UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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StanCorp Financial Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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[LOGO OF STANCORP/SM/ FINANCIAL GROUP]
March 29, 2001
Dear Fellow Shareholder:
On behalf of your Board of Directors, I have the pleasure of inviting you to
attend our 2001 Annual Meeting of shareholders. The meeting will be held on
Monday, May 7, 2001 at 11:30 a.m. Pacific Time in the Pavilion Ballroom of the
Hilton Hotel, 921 SW Sixth Avenue, Portland, Oregon. I hope that you will
participate in the Annual Meeting in one of the three available ways. You can
do so by attending the meeting and voting in person. Alternatively, you may
vote by completing the enclosed proxy card and returning it as promptly as
possible. You may also complete your proxy by telephone or over the Internet.
Included with this mailing, you will find our Annual Report to Shareholders,
which includes our Annual Report on Form 10-K. The Annual Report includes
audited financial statements for our fiscal year, which ended on December 31,
2000. You will also find our annual meeting notice and proxy statement. The
proxy statement outlines the items of business that will be discussed and
voted upon at the Annual Meeting. I urge you to read the Annual Report and the
proxy statement carefully, as they contain information about us that you may
find important.
I hope to see you at the Annual Meeting. If you are unable to attend, I
again ask that you complete your proxy and return it by mail, telephone or
over the Internet as soon as possible.
Sincerely,
/s/ Ronald E. Timpe
Ronald E. Timpe
Chairman, President, and
Chief Executive Officer
TABLE OF CONTENTS
Topic Page
- ----- ----
NOTICE OF ANNUAL MEETING
PROXY STATEMENT
GENERAL INFORMATION...................................................... 1
Voting Rights.......................................................... 1
Voting by Proxy........................................................ 1
Votes Required......................................................... 2
Cost of Proxy Solicitation............................................. 2
ELECTION OF DIRECTORS.................................................... 2
Nominees for Election at the Annual Meeting............................ 2
Directors in Classes................................................... 3
Nominees for Election.................................................. 3
Continuing Directors................................................... 4
CORPORATE GOVERNANCE..................................................... 5
Committees of the Board................................................ 5
Directors' Compensation................................................ 5
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN
SHAREHOLDERS............................................................ 6
CERTAIN SHAREHOLDERS..................................................... 7
REPORT OF THE ORGANIZATION & COMPENSATION COMMITTEE...................... 7
COMPENSATION OF EXECUTIVE OFFICERS....................................... 11
Summary Compensation Table............................................. 11
Stock Options Granted.................................................. 12
Stock Options Exercised................................................ 12
Long-Term Incentive Plan Awards Granted in 2000........................ 13
Standard Retirement Program............................................ 13
Certain Relationships and Related Transactions......................... 14
PERFORMANCE GRAPH........................................................ 16
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.................. 16
AUDIT COMMITTEE MATTERS.................................................. 17
OTHER MATTERS............................................................ 17
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................................ 17
SHAREHOLDER NOMINATIONS AND PROPOSALS.................................... 18
EXHIBIT A--AUDIT COMMITTEE CHARTER....................................... 19
i
STANCORP FINANCIAL GROUP, INC.
1100 SW Sixth Avenue
Portland, Oregon 97204
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Notice of Annual Meeting of Shareholders
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Notice is hereby given that the Annual Meeting of Shareholders of StanCorp
Financial Group, Inc., an Oregon corporation, will be held in the Pavilion
Ballroom of the Hilton Hotel, 921 SW Sixth Avenue, Portland, Oregon, on May 7,
2001, at 11:30 a.m. Pacific Time, for the following purposes:
1. To elect five directors to serve for three-year terms expiring in
2004;
2. To ratify the appointment of Deloitte & Touche LLP as StanCorp's
independent auditors for the year 2001; and
3. To transact any other business that may properly come before the
Annual Meeting.
The close of business on March 2, 2001 has been fixed as the record date for
determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting.
Shareholders may vote by written proxy, by telephone, or over the Internet.
Instructions for voting by telephone and over the Internet are printed on the
proxy card. If you attend the meeting and intend to vote in person, please
notify our personnel of your intent as you sign in for the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dwight L. Cramer
Dwight L. Cramer
Vice President, General Counsel
and Corporate Secretary
March 29, 2001
STANCORP FINANCIAL GROUP, INC.
1100 SW Sixth Avenue
Portland, Oregon 97204
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement concerns the Annual Meeting of Shareholders of StanCorp
Financial Group, Inc. ("StanCorp," "the Company," "we," "us," and "our") to be
held on May 7, 2001 ("Annual Meeting"). The Annual Meeting will be held at
11:30 a.m. Pacific Time in the Pavilion Ballroom of the Hilton Hotel, 921 SW
Sixth Avenue, Portland, Oregon. Our shares of common stock trade on the New
York Stock Exchange under the ticker symbol "SFG". We have only one
outstanding class of common stock that is eligible to vote. As of March 2,
2001, we had 31,478,056 outstanding shares of common stock ("Common Stock").
Our Board of Directors is soliciting your proxy for use at the Annual
Meeting and at any adjournment of the meeting. You will be asked to vote upon
two items: Item 1. Election of Directors and Item 2. Approval of Deloitte &
Touche LLP as our independent auditors. Your proxy will also permit a vote on
any other matter that may legally come before the Annual Meeting. We are
currently not aware of any other item that will require a shareholder vote.
We have included in this mailing a copy of our 2000 Annual Report to
Shareholders, which includes our Annual Report on Form 10-K. The Annual Report
includes audited financial statements. You may wish to review the Annual
Report carefully. We are mailing this proxy statement and the accompanying
forms of proxy and voting instructions on or about March 29, 2001 to holders
of our common stock on the record date for the Annual Meeting.
Voting Rights
Each share of our Common Stock is entitled to one vote on each proposal and
with respect to each director position to be filled. There is no cumulative
voting. To be eligible to vote on matters coming before the Annual Meeting,
you must own our Common Stock on the record date. The Board of Directors has
set the record date as close of our business day on March 2, 2001 ("Record
Date"). If you own shares as of the Record Date, you may vote either in person
at the Annual Meeting or by proxy. You may vote by proxy by completing a proxy
card and mailing it in the postage paid envelope, by using a toll-free
telephone number, or by voting over the Internet. Please refer to your proxy
card or the information forwarded to you by your bank, broker, or other holder
of record to see which options are available to you. Your ability to vote by
telephone or by the Internet will close at 4:00 p.m. Eastern Time on May 4,
2001.
Voting by Proxy
We have included a proxy in this packet. Our Board of Directors is
soliciting this proxy from you. The proxyholder(s) (the person(s) designated
in the proxy to cast your vote, also known as "proxies") will vote your shares
according to your instructions. If you return your proxy signed, but without
directions, the proxyholders will vote your shares in accordance with the
recommendations of our Board of Directors with regard to Items 1 and 2. If
other matters come before the Annual Meeting that require a shareholder vote,
the proxyholder will vote your shares in accordance with the recommendation of
our management.
You have the right to revoke your proxy at any time up to the time your
shares are voted. You have three ways to revoke your proxy. First, you may do
so in writing. Please send your revocation to our Corporate Secretary, P. O.
Box 711, Portland, OR 97207. Your written revocation must actually be received
by April 28,
2000. Secondly, you can cast another valid proxy in writing, by telephone or
over the Internet. Your vote will be cast in accordance with the latest valid
proxy. Thirdly, you can revoke your proxy by voting in person at the Annual
Meeting. If you choose to vote in person, please let our personnel know that
you are revoking a previously given proxy and are now voting in person.
Votes Required
As required by Oregon law, our Articles of Incorporation and our Bylaws, to
elect nominees to our Board of Directors at the Annual Meeting, the meeting
must have a quorum and the nominees receiving the highest number of votes cast
will be elected. For a proposal to pass at the Annual Meeting, the meeting
must have a quorum and the proposal must receive more votes in its favor than
were cast against it. Broker nonvotes and abstentions will be treated as if
the shares were present at the Annual Meeting, but not voting.
Cost of Proxy Solicitation
We will pay the cost of soliciting proxies. Our directors, officers, or
employees may solicit proxies on our behalf in person or by telephone,
facsimile, or other electronic means. We have also engaged the firm of
Corporate Investor Communications, Inc. to assist us in the distribution and
solicitation of proxies. We have agreed to pay Corporate Investor
Communications, Inc. a fee of $4,000 plus expenses for their services.
In accordance with the regulations of the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange, we will also reimburse brokerage
firms and other custodians, nominees, and fiduciaries for their expenses
incurred in sending proxies and proxy materials to beneficial owners of
StanCorp.
ELECTION OF DIRECTORS
Under Oregon law and pursuant to our Articles of Incorporation and Bylaws,
StanCorp's business, property, and affairs are managed under the direction of
our Board of Directors. Members of our Board of Directors are kept informed of
our business through discussions with our Chairman, President and Chief
Executive Officer and other officers, by reviewing materials provided to them,
through reliance on qualified experts in professional disciplines, and by
participating in meetings of the board and its committees.
We have had fourteen directors. Our Board of Directors is divided into three
classes of a nearly equal number of directors. Each class serves a three-year
term in office. At this Annual Meeting, you will be requested to elect five
Class II directors. Class II currently consists of five directors, all of whom
have agreed to stand for re-election. One Class I director, Mr. William
Swindells, will reach mandatory retirement age and retire from our board this
year.
Class II directors, if elected, will serve a three year term, until the
annual meeting of shareholders in 2004. If any director resigns, dies, or is
otherwise unable to serve, the Board of Directors may fill the vacancy for the
unexpired term.
Our Board of Directors thanks Mr. Swindells for his many years of service to
us and to our subsidiaries.
Our Board of Directors also serves as the Board of Directors of our
principal subsidiary, Standard Insurance Company. Unless otherwise noted in
the biographical information below, our directors serve on the same board
committees of Standard Insurance Company as they do for StanCorp.
Nominees for Election at the Annual Meeting
The Board of Directors has proposed the following individuals for election
as Class II directors: Virginia L. Anderson, Jerome J. Meyer, Ralph R.
Peterson, E. Kay Stepp and Michael G. Thorne, all of whom are current
directors.
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If any nominee should become unable to serve, the proxyholder will vote for
the person or persons the Board of Directors recommends, if any. We have no
reason to believe that any of the nominees is not available or would be unable
to serve if elected.
Directors in Classes
We have set forth below information, as of December 31, 2000, about each
nominee and continuing director. This information includes the director's age,
positions held with us, principal occupation, business history for at least
the last five years, committees of our board on which the director serves, and
other directorships held.
Director Term
Name Class Age Since(1) Position Held Expires
- ---- ----- --- -------- ------------- -------
Virginia L. Anderson..... II 53 1989 Director 2001
Jerome J. Meyer.......... II 62 1995 Director 2001
Ralph R. Peterson........ II 56 1992 Director 2001
E. Kay Stepp............. II 55 1997 Director 2001
Michael G. Thorne........ II 60 1992 Director 2001
Frederick W. Buckman..... III 54 1996 Director 2002
John E. Chapoton......... III 64 1996 Director 2002
Peter O. Kohler, MD...... III 62 1990 Director 2002
Ronald E. Timpe.......... III 61 1993 Chairman, President & CEO 2002
Franklin E. Ulf.......... III 69 1987 Director 2002
Barry J. Galt............ I 67 1988 Director 2003
Richard Geary............ I 65 1991 Director 2003
Peter T. Johnson......... I 68 1987 Director 2003
William Swindells........ I 70 1988 Director 2003(2)
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(1) Reflects the year in which the director was elected to Standard Insurance
Company's Board of Directors. All directors joined StanCorp's Board of
Directors in March of 1999, just prior to Standard Insurance Company's
demutualization and StanCorp's initial public offering.
(2) Mr. Swindells has attained the mandatory retirement age of 70 and is
retiring at the Annual Meeting.
Nominees for Election
Virginia L. Anderson--Since 1988, Ms. Anderson has been the Director of the
Seattle Center, a 74-acre, 31 facility urban civic center, located in Seattle,
Washington. Ms. Anderson serves on the Audit Committee and the Nominating and
Corporate Governance Committee.
Jerome J. Meyer--From January 2000, Mr. Meyer has been the Chairman of the
Board of Tektronix, Inc., a high technology company located in Beaverton,
Oregon. From 1990 to 1999, Mr. Meyer was Chairman of the Board and Chief
Executive Officer of Tektronix, Inc. Mr. Meyer serves as the chair of the
Organization and Compensation Committee and serves on the Finance and
Operations Committee. In addition to Tektronix, Inc., Mr. Meyer is a member of
the board of directors of Enron Corporation, and Centerspan, Inc.
Ralph R. Peterson--Since 1991, Mr. Peterson has been President and Chief
Executive Officer of CH2M Hill Companies, Ltd., an engineering, design, and
consulting firm located in Denver, Colorado. Mr. Peterson serves on the
Nominating and Corporate Governance Committee and on the Organization and
Compensation Committee. Mr. Peterson also serves on the board of CH2M Hill
Companies, Ltd.
E. Kay Stepp--Since 1994, Ms. Stepp has been principal and owner of
Executive Solutions, a management consulting firm in Portland, Oregon. From
1989 to 1992, Ms. Stepp was President and Chief Operating Officer
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of Portland General Electric, an electric utility. Ms. Stepp serves on the
Nominating and Corporate Governance Committee and on the Organization and
Compensation Committee. Ms. Stepp is a member of the board of directors of
Planar Systems, Inc. and Franklin Covey Company.
Michael G. Thorne--Since 1991, Mr. Thorne has been Executive Director of the
Port of Portland, Oregon, a public corporation whose primary business is
providing facilities and services to move cargo and people. Mr. Thorne serves
on the Executive Committee and the Finance and Operations Committee. Mr.
Thorne is also a member of the board of directors of Willamette Industries,
Inc.
The Board of Directors recommends a vote for the above nominees for election
as directors.
Continuing Directors
Frederick W. Buckman--Since 1999, Mr. Buckman has served as President of
Frederick Buckman, Inc., a consulting firm located in Portland, Oregon. From
1994 to 1998, Mr. Buckman was President, Chief Executive Officer and Director
of PacifiCorp, a holding company of diversified businesses, including an
electric utility, based in Portland, Oregon. Mr. Buckman serves as the Chair
of the Finance and Operations Committee and serves on the Audit Committee.
John E. Chapoton--In 2001, Mr. Chapoton became a partner of Brown Investment
Advisory & Trust Company, in Washington, D.C. From 1984 to 2001, Mr. Chapoton
was the managing partner of the Washington D. C. office of the law firm of
Vinson & Elkins. Mr. Chapoton serves as the chair of the Audit Committee.
Barry J. Galt--Mr. Galt is now retired. In 1998, Mr. Galt was Chairman of
Seagull Energy Corporation and Vice Chairman in 1999. From 1983 to 1998, Mr.
Galt was the Chairman and Chief Executive Officer of Seagull Energy
Corporation, a diversified energy company, located in Houston, Texas. Mr. Galt
serves on the Finance and Operations Committee and the Organization and
Compensation Committee. Mr. Galt is a member of the board of directors of
Ocean Energy, Inc. (formerly Seagull Energy Corporation), Trinity Industries,
Inc. and Friede Goldman Halter, Inc.
Richard Geary--From 1984 to 1998, Mr. Geary was President of Kiewit Pacific
Co. (Vancouver, Washington), a subsidiary of Peter Kiewit Sons', Inc., a
diversified construction company. Mr. Geary serves on the Executive Committee
and the Finance and Operations Committee. Mr. Geary is a member of the Board
of Directors of Peter Kiewit Sons', Inc., Kiewit Materials Company, David
Evans & Associates, and Today's Bank.
Peter T. Johnson--Mr. Johnson of McCall, Idaho has been a private investor
since retiring in 1986 as Administrator of the Bonneville Power
Administration, a federal power marketing and generation agency. Mr. Johnson
serves on the Executive Committee and the Audit Committee. Mr. Johnson is a
member of the board of directors of Idaho Power Company and its wholly owned
subsidiary, IDA West Corporation.
Peter O. Kohler, MD--Since 1988, Dr. Kohler has been President of the Oregon
Health Sciences University, located in Portland, Oregon. Dr. Kohler serves as
chair of the Nominating and Corporate Governance Committee and serves on the
Executive Committee.
Ronald E. Timpe, FSA, CLU--Mr. Timpe has been Chairman, President and Chief
Executive Officer of StanCorp since its incorporation. Mr. Timpe has been
President and Chief Executive Officer of our principal subsidiary, Standard
Insurance Company, since 1994 and became Chairman of its Board of Directors in
1998. Mr. Timpe is the chair of the Executive Committee of StanCorp and of the
Management Committee of Standard Insurance Company.
Franklin E. Ulf--Since 1997, Mr. Ulf has been Chairman of U.S. Trust
Company, N.A., a national bank located in Los Angeles, California. From 1983
to 1997, Mr. Ulf was Chief Executive Officer of the same organization. Mr. Ulf
serves on the Executive Committee and the Finance & Operations Committee.
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CORPORATE GOVERNANCE
In 2000, our board met five times and committees of the board held meetings
as follows: Audit Committee (4 times), Finance & Operations Committee (6
times), Nominating & Corporate Governance Committee (3 times), Organization &
Compensation Committee (5 times). No member of the board attended fewer than
75 percent of the aggregate number of board meetings and meetings of
committees of which he or she was a member.
Committees of the Board
Our Board of Directors has established five committees. They are the
Executive Committee, the Audit Committee, the Nominating & Corporate
Governance Committee, the Finance & Operations Committee, and the Organization
& Compensation Committee. The function of each committee is discussed below.
Executive Committee--The Executive Committee did not meet in 2000. Except as
otherwise provided in Oregon law, our Articles of Incorporation, or Bylaws,
the Executive Committee exercises the full authority of our Board of Directors
during those periods in which our full Board of Directors is not scheduled to
meet. Mr. Timpe chairs the Executive Committee. In addition to Mr. Timpe, the
committee is currently comprised of Messrs. Geary, Johnson, Kohler, Thorne,
and Ulf.
Audit Committee--It is the responsibility of the Audit Committee to:
determine the firm of independent public accountants to recommend to the
board; review the quality of the public accountants work; assure the
independence of the public accounts; review the audit scope and plan; review
and discuss with the public accountants their annual audit report and
accompanying management letter and quarterly financial reviews; and oversee
the adequacy of the internal control structure. All members of the Audit
Committee are "independent", as such term is defined in the listing standards
of the New York Stock Exchange. For additional information concerning the
Audit Committee's responsibilities, see "Audit Committee Matters."
Finance and Operations Committee--It is the responsibility of the Finance
and Operations Committee to: oversee the appropriate capital structure of
StanCorp; approve operational plans and budgets; oversee the investment policy
and review and approve investment reports and significant acquisitions; make
periodic recommendations regarding dividends; counsel the board regarding
acquisitions, divestitures, and other business combinations; and review
financial information that will be released.
Nominating and Corporate Governance Committee--It is the responsibility of
the Nominating and Corporate Governance Committee to: review the organization
and structure of the board; review of the qualifications and recommend
candidates for the board and its committees; review the effectiveness of the
board; recommend directors compensation; and oversee the compliance program.
Organization and Compensation Committee--It is the responsibility of the
Organization and Compensation Committee to: review executive compensation and
recommend changes, as appropriate; develop and administer an overall
compensation policy; monitor the performance of the chief executive officer;
oversee succession planning; oversee stock option and stock purchase plans;
review organizational changes recommended by the chief executive officer; and
review board compensation. All directors who are members of the Organization
and Compensation Committee were independent directors within the meaning of
the Securities Exchange Act of 1934 and its regulations (the " '34 Act").
There were no "interlocks" within the meaning of the '34 Act.
Directors' Compensation
Each director, who is not an employee of StanCorp or Standard Insurance
Company, receives an annual retainer fee of $20,000 and $1,000 meeting fee for
each board meeting and committee meeting attended. Each chair of a board
committee receives an additional annual retainer of $3,000. The retainer is
paid quarterly one-half in cash and one-half in Common Stock valued at fair
market value at the time issued. Additionally, on the
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date of the annual meeting, each director receives an annual option grant
covering 1,500 shares of Common Stock at fair market value on the date of
grant. We reimburse directors for all travel and other expenses. Our directors
receive only one retainer for serving on StanCorp's and Standard Insurance
Company's boards and one meeting fee for joint meetings of StanCorp's and
Standard Insurance Company's boards.
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership, as of January 31, 2001, of our Common Stock by each of our
directors, nominees, and five most highly compensated executive officers, and
by our directors, nominees, and executive officers as a group. Except as
otherwise noted, the named individual or family members had sole voting and
investment power with respect to such securities. No director, nominee or
executive officer or directors, nominees, and executive officers as a group
beneficially own 1% or more of StanCorp's outstanding shares of Common Stock.
Common Stock
Beneficially
Name Owned
---- ------------
Virginia L. Anderson.................................. 1,076
Frederick W. Buckman.................................. 5,827
John E. Chapoton...................................... 827
Barry J. Galt......................................... 1,726
Richard Geary......................................... 40,726
Peter T. Johnson...................................... 2,012
Peter O. Kohler....................................... 827
Jerome J. Meyer....................................... 3,020
Ralph R. Peterson..................................... 778 (1)
E. Kay Stepp.......................................... 741
William Swindells..................................... 5,726
Michael G. Thorne..................................... 1,826
Ronald E. Timpe....................................... 154,886 (2)(3)(4)
Franklin E. Ulf....................................... 726
Kim W. Ledbetter...................................... 34,555 (2)(3)(5)
Douglas T. Maines..................................... 54,324 (2)(3)
J. Gregory Ness....................................... 26,445 (2)(3)
Eric E. Parsons....................................... 50,834 (2)(3)
Executive Officers and Directors as a Group........... 425,276
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(1) Includes 52 shares owned by Mr. Peterson's spouse.
(2) Not included 104,987 shares owned by Standard Insurance Company Defined
Contribution Plan Trust for Home Office Employees and Standard Insurance
Company Defined Contribution Plan Trust for Field Personnel. The trust is
a unitized trust that matches 3% of employees' contributions with Common
Stock. The purchase and sale of StanCorp stock are determined by the
terms of the plan and are carried out by the administrator. Mr. Timpe and
Mr. Ledbetter and another executive officer are co-trustees of the trust.
The co-trustees have voting power over the shares owned in trust, but do
not have investment or dispositive power over the shares. The co-trustees
cannot withdraw shares from the trust and, upon retirement, neither the
co-trustees nor any other employee participants receive distributions in
stock from the plan.
(3) Includes; 75,000, 12,500, 34,381, 12,500 and 25,000 shares of restricted
stock for Messrs. Timpe, Ledbetter, Maines, Ness and Parsons,
respectively. Each has voting power over their respective shares. With
respect to 9,381 shares owned by Mr. Maines, such shares will vest
provided he is an employee of the Company on September 30, 2001. All
other shares of restricted stock are subject to forfeiture restrictions
set forth below under "Compensation of Executive Officers."
6
(4) Includes 1,537 shares from Deferred Compensation Plan for Senior Officer
Management Group and Supplemental Deferred Compensation Plan for Senior
Officer Management Group.
(5) Includes 52 shares owned by Mr. Ledbetter's spouse and 176 shares owned
by Mr. Ledbetter's mother's living trust of which Mr. Ledbetter is a
trustee and beneficiary.
CERTAIN SHAREHOLDERS
There are no shareholders of the Company known to management to be
beneficial owners of more than 5 percent of our Common Stock. Under Oregon
law, no individual or group of individuals may own 5 percent or more of our
voting shares for the first five years from the effective date of our
reorganization, unless they first receive permission to do so from the
Director of the Oregon Department of Consumer and Business Affairs
("Director").
REPORT OF THE ORGANIZATION & COMPENSATION COMMITTEE
This report was prepared by the Organization & Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee advises
management and exercises authority with respect to compensation and benefits
afforded the CEO and members of the Company's Management Committee (senior
executives who report directly to the CEO). The Committee oversees all of the
Company's broad-based compensation and benefit programs. The current members
of the Organization & Compensation Committee are Mr. Meyer, Mr. Galt, Mr.
Peterson and Ms. Stepp, all of whom are independent directors.
Overview
The Company's compensation program is designed to attract, retain, and
motivate highly talented individuals whose abilities are critical to the
success of the Company. Compensation policies that attract personnel of this
caliber are particularly important for a relatively new public entity like the
Company. The Company's compensation program is guided by the following
fundamental principles:
. Compensation is based on the level of job responsibility, the
performance of the Company and business operations for which the officer
is responsible, and the performance of the individual.
. Total compensation levels are designed to be competitive with
compensation paid by organizations with which the Company competes for
executive talent.
. Compensation should align the interests of the officers with those of
the Company's stockholders by basing a significant part of total
compensation on the long-term performance of the Company's common stock.
Each year the Committee reviews the compensation program to ensure that it
continues to serve the overall objectives of the Company. This review includes
a comprehensive report from an independent consulting firm, which assesses the
effectiveness of the compensation program. As part of this analysis, the
Committee reviews the Company's performance and compares it to the performance
of a group of comparator companies. The comparator companies selected for this
analysis are subject to change as the Company or its competitors change their
focus or as new competitors emerge. The annual compensation review permits an
ongoing evaluation of the link between organizational performance and its
compensation practices within the context of the compensation programs of
comparator companies.
To establish a competitive range of base salary, annual and long-term
incentive compensation, the Committee reviews competitive market data of these
comparator companies, historical Company practices and the recommendations of
outside compensation specialists. The resulting decisions regarding
compensation levels are based on competitive market practices, the executive's
level of responsibility and strategic decision-making requirements as well as
organization and individual performance measured against stated objectives.
The
7
Committee believes that the long-term focus on organization performance
brought about by the compensation principles keeps management focused on
strategies that position the Company for sustained growth in earnings and
return on equity.
Compensation Components
In establishing executive compensation, the various components of
compensation are considered collectively in order to properly assess the
appropriateness of the Company's program relative to the attainment of its
objectives. The Company's compensation program consists of two key elements:
(i) an annual component, i.e., base salary and annual bonus and (ii) a long-
term component, i.e. stock options and restricted stock awards under the 1999
Stock Incentive Plan.
Annual Component
In 2000, annual compensation for officers of the Company consisted of two
components--base salary and a cash payment under the Company's Short Term
Incentive Plan ("STIP"). The base salaries for senior officers (including Mr.
Timpe) were determined by the Committee based on each individual's performance
and, as previously discussed, the Company's performance and the range of
compensation of senior officers with similar responsibilities in comparable
companies.
Annual bonuses paid to officers under the STIP are a significant element of
the executive compensation program. The STIP is designed to reward
participants for the achievement and success of general corporate goals and to
recognize and reward their individual performance in achieving such goals.
Under the STIP, each officer of the Company is assigned annual performance
goals that may relate to aspects of his or her personal performance, the
results attained in a divisional, departmental or other business unit for
which that officer is responsible and overall corporate results. The financial
criteria used to measure results may include sales or revenue targets,
business unit expense targets, and specially crafted measures at the
departmental and divisional levels. These criteria may also include after-tax
operating income, earnings growth and return on equity, at the corporate
level. Performance criteria may combine objective and subjective elements, and
contain a discretionary component.
The Committee is responsible for determinations regarding performance goals
for the CEO and those officers who report directly to him. All other
determinations for employees below the Management Committee level are made by
the appropriate officers and employees subject to the approval of the
Committee. In 2000, each officer (other than the CEO) has a targeted annual
payout, which ranges from 10% to 50% of base salary, depending on the level of
the individual's assignment in the organization. Actual annual payouts may
range from zero to as much as 150% of the targeted amount. STIP bonuses are
paid in February of the year following the year for which performance was
measured.
Long Term Compensation
The long-term incentive component of the Company's executive compensation
program currently consists of awards under the 1999 Stock Incentive Plan.
These incentives are designed to reinforce management's long-term perspective
on corporate performance and provide an incentive for key executives to remain
with the Company for the long term.
Awards under the 1999 Stock Incentive Plan are a significant element of the
Company's executive compensation program. Compensation derived from stock
ownership provides a strong incentive to increase shareholder value, since the
value of this compensation is determined by changes in the price of the
Company's common stock over the term of each award. To date, awards under the
1999 Stock Incentive Plans have taken the form of stock options and restricted
stock awards.
8
Stock options, the principal form of long-term incentive compensation under
the 1999 Stock Incentive Plan, promote executive retention because they carry
a three-year or four-year vesting period and, if not exercised, are generally
forfeited if the employee leaves the Company before retirement. In addition,
stock options, granted at the fair market value on the date of grant and with
terms not to exceed 10 years, are designed to keep management and professional
employees oriented to growth over the long-term and not simply to short-term
profits. Awards are granted subjectively at the discretion of the Organization
and Compensation Committee based on a variety of factors, including a
recipient's demonstrated past and expected future performances, a recipient's
level of responsibility with the Company and his or her ability to affect
shareholder value. In making awards, the Committee considers various measures
of option valuation and current comparator group equity practices.
Because options granted in 1999 were intended to cover a two-year period,
the Company made no stock option awards to the CEO or other members of the
Management Committee in 2000 (other than one initial grant in connection with
a new hire and two incremental grants in connection with promotions).
In addition, the Company made performance-based restricted-stock awards
under the 1999 Stock Incentive Plan to the CEO and each member of the
Management Committee during 2000. The performance-based restricted-stock
awards were designed as a four-year program to measure and reward management's
efforts to improve the Company's ROE during that time period. Forfeiture
restrictions are incrementally released from shares as the Company attains
annual ROE targets between 10.5 percent and 15 percent. Certain provisions
permit adjustment to increase or decrease the number of shares released upon
attainment of intermediate ROE targets during the program. Failure to meet ROE
goals during the time period 2000-2004 will result in the forfeiture of shares
which have not been released at the end of 2004.
As a mutual insurance company, Standard Insurance Company had maintained a
long-term cash incentive plan in which awards were made, and then paid out,
over multi-year periods. The Company's final such long-term cash incentive
plan has been concluded. The final payments under such plans have been made
and are reported elsewhere in the proxy statement. The Company currently
intends to rely on the 1999 Stock Incentive Plan as the sole means of long-
term compensation, believing compensation in the form of stock ownership
increases long-term value for the stockholders while compensating individual
employees for superior performance.
Deductibility Cap on Executive Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for annual compensation over $1 million paid to
their chief executive officer and certain other highly compensated executive
officers. The Internal Revenue Code generally excludes from the calculation of
the $1 million cap compensation that is based on the attainment of pre-
established, objective performance goals. Where practicable, it is the policy
of the Committee to establish compensation practices that are both cost-
efficient from a tax standpoint and effective as a compensation program.
However, the Committee considers it important to be able to utilize the full
range of incentive compensation, even though some compensation may not be
fully deductible, and has done so in the past with respect to the chief
executive officer.
Chief Executive Officer Compensation
The CEO's compensation for 2001 was determined pursuant to the same
philosophy and objectives described earlier in this report and includes the
same elements and performance measures as the Company's other senior
executives. Under the STIP, the CEO's annual targeted payment is 75% of base
salary. For 2001, the Committee approved Mr. Timpe's base salary of $625,000.
In addition, the Committee approved a cash bonus relating to 2000 performance
of $485,000 under the STIP and a stock option grant of 60,000 shares. The
Board has approved the Committee's compensation decisions. In awarding
compensation, the Committee took note of Mr. Timpe's substantial and unique
contributions to the Company's performance as measured against the Company's
goals and its peer group's performance, in particular the total return to
shareholders and progress in improving the Company's ROE.
9
Summary
Subject to the oversight of the Board of Directors, the Committee is
responsible for the overall review, monitoring and approval of all
compensation decisions affecting the Company's senior executives. The
Committee actively monitors the effectiveness of the executive compensation
program and, from time to time, reviews the program against the principles set
forth in this report and makes modifications it believes to be appropriate.
Jerome J. Meyer, Chair Barry J. Galt
Ralph R. Peterson E. Kay Stepp
10
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The information set forth below describes the components of total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers (collectively, the "Named Executives") of the
Company and its subsidiaries.
Long Term
Compensation
------------------
Annual Compensation Awards Payouts
---------------------------- ---------- -------
Restricted
Other Annual Stock LTIP All Other
Name and Principal Salary Bonus Compensation Awards Payouts Compensation
Position Year ($) ($) ($) ($)(1) ($)(2) ($)(3)
- ------------------ ---- ------- ------- ------------ ---------- ------- ------------
Ronald E Timpe.......... 2000 560,000 485,000 158 2,240,625 156,015 23,310
Chairman, President and 1999 518,000 350,500 647 525,367 186,480 21,378
Chief Executive 1998 450,000 165,560 160 -- 156,555 19,050
Officer (4)
Eric E. Parsons......... 2000 260,000 223,280 722 628,125 48,282 20,854
Senior Vice President 1999 250,000 97,875 5,757 245,173 60,000 19,080
and Chief Financial 1998 220,000 71,832 4,524 -- 51,018 16,126
Officer (4)
Douglas T. Maines....... 2000 291,667 199,209 114 628,125 -- 16,412
Senior Vice President 1999 240,000 96,118 108 208,727 -- 12,013
Group Insurance (5) 1998 62,769 24,500 151,362(6) -- -- 180
Kim W. Ledbetter........ 2000 190,000 124,488 184 314,062 35,283 12,613
Senior Vice President, 1999 180,000 66,947 1,223 198,470 43,200 9,103
Individual Insurance 1998 170,000 35,031 391 -- 39,423 8,535
and Retirement Plans
J. Gregory Ness......... 2000 197,500 92,820 0 314,062 36,675 525
Senior Vice President, 1999 150,000 58,302 1,223 72,980 36,000 0
Investments 1998 130,000 28,935 391 -- 30,147 0
- --------
(1) For each year these dollar amounts represent the number of restricted
shares awarded to the Named Executive multiplied by the market value per
share, on the date of award. The 2000 awards are subject to forfeiture
restrictions during the four-year period established by the performance
stock program. See "Long Term Incentive Plan Awards Granted in 2000." The
1999 awards have vested for all Named Executives other than Mr. Maines
(whose award vests on September 30, 2001, provided he remains employed by
the Company through that date). At December 31, 2000, based on a price of
$47.75 per share, the aggregate restricted stock holdings of the Named
Executives were as follows: Mr. Timpe--23,612 shares valued at $1,127,473;
Mr. Parsons--11,019 shares valued at $526,157; Mr. Maines--9,381 shares
valued at $447,943; Mr. Ledbetter--8,920 shares valued at $425,930; and
Mr. Ness--3,280 shares valued at $156,620 (the foregoing amounts exclude
the awards reported in the Long Term Incentive Plan Awards granted in 2000
Table).
(2) Amounts shown are amounts paid with respect to three-year LTIP plans
covering 1998-2000, 1997-1999 and 1996-1998, respectively. No awards have
been made under the LTIP plans since the demutualization of the Company in
1998. All amounts shown above reflect payments of awards made prior to
that time. The most recent LTIP payments were made 60 percent in stock,
valued at fair market value on the date of payment, and 40 percent in
cash. Prior payouts were made entirely in cash.
(3) Amounts shown include matching contributions credited to the accounts of
the Named Executives under Standard Insurance Company's nonqualified
Supplemental Executive Compensation Plan and imputed income from Group
Life Insurance Plan for Home Office Employees. Amounts of imputed income
for 2000
11
for group term life contributions are: $4,410; $2,072; $662; $662; and $0
for Messrs. Timpe, Parsons, Maines, Ledbetter and Ness, respectively.
Amounts contributed to the nonqualified plan in 2000 are: $18,900; $18,782;
$15,750; $11,951; and $525, respectively.
(4) Mr. Timpe and Mr. Parsons hold their respective positions for both
StanCorp and certain of its subsidiaries. All other Named Executives are
employed only by subsidiaries of StanCorp Financial Group, Inc.
(5) Mr. Maines became an employee of Standard Insurance Company during the
fourth quarter of 1998 and accordingly was ineligible for grants made in
previous years.
(6) Includes income tax allowance on non-deductible moving expenses and
relocation allowance for Mr. Maines.
To reflect completely the compensation paid Named Executives in the most
recent prior period, the Company reports compensation with respect to the year
in which it is earned, even if paid in subsequent time periods. Certain
amounts reported in the table above for years 1998-2000 were paid in the first
quarter of the following year.
Stock Options Granted
2000 Option Grants
Potential
Realized
Value at
Assumed
Annual Rates
Individual Grants of Stock
--------------------------------------------------- Price
Number of % of Total Appreciation
Securities Options for Option
Underlying Granted to Exercise Term (2)
Options Employees in Price Expiration -------------
Name granted(#)(1) Fiscal Year ($/per share) Date 5%($) 10%($)
- ---- ------------- ------------ ------------- ---------- ------ ------
Ronald E. Timpe......... 0
Eric E. Parsons......... 0
Douglas T. Maines....... 0
Kim W. Ledbetter........ 0
J. Gregory Ness......... 1,500 1.07% 29.875 05/01/10 28,182 71,420
- --------
(1) One third of the options vest annually from the date of grant. The
exercise period is 10 years. Shares are granted at their fair market value
on the date of grant.
(2) Potential realized value at expiration is based on an assumption that the
share price of Common Stock appreciates at the rate shown (compounded
annually) from the date of the grant until the end of the ten-year term.
On February 5, 2001, options were granted at $42.50 per share in the
following amounts to the following executives: Mr. Timpe (60,000), Mr. Maines
(16,000), Mr. Parsons (16,000), Mr. Ledbetter (10,000), and Mr. Ness (12,500).
One quarter of such options vest annually from the date of grant and the
options are exercisable for 10 years from the date of grant.
Stock Options Exercised
2000 Option Exercises and 2000 Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at 12/31/00(#) 12/31/00($)(1)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Ronald E. Timple........ 0 0 46,667 93,333 1,195,842 2,391,658
Eric E. Parsons......... 0 0 14,667 29,333 375,842 751,658
Douglas T. Maines....... 0 0 14,000 28,000 358,750 717,500
Kim W. Ledbetter........ 0 0 10,667 21,333 273,342 546,658
J. Gregory Ness......... 0 0 8,333 18,167 213,533 453,904
- --------
(1) Potential unrealized value is (i) the value of a share of Common Stock at
December 31, 2000 ($47.75) less the option exercise price times (ii) the
number of shares covered by the options.
12
Long Term Incentive Plan Awards Granted in 2000
The following table describes certain performance-based restricted stock
awards granted during the year ended December 31, 2000 to the Named
Executives. All awards reflected in this table are reported above in the
Summary Compensation Table, valued as set forth in Note (1) to that table. In
any year, shares of restricted stock awarded under the Performance Stock
Program may be released, in the discretion of the Board of Directors, upon
attainment in any annual measuring period of progressive improvement in return
on equity from that of preceding years, within a range between 10.5% (a 10%
payout) and 15.0% (a 100% payout).
Performance or
Number of Other Period Until
Name Shares Maturation or Payout(1)
---- --------- -----------------------
Ronald E. Timpe............................ 75,000 2000--2004
Eric E. Parsons............................ 25,000 2000--2004
Douglas T. Maines.......................... 25,000 2000--2004
J. Gregory Ness............................ 12,500 2000--2004
Kim W. Ledbetter........................... 12,500 2000--2004
- --------
(1) The program is not structured with a target payment expectation. If annual
corporate ROE remains below 10% throughout the period, no release will
occur; if the Company attains an annual 15% ROE during the period, full
release occurs.
Standard Retirement Program
Each of the Named Executives participates in both Standard Insurance Company
Retirement Plan for Home Office Personnel (the "Retirement Plan") and the
Supplemental Retirement Plan for Senior Executives (the "Supplemental
Retirement Plan").
The following table sets forth the benefits payable, assuming retirement at
age 65, to participants in the Retirement Plan and the Supplemental Retirement
Plan (the "Retirement Plans") at the levels of compensation and the periods of
service contained therein.
Annual Retirement Plan Benefits
Annual Benefit at Age 65 for Years of Service(1)
High 5 Yr Ave. --------------------------------------------------------------
Remuneration 15 20 25 30 35
-------------- -------- -------- -------- -------- --------
$125,000 $ 29,325 $ 39,100 $ 48,875 $ 58,650 $ 68,425
$150,000 $ 35,325 $ 47,100 $ 58,875 $ 70,650 $ 82,425
$175,000 $ 41,325 $ 55,100 $ 68,875 $ 82,650 $ 96,425
$200,000 $ 47,325 $ 63,100 $ 78,875 $ 94,650 $110,425
$225,000 $ 53,325 $ 71,100 $ 88,875 $106,650 $124,425
$250,000 $ 59,325 $ 79,100 $ 98,875 $118,650 $138,425
$300,000 $ 71,325 $ 95,100 $118,875 $142,650 $166,425
$350,000 $ 83,325 $111,100 $138,875 $166,650 $194,425
$400,000 $ 95,325 $127,100 $158,875 $190,650 $222,425
$450,000 $107,325 $143,100 $178,875 $214,650 $250,425
$500,000 $119,325 $159,100 $198,875 $238,650 $278,425
$550,000 $131,325 $175,100 $218,875 $262,650 $306,425
$600,000 $143,325 $191,100 $238,875 $286,650 $334,425
$650,000 $155,325 $207,100 $258,875 $310,650 $362,425
$700,000 $167,325 $223,100 $278,875 $334,650 $390,425
$750,000 $179,325 $239,100 $298,875 $358,650 $418,425
- --------
(1) Maximum service under the plan is 35 years.
13
The benefits shown in the above table are payable in the form of a straight
life annuity with annualized cost of living increases not to exceed a
cumulative limit of 3% of the original benefit amount for each year after
retirement. Benefits payable under the Retirement Plans are not subject to
offset for Social Security benefits. Compensation taken into account under the
Retirement Plans is the average monthly compensation paid to a participant
during the consecutive 60-month period over the most recent 120-month period
that produces the highest average compensation. For this purpose, compensation
is the total of base salary and short-term incentive bonus in the year
accrued.
As of December 31, 2000, the estimated highest five year average
remuneration and credited years of service for each of the Named Executives
under the Retirement Plans was: Mr. Timpe, $707,586 and 32 years; Mr. Maines,
$394,817 and 2 years; Mr. Parsons, $317,006 and 10 years; and Mr. Ledbetter,
$212,602 and 26 years and Mr. Ness, $171,137 and 21 years.
Certain Relationships and Related Transactions
Retention Agreement. As part of Standard Insurance Company's
demutualization, Standard Insurance Company entered into a Retention agreement
with each Named Executive and certain other executive officers (each, an
"executive"). Under the Retention Agreements, Standard Insurance Company
agreed to pay each executive a retention bonus, payable in restricted stock,
provided that the executive remained continuously employed by the Company
through January 2, 2001, except Mr. Maines, who was required to remain
continuously employed through September 30, 2001. Other than with respect to
Mr. Maines, for each Named Executive, the forfeiture restrictions were
satisfied and shares released on January 2, 2001.
Change of Control Agreement. The Company has also entered into Change of
Control Agreements with each of the Named Executives and certain other
executive officers (each, an "executive"). The provisions of these agreements
become effective if and when there is a Change of Control (as defined below)
of StanCorp or Standard Insurance Company. The Change of Control Agreements
will continue in effect through December 31, 2001. The agreements will be
automatically renewed for successive one-year terms unless the Company gives
notice to the executive that it will not extend the expiration date (provided
that no such notice can be given during the pendency of a potential Change of
Control). If a Change of Control occurs, the expiration date is automatically
extended for twenty-four months beyond the month in which the Change of
Control occurs.
Under the Change of Control Agreements, the Company will provide the
executive with the following benefits in the event of termination within
twenty-four months of a Change of Control other than for cause.
. a lump-sum payment in an amount equal to three times the sum of (a) the
executive's annual base salary in effect at the time the Change of
Control occurs and (b) target incentive compensation payable to the
executive under any short term incentive plan;
. an amount equal to the target bonus payable under any cash long term
incentive plan in effect immediately prior to the Change of Control;
. outstanding stock options, stock bonuses, or other stock awards shall
become immediately vested, become exercisable in full and all
outstanding stock options shall remain exercisable and
. immediate vesting of all benefits to which the executive is entitled
under any of the Company's retirement plans and a 30 month continuation
of certain welfare plans.
The Change of Control Agreements also provide that, to the extent any
payments to the executives would be subject to "golden parachute" excise taxes
under Section 4999 of the Internal Revenue Code, the executives will receive
"gross-up" payments in order to make them whole with respect to such taxes and
any related interest and penalties.
14
For the purposes of the Change of Control Agreements, a "Change of Control"
is defined generally to include:
. an acquisition of 30 percent of more of the voting stock of the Company
or Standard Insurance Company;
. a change in the majority of the members of the Company's or Standard
Insurance Company's Board within a twelve-month period that is not
supported by two-thirds of the incumbent directors;
. approval by the shareholders of a merger or reorganization in which the
Company's or Standard Insurance Company's shareholders do not own at
least 51 percent of the voting securities of the resulting entity;
. a sale of all or substantially all of the Company's assets or those of
Standard Insurance Company;
. a tender or exchange offer which results in at least 30 percent of the
Company's voting securities or those of Standard Insurance Company being
purchased by the offeror; or
. adoption by the Company's or Standard Insurance Company's Board of
Directors of a resolution to the effect that a Change of Control has
occurred.
Acquisition by an executive, or a group of persons including an executive,
of 25 percent or more of the voting securities of StanCorp or Standard
Insurance Company does not constitute a Change of Control under the Change of
Control Agreements.
15
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total
shareholder return on the Company's Common Stock, with the cumulative total
return of the S & P Life Insurance Index, the S & P 500 Index and the S & P
Insurance Composite Index. The comparison assumes $100 was invested on April
16, 1999 in the Company's Common Stock and in each of the foregoing indexes
and assumes the reinvestment of dividends.
This graph covers the period of time beginning on April 16, 1999, when our
shares were first traded on the New York Stock Exchange, through December 29,
2000.
[PERFORMANCE GRAPH]
StanCorp's Cumulative Total Return Relative to
the S&P 500, S&P Life Insurance and S&P Insurance Composite Indices
Date SFG S&P 500 S&P Life Insurance S&P Insurance Composite
- ---- ------ ------- ------------------ -----------------------
4/16/99 100.00 100.00 100.00 100.00
4/30/99 99.48 101.26 105.91 100.47
5/28/99 103.10 98.87 106.06 101.51
6/30/99 110.08 99.97 106.64 101.67
7/30/99 104.39 101.10 104.73 98.73
8/31/99 96.90 102.71 93.15 99.01
9/30/99 92.23 97.40 76.84 87.83
10/29/99 104.67 104.03 89.10 98.11
11/30/99 116.36 108.24 82.86 96.52
12/31/99 104.67 112.39 78.48 97.13
1/31/00 101.29 104.12 66.09 88.24
2/29/00 100.24 102.18 52.69 74.05
3/31/00 114.03 114.97 59.53 94.31
4/28/00 121.32 111.51 56.25 94.22
5/31/00 120.05 105.92 60.21 100.43
6/30/00 134.15 111.91 59.59 98.75
7/31/00 142.76 109.32 66.35 110.25
8/31/00 155.06 116.10 64.96 110.51
9/29/00 178.85 110.83 72.24 124.56
10/31/00 168.66 106.50 71.41 125.73
11/30/00 178.10 103.70 71.91 124.11
12/29/00 200.10 102.16 81.79 134.77
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Our Board of Directors, on the recommendation of the Audit Committee, has
appointed Deloitte & Touche as independent auditors for the year 2001.
Although not required, our board has determined that it is desirable to
request ratification of this appointment by our shareholders. If ratification
is not obtained, the board will reconsider the appointment.
The aggregate fees billed for professional services rendered by Deloitte &
Touche, the member firms of Deloitte Touche Tohmatsu, and their respective
affiliates (collectively, "Deloitte & Touche") in connection with their audit
of our consolidated financial statements and reviews of the consolidated
financial statements included in our quarterly reports on Form 10Q for the
year 2000 approximated $435,000. There were no professional services rendered
by Deloitte & Touche in 2000 relating to financial information systems design
and implementation. The aggregate fees billed for other non-audit related
services approximated $404,000 for the year 2000. Deloitte & Touche has
confirmed that as of January 29, 2001, they were independent accountants with
respect to the Company, within the meaning of the Securities Acts administered
by the Securities and Exchange Commission and the requirements of the
Independence Standards Board.
Deloitte & Touche and its predecessor firms have served as our independent
auditors for over 50 years.
We have been advised that representatives of Deloitte & Touche will be
present at the Annual Meeting. They will be afforded the opportunity to make a
statement, should they desire to do so, and to respond to appropriate
questions.
Our Board of Directors unanimously recommends that you vote for this
proposal.
16
AUDIT COMMITTEE MATTERS
The Audit Committee operates pursuant to a Charter approved by the Company's
Board of Directors. The Audit Committee reports to the Board of Directors and
is responsible for overseeing and monitoring financial accounting and
reporting, the system of internal controls established by management and the
audit process of the Company. The Audit Committee Charter sets out the
responsibilities, authority and specific duties of the Audit Committee. The
Charter specifies, among other things, the structure and membership
requirements of the Audit Committee, as well as the relationship of the Audit
Committee to the independent accountants, the internal audit department, and
management of the Company. A copy of the Audit Committee Charter is attached
to this Proxy Statement as Exhibit A.
Report of the Audit Committee. The Audit Committee reports as follows with
respect to the Company's audited financial statements for the year ended
December 31, 2000:
. The Audit Committee has completed its review and discussion of the
Company's audited financial statements with management;
. The Audit Committee has discussed with the independent auditors
(Deloitte & Touche LLP) the matters required to be discussed by
Statement on Auditing Standards ("SAS") No. 61, Communication with Audit
Committees, as amended by SAS No. 90, Audit Committee Communications,
including, matters related to the conduct of the audit of the Company's
financial statements;
. The Audit Committee has received written disclosures, as required by
Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees, indicating all relationships, if any, between the
independent auditor and its related entities and the Company and its
related entities which, in the auditor's professional judgment,
reasonably may be thought to bear on the auditors independence. The
Audit Committee has considered whether the independent auditor's
provision of information technology services and other non-audit
services to the Company is compatible with maintaining the auditor's
independence. The Audit Committee has reviewed the letter from the
independent auditors confirming that, in its professional judgment, it
is independent from the Company, and has discussed with the auditors the
auditors' independence from the Company; and
. The Audit Committee has, based on its review and discussions with
management of the Company's 2000 audited financial statements and
discussions with the independent auditors, recommended to the Board of
Directors that the Company's audited financial statements for the year
ended December 31, 2000 be included in the Company's Annual Report on
Form 10-K.
Audit Committee:
John E. Chapoton, Chair
Virginia L. Anderson
Frederick W. Buckman
Peter T. Johnson
William Swindells
OTHER MATTERS
Our Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters are presented, the persons named as proxies
will vote on such matters as recommended by management.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the '34 Act requires our directors and executive officers
to file reports of holdings and transactions in our stock with the SEC. Based
on our records and other information, we believe that filing requirements
applicable to our directors and executive officers with respect to 2000 have
been met.
17
SHAREHOLDER NOMINATIONS AND PROPOSALS
Shareholders who wish to submit names to the Nominating and Corporate
Governance Committee for consideration for election to the Board of Directors
should do so in writing between February 15, 2002 and March 12, 2002,
addressed to the Nominating and Corporate Governance Committee, c/o Corporate
Secretary, StanCorp Financial Group, Inc., P. O. Box 711, Portland, Or. 97207.
The notice should set forth as to each nominee whom the shareholder proposes
to nominate for election or reelection as director the following:
. the name, age, business and residence addresses of the nominee;
. the principal occupation or employment of the nominee;
. the number of shares of Common Stock beneficially owned by the nominee;
and
. any other information concerning the nominee that would be required to
appear in a proxy statement for the election of such nominee under the
rules of the SEC.
The shareholding giving notice must also provide his or her name and record
address and the number of shares of Common Stock owned by the shareholder.
Under our bylaws, shareholders who wish to present proposals for action at
an annual meeting must give timely notice of the proposed business to our
Corporate Secretary. To be timely, a shareholder's notice must be in writing,
delivered to, or mailed and received at, our principal office in Portland,
Oregon not less than 50 days nor more than 75 days prior to that year's annual
meeting. However, if we have not provided shareholders notice of, or otherwise
publicly disclosed, the date of the annual meeting within 65 days of the
meeting date, notice must be received not later than the close of business on
the 15th day following the date on which such notice was mailed or public
disclosure was made. Our 2002 annual meeting is scheduled to be held on May 6,
2002. Therefore, a notice, to be timely, must be received by us between
February 15, 2002 and March 12, 2002. If received after that date, the
proposal, when and if raised at the 2002 annual meeting, will be subject to
the discretionary vote of the proxyholder as described earlier in this
material.
Please note that these rules govern raising proposals at the annual meeting.
In order for a shareholder's proposal to be considered for inclusion in our
2002 proxy statement, under SEC Rules, we must receive the proposal by
November 28, 2001. Shareholders should mail their proposal to our Corporate
Secretary, P. O. Box 711, Portland, OR 97207.
In order to make a proposal, the shareholder must meet certain ownership
criteria and provide us with a brief description of the matter to be brought
before the meeting and the reasons for the proposal. The shareholder must also
provide us with his or her name and record address, the number of shares of
Common Stock that the shareholder owns, and any interest that the shareholder
may have in the proposal.
March 29, 2001
/s/ Dwight L. Cramer
Dwight L. Cramer
Vice President, General Counsel
and Corporate Secretary
18
EXHIBIT A
AUDIT COMMITTEE CHARTER
The Audit Committee of StanCorp Financial Group, Inc. is elected annually by
the StanCorp Board of Directors. It is composed of three or more independent
Directors. "Independent" shall mean having no relationship to the Company that
may interfere with the exercise of their independence from management and the
Company. Each member of the Audit Committee shall be financially literate or
become financially literate within a reasonable period of time after his or
her appointment to the Audit Committee. "Financially literate" shall mean
possessing the ability to understand key financial statements, including the
balance sheet, income statement and cash flow statement, with sufficient
comprehension to initiate and pursue inquiries that contribute to the
performance of the Committee's oversight responsibilities, or as such
qualification may be interpreted by the Board of Directors in its business
judgment. No more than one of the Committee members may also be a member of
the Executive Committee. At least one member of the Audit Committee shall have
accounting or related financial management expertise, as the Board of
Directors interprets such qualification in its business judgment.
Management is responsible for the preparation of financial statements and
maintenance of an accounting system and internal control structure that
provide strong assurance as to the reliability of the financial records and
the protection of assets for StanCorp and each of its subsidiaries. The Audit
Committee assists the Board of Directors in fulfilling its oversight
responsibilities by reviewing the quality and integrity of quarterly and
annual financial reports to shareholders and others and obtaining from
Management and the independent public accountant adequate assurances that
appropriate accounting standards and financial assumptions have been followed
and that such reports comply with laws and regulations. The Committee also
assures that effective internal controls are in place. The Committee is
empowered to retain independent accountants, legal counsel, and others, as
necessary, to assist it in carrying out its duties.
The Audit Committee shall require that the outside auditor for the Company
be ultimately accountable to the Board of Directors and Audit Committee.
Accordingly, the Audit Committee and Board of Directors have the ultimate
authority and responsibility to select, evaluate, and, where appropriate,
replace the outside auditor (or to nominate the outside auditor to be proposed
for shareholder approval in any proxy statement). The Audit Committee shall be
responsible for ensuring that the outside auditor submits on a periodic basis
to the Audit Committee a formal written statement delineating all
relationships between the auditor and the Company. The Audit Committee is
responsible for actively engaging in a dialogue with the outside auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and for recommending that
the Board of Directors take appropriate action in response to the outside
auditors' report to satisfy itself of the outside auditors' independence.
The Committee maintains free and open communication among the Directors, the
independent auditors, the internal auditors, and Company management.
Meetings
The Audit Committee meets three times each year in February, May, and
November. When possible, meetings are held in conjunction with regular Board
meetings. Additional meetings for any purpose may be held when called by the
Chairperson.
Duties and Authority
The duties and authority of the Audit Committee include the following:
. Review and update the Committee's charter and activities checklist
annually
19
. Determine annually the firm of independent public accountants to be
recommended to the Board of Directors for submission to the shareholders
for ratification at the annual meeting, approve their fees, review the
quality of their work, and, if necessary, recommend their replacement or
discharge
. Assure the independence of the independent public accountants by
reviewing at least annually a written statement provided by them
describing relationships with the Company contemplated above
. Review the audit scope and plan of the independent public accountants
and the internal auditors
. Review and discuss with the independent public accountants their annual
audit report and the accompanying management letter. Review and discuss
with the independent public accountants their review of quarterly and
annual financial reports. Included in these discussions on quarterly and
annual financial reports will be a specific discussion regarding the
quality of earnings and the integrity of the financial reports
. Oversee the adequacy of the internal control structure, in part through
the review of reports from the internal auditors
. Review reports of regulatory agencies relative to surplus adequacy and
compliance with laws and regulations.
. Based on discussion with management and the independent public
accountants, recommend annually to the Board of Directors that the
financial statements be included in the company's annual report on Form
10-K
. Annually provide a proxy disclosure statement in the form prescribed by
the SEC
Reports
The Audit Committee will submit a report of its activities to the Board of
Directors after each Committee meeting.
20
[LOGO OF STANCORP FINANCIAL GROUP]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STANCORP FINANCIAL GROUP, INC
The undersigned hereby appoints Ronald E. Timpe, Eric E. Parsons and Dwight L.
Cramer as proxies, with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated on
the other side, all the shares of stock of StanCorp Financial Group, Inc. held
in the name of the undersigned with all powers which the undersigned would
possess if present at the Annual Meeting of Shareholders of the Company to be
held May 7, 2001 or any adjournment thereof. If this Proxy is returned signed
but without a clear voting designation, the proxies will vote in accordance with
the Board's recommendations. If other matters come properly before the meeting,
the proxies will vote in accordance with management's recommendations.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
.FOLD AND DETACH HERE.
You can now access your Stancorp Financial Group, Inc.
shareholder account online.
Access your Stancorp Financial Group, Inc. shareholder account online via
Investor ServiceDirect/SM/ (ISD).
Mellon Investor Services LLC agent for Stancorp Financial Group, Inc.
Shareholder Services, now makes it easy and convenient to get current
information on your shareholder account. After a simple, and secure process of
establishing a Personal Identification Number (PIN), you are ready to log in and
access your account to:
. View account status . View payment history for dividends
. View certificate history . Make address changes
. View book-entry information . Obtain a duplicate 1099 tax form
. Establish/change your PIN
Visit us on the web at http://www.mellon-investor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS -- Establish a PIN
You must first establish a Personal Identification Number (PIN) online by
following the directions provided in the upper right portion of the web screen
as follows. You will also need your Social Security Number (SSN) available to
establish a PIN.
Investor ServiceDirect/SM/ is currently available for domestic shareholder
accounts.
. SSN
. PIN
. Then click on the (Establish PIN) button
Please be sure to remember your PIN, or maintain it in a secure place for future
reference.
Step 2: Log in for Account Access
You are now ready to log in. To access your account please enter your:
. SSN
. PIN
. Then click on the (Submit) button
If you have more than one account, you will now be asked to select the
appropriate account.
Step 3: Account Status Screen
You are now ready to access your account information. Click on the appropriate
button to view or initiate transactions.
. Certificate History
. Book-Entry Information
. Issue Certificate
. Payment History
. Address Change
. Duplicate 1099
For Technical Assistance Call 1-877-978-7778 between
9am-7pm Monday-Friday Eastern Time
PLEASE NOTE: This service is available to registered shareholders only. Employee
plan participants are not covered.
This Proxy when properly executed will be voted by the proxies in the manner
designated below. If this Proxy is returned signed but without a clear voting
designation, the proxies will vote FOR items 1 and 2.
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR items 1 and 2.
Item 1 - ELECTION OF CLASS II DIRECTORS
FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked) to vote for all nominees
to the contrary) listed below
[ ] [ ]
Nominees: 01 Virginia L. Anderson,
02 Jerome J. Meyer,
03 Ralph R. Peterson,
04 E. Kay Stepp,
05 Michael G. Thorne
(Instruction: To withhold authority to vote for any nominee, write that
nominee's name on the line below.)
__________________________________________________________________
Item 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please disregard if you have previously provided your consent decision.
By checking the box to the right, I consent to future delivery of [ ]
annual reports, proxy statements, prospectuses and other materials
and shareholder communications electronically via the Internet at a
webpage which will be disclosed to me. I understand that the Company may no
longer distribute printed materials to me from any future shareholder meeting
until such consent is revoked. I understand that I may revoke my consent at any
time by contacting the Company's transfer agent, Mellon Investor Services L.L.C.
Ridgefield Park, NJ and that costs normally associated with electronic delivery,
such as usage and telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
Signature _______________________ Signature ___________________ Date ___________
Note: Please sign as name appears hereon, joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to
vote your shares in the same manner as if you marked,
signed and returned your proxy card.
Internet
http://www.proxyvoting.com/sfg
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-840-1208
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your proxy card and return it the enclosed postage-paid
envelope.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement on the
Internet at: www.stancorpfinancial.com/investors/sec.html
(Company Logo)
March 29, 2001
Dear Shareholder:
Thank you for consenting to receive our 2000 Annual Report to Shareholders and
Proxy Statement electronically via the Internet. You may view this material by
simply logging onto
www.stancorpfinancial.com/investors/sec.html.
- --------------------------------------------
Your vote is important to us. You may vote your shares via the Internet, by
telephone or by completing the enclosed proxy card and returning it in the
envelope provided.
Should you desire to revoke your consent to receive our material electronically,
you may do so by contacting our Transfer Agent, Mellon Investor Services, via
Investor Services Direct, www.mellon-investor.com, or 1-800-303-3963.
-----------------------
Once again, we value you as a shareholder and sincerely appreciate your support.
Sincerely,
/s/ Dwight L. Cramer
Dwight L. Cramer
Vice President, General Counsel
and Corporate Secretary