fully vested at or shortly after the merger with Provident. Each employee was originally granted 150 common stock options. The market value of the common stock continued to climb in the period just prior to the merger, and therefore, there was a stock split giving each employee 300 shares with a grant price of $16 per share.
After the merger with Provident some employees exercised their shares, however, the majority of UNUM employees held on to their stock options in anticipation of increasing market values. This did not happen, in fact, the common stock price of UNUM Provident stock continued to decline to around $10 per share. Although promised by management that the stock options would not be worthless, as decreasing values of common stock continued to be realized, employees left the company and forfeited the value of their stock options. My recollection is that Unum’s stock bottomed out at $5 per share within 6 months of the merger.
The employee exodus was so widespread that one of the Vice Presidents, Barbara Coughlin promised the general medical impairment unit employees that “the values of their stock options” would go right back to $60 per share once the merger was in place. It never happened.
The only people who care about this now are probably the Unum employees who were left holding worthless Stock Options. About 60% of employees threw their hands up in the air and left the company leaving the claims areas with backlogs of claims and fewer people to review them.
While this “Blast from the Past”, is for the most part, a “who gives a damn” rendition from Unum’s past, it is after all an interesting story of “Who Stole the Cheese” from Unum’s employees at one point in time.
