DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

Alignment Healthcare, Inc.

(Name of registrant as specified in its charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 

 

 


 

 

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April 26, 2023

Dear Fellow Stockholders:

Alignment Healthcare, Inc. (“Alignment”) was founded on the principle of creating a standard of health care that puts the senior first. We strive to offer members what they need, where and when they need it. By focusing on serving our members, we believe we can improve the health and well-being of seniors across the United States.

One of the key priorities since our initial public offering was to meet or exceed our guidance range across each of our four key performance indicators (“KPIs”): total revenue, health plan membership, adjusted gross profit and adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”). We successfully delivered on that goal by meeting or exceeding our guidance range for all four KPIs for eight straight quarters.

In today’s climate, balancing disciplined growth and high quality with prudent fiscal management is key. We are focused on growth while prioritizing margins, moving toward becoming adjusted EBITDA positive and minimizing cash burn. The Centers for Medicare & Medicaid Services (“CMS”) is increasing the standards of our industry, which we view as a good thing. The increased standards encourage all Medicare Advantage (“MA”) plans to have a durable model emphasizing quality at a low cost – our mission from day one. Alignment is better positioned than ever to stand out amongst its peers. Our purpose-built AVA® technology platform and Care Anywhere care delivery model continue to produce strong operating results and are what differentiate us in the marketplace.

Last year was another strong year for Alignment with outstanding achievements, including:

23% year-over-year revenue growth as of Dec. 31, 2022;
~95% of members in plans that received 4 Stars or better under CMS’s 5 Star Quality Rating System, including a 5 Star rating in North Carolina for the 2023 plan year;
A Net Promoter Score (“NPS”) of greater than 60, which is significantly higher than the MA national average NPS of 40 and includes an NPS of greater than 70 for our Care Anywhere program;
Improved clinical outcomes across markets thanks to our Care Anywhere care delivery model powered by AVA insights, including:
o
Members in our Care Anywhere program show a 32% net reduction in institutional claims expense 12 months after engagement versus Care Anywhere-eligible members who did not enroll in the program.
o
At-risk members across all chronic condition cohorts saw 47% lower emergency room ("ER") visits per thousand versus traditional Medicare, including a 58% reduction in ER utilization for members with six or more chronic conditions.
o
At-risk members who have been with us for at least six years have experienced an average 10% improvement in the medical benefits ratio, going from 88% to 78%.
o
Fewer than 155 inpatient admissions per thousand in each of our new states, nearly 40% better than traditional Medicare, which averages over 250 inpatient admissions per thousand – a powerful testament to the replicability of our care model.

In 2023, we will aim to strengthen six key areas that will allow us to scale successfully:

Quality: We are doubling down on our quality and cost initiatives, which have been the foundational element of our company for sustained growth both inside and outside of California. For 2024, it is a strategic priority to maximize our Stars rating outcomes, the

 


 

importance of which is evidenced by our successful 2023 plan year annual enrollment period in North Carolina, where we achieved our first 5-star plan.
Clinical Innovation: We continually invest in our AVA and Care Anywhere capabilities. We have developed the Safety Assessment Fall Education program to proactively identify intrinsic and extrinsic risks contributing to falls, the leading cause of senior injuries.
Network: We are deepening relationships with our provider partners and expanding our networks to create greater access for members. We have established a strategic geographic footprint across six states and remain focused on going deep in each market. Our market share in our most penetrated counties is 28%, and with less than a 3% share across our 52 counties today, we see a significant opportunity to strengthen our presence in existing counties. Furthermore, more than 30% of all Medicare eligibles reside in our six states, representing a long growth runway as we expand into contiguous counties within these existing states.
Products: We will increase the richness of our products heading into 2024 while balancing long-term margin objectives.
Distribution: We are employing a broader, more balanced distribution strategy. We will continue to invest in our durable relationships with third-party brokers that have consistently delivered while we add internal sales agents and a greater online sales presence.
Operational Excellence: We are continuing to invest in growing the company and improving our back-office operations to yield better member retention, more operating scale and enhanced workflows. Our operating scale economies are evidenced by California becoming adjusted EBITDA positive in 2022.

Our results underscore our approach to doing well by doing good for our members. Alignment is deploying our winning model with a disciplined growth strategy that continues to differentiate us from our peers. We believe it will take the company from good to great.

On behalf of the Alignment Healthcare Board of Directors, it is our pleasure to invite you to attend our second Annual Meeting of Stockholders on June 6, 2023, at 8:00 a.m. PDT. The Annual Meeting will be held virtually via audio-only webcast at www.proxydocs.com/ALHC. You can listen to the meeting live, submit questions and vote online during the Annual Meeting.

Our Board and management team remain committed to creating long-term value. Thank you for your continued support throughout the past year. We look forward to speaking with you at the Annual Meeting.

Sincerely,

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John Kao

Joseph Konowiecki

Margaret McCarthy

Chief Executive Officer

Chairman of the Board

Lead Independent Director

 

 


 

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NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS

The 2023 Annual Meeting of Stockholders of Alignment Healthcare, Inc. (the “Annual Meeting”) will be held on June 6, 2023, at 8:00 a.m. Pacific Time.

Items of Business

Matters to be voted on at the Annual Meeting are as follows:

Proposal 1: Election of four nominees identified in the accompanying proxy statement to serve as Class II directors to hold office until the 2026 Annual Meeting of Stockholders;
Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2023; and
Proposal 3: Approval, on a non-binding, advisory basis, of the compensation of our named executive officers (“Named Executive Officers” or “NEOs”).

Items of business may also include transacting other business as may properly come before the meeting or any adjournment of the meeting. The Proxy Statement accompanying this notice describes each of the items of business in more detail.

Access to the Meeting

The Annual Meeting will be held via live audio webcast available at www.proxydocs.com/ALHC. Please see the “Commonly Asked Questions and Answers About the Annual Meeting” section in the attached Proxy Statement for information on registration to attend the Annual Meeting. Stockholders will be able to participate, vote, view the list of stockholders of record and submit questions from any location.

Record Date & List of Stockholders

Our Board has set the record date as of April 10, 2023 (the “Record Date”). Only stockholders that owned Alignment common stock at the close of business on that day are entitled to notice of and may vote at the Annual Meeting or any adjournment of the meeting. A list of Alignment’s stockholders of record will be available at our corporate headquarters and principal executive offices located at 1100 W. Town & Country Rd., Suite 1600, Orange, CA 92868 at least ten days prior to June 6, 2023. Additionally, instructions regarding how to view a complete list of these stockholders will be provided to you by email after you have completed registration to attend the Annual Meeting.

 

 


 

How to Vote Your Shares

By Internet

Go to www.proxydocs.com/ALHC and follow the instructions.

By Telephone

Dial toll-free 866-314-3346 using any touch-tone telephone and follow the recorded instructions.

By Mail

Complete, sign, date and return your proxy card or voting instruction form in the envelope provided.

In Person (Virtual)

Attend our virtual Annual Meeting and cast your vote using the webcast voting options.

Whether or not you expect to attend the Annual Meeting, please make sure you vote so that your shares will be represented at the meeting.

By Order of the Board of Directors

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Richard Cross

General Counsel and Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 2023

This Notice of Annual Meeting, the Proxy Statement and our fiscal year 2022 Annual Report are available on the investor relations section of our website at https://ir.alignmenthealth.com/. Additionally, you may access our proxy materials at www.proxydocs.com/ALHC. We are taking advantage of U.S. Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. These materials will be available on the Internet on or about April 26, 2023. We are sending a “Notice of Internet Availability of Proxy Materials" (“Notice of Availability”) to our stockholders of record instead of a paper proxy statement and annual report containing financial statements, unless paper copies have previously been requested. We believe that Internet delivery of our proxy materials allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting.

 

 

 

 


 

Table of Contents

 

COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

1

PROXY SUMMARY

 

7

PROPOSAL 1 – ELECTION OF DIRECTORS

 

12

 

Continuing Directors

 

15

 

Nomination Criteria and Director Experience

 

18

 

Director Diversity

 

21

CORPORATE GOVERNANCE

 

22

 

Board and Corporate Governance Highlights

 

22

 

Board Composition and Director Independence

 

23

 

Board Leadership Structure

 

24

 

The Board’s Role in Risk Oversight

 

25

 

Board Committees

 

27

 

Board Oversight of Environmental, Social and Governance Matters

 

29

 

Stockholder Engagement

 

33

 

Family Relationships

 

33

 

Compensation Committee Interlocks and Insider Participation

 

33

 

Code of Business Conduct and Ethics

 

34

 

Insider Trading Policy; Hedging and Other Transactions

 

34

 

Board Evaluation Practices

 

35

 

Board and Committee Meetings

 

36

 

Communications by Stockholders and Other Interested Parties with the Board

 

36

EXECUTIVE OFFICERS

 

37

COMPENSATION DISCUSSION AND ANALYSIS

 

39

 

Executive Summary

 

39

 

Compensation Best Practices & Policies

 

41

 

What Guides Our Program

 

42

 

Executive Compensation Decision-Making Process

 

43

 

2022 Executive Compensation Program in Detail

 

45

 

Other Compensation Matters

 

51

 

Compensation Committee Report

 

52

EXECUTIVE AND DIRECTOR COMPENSATION

 

53

 

Pay Versus Performance

 

66

 

CEO Pay Ratio

 

70

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

71

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

75

PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

78

AUDIT COMMITTEE REPORT

 

80

PROPOSAL 3 – NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

81

OTHER MATTERS

 

82

AVAILABILITY OF SEC FILINGS, CODE OF CONDUCT AND COMMITTEE CHARTERS

 

82

 


 

WHERE TO FIND ADDITIONAL INFORMATION

 

82

COST OF PROXY SOLICITATION

 

82

APPENDIX – NON-GAAP FINANCIAL MEASURES

 

83

 

Cautionary Note Regarding Forward-Looking Statements

 

This proxy statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are subject to risks and uncertainties and are based on assumptions that may prove to be inaccurate, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: our ability to attract new members and enter new markets, including the need for certain governmental approvals; our ability to maintain a high rating for our plans on the Centers for Medicare and Medicaid ("CMS") Five Star Quality Rating System ("CMS Star Ratings"); risks associated with being a government contractor; changes in laws and regulations applicable to our business model; risk related to our indebtedness, including the potential for rising interest rates; changes in market or industry conditions and receptivity to our technology and services; results of litigation or a security incident; the impact of shortages of qualified personnel and related increases in our labor costs; and the impact of COVID-19 on our business and results of operation. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our reports filed with the U.S. Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K filed with the SEC on February 28, 2023. All information provided in this proxy statement is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

 

Website References

 

References to our website throughout this proxy statement are intended to provide inactive, textual references and are provided for convenience only. The content on our website does not constitute a part of this proxy statement.

 


 

COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Why did I receive these materials?

The Board of Alignment Healthcare, Inc. (“Alignment” or the “Company”) is soliciting your proxy to vote at our 2023 Annual Meeting of Stockholders (or at any postponement or adjournment of the meeting) (the “Annual Meeting”). Stockholders who own shares of our common stock as April 10, 2023 (the “Record Date”), are entitled to vote at the Annual Meeting. These proxy materials are first being distributed to stockholders on or about April 26, 2023. You should review these proxy materials carefully as they give important information about the proposals that will be voted on at the Annual Meeting, as well as other important information about Alignment.

Notice of Electronic Availability of Proxy Statement and Annual Report. As permitted by SEC rules, we are making this proxy statement and our annual report available to our stockholders electronically via the Internet. The notice of electronic availability contains instructions on how to access this proxy statement and our annual report and vote online. If you received a notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The notice also instructs you on how you may submit your proxy over the Internet or by telephone. If you received a notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the notice.

Householding. The SEC’s rules permit us to print an individual’s multiple accounts on a single notice or set of Annual Meeting materials. To take advantage of this opportunity, we have summarized on one notice or set of Annual Meeting materials all of the accounts registered with the same tax identification number or duplicate name and address, unless we received contrary instructions from the impacted stockholder prior to the mailing date. The SEC’s rules also permit us to send a single set of proxy materials to two or more securityholders who share a single address, which is called “householding.” We agree to deliver promptly, upon written or oral request, a separate copy of the notice or Annual Meeting materials, as requested, to any stockholder (including any stockholder at a shared address) to which a single copy of those documents was delivered. If you prefer to receive separate copies of the notice or Annual Meeting materials, or if you currently receive separate copies of the notice or Annual Meeting materials but would like to receive a single copy of such materials going forward, please visit www.proxydocs.com/ALHC, write to us at 1100 W. Town & Country Rd., Suite 1600, Orange, CA 92868, Attn: Investor Relations, or contact Mediant, Inc. at (866) 648-8133 or paper@investorelections.com. A number of brokerage firms have instituted householding. They will have their own procedures for stockholders who wish to receive individual copies of the proxy materials, or who currently receive individual copies of such materials and would like to participate in householding.

Who will be entitled to vote?

Stockholders who own shares of our common stock as of the Record Date are entitled to vote at the Annual Meeting. As of the Record Date, Alignment had approximately 188,370,007 shares of common stock outstanding. Holders of shares of common stock are entitled to one vote per share. Cumulative voting is not permitted with respect to the election of directors or any other matter to be considered at the Annual Meeting.

What will I be voting on?

You will be voting on:

Proposal 1: Election of four nominees identified in this proxy statement to serve as Class II directors to hold office until the 2026 Annual Meeting of Stockholders;
Proposal 2: Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2023; and

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Proposal 3: Approval, on an advisory basis, of the compensation of our named executive officers (“Named Executive Officers” or “NEOs”).

You will also vote on any other business as may properly come before the meeting or any adjournment of the Annual Meeting. All shares that are represented at the Annual Meeting by properly executed proxies received before or at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions indicated in the proxies.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” THE ELECTION OF EACH DIRECTOR NOMINEE UNDER PROPOSAL 1
AND “FOR” PROPOSALS 2 AND 3

How can I attend the Annual Meeting?

The Annual Meeting is being held as a virtual-only meeting. In order to attend the Annual Meeting, you must register at www.proxydocs.com/ALHC by no later than 5:00 p.m. Pacific Time on June 5, 2023. If you are a stockholder of record as of the Record Date, upon completing your registration, you will receive further instructions via email, including a unique link that will allow you access to the Annual Meeting and to vote and submit questions during the Annual Meeting. As part of the registration process, you must enter the control number located on your proxy card, voting instruction form, or Notice of Internet Availability.

If you are a beneficial owner of shares through a brokerage firm, bank, broker-dealer or other nominee holder (i.e., you hold shares in “street name”) as of the Record Date, you may gain access to the meeting by following the instructions in the voting instruction card provided by your brokerage firm, bank, broker-dealer or other nominee holder. You will need to enter your uniquely assigned control number at www.proxydocs.com/ALHC as part of the registration process. You may not vote your shares via the Internet at the Annual Meeting unless you receive a valid legal proxy from your brokerage firm, bank, broker-dealer or other nominee holder. If you were not a stockholder as of the Record Date, you may still listen to the Annual Meeting, but will not be able to ask questions or vote at the meeting.

The audio broadcast of the Annual Meeting will be archived on the investor relations section of our website, https://ir.alignmenthealth.com/, for at least one year.

How can I ask questions at the Annual Meeting?

We have designed the virtual Annual Meeting to provide substantially the same opportunities to participate as stockholders would have at an in-person meeting. The virtual Annual Meeting format allows stockholders to ask questions of our management and Board of Directors, as appropriate. If you have questions, you may type them into the dialog box provided at any point during the meeting (until the floor is closed to questions).

We reserve the right to exclude questions regarding topics that are not pertinent to meeting matters or company business or are inappropriate. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition. Any questions that are appropriate and pertinent to the Annual Meeting will be answered in the live question and answer session during the Annual Meeting, subject to time constraints. Any such questions that cannot be answered during the Annual Meeting due to time constraints will be posted and answered on the investor relations section of our website, https://ir.alignmenthealth.com/, as soon as practicable after the Annual Meeting.

Additional information regarding the ability of stockholders to ask questions during the Annual Meeting and information regarding how to obtain the related rules of conduct and other materials for the Annual Meeting will be provided by email after you have completed registration to attend the Annual

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Meeting. The rules of conduct will also be available on the Annual Meeting platform during the Annual Meeting.

How can I access technical support for the Annual Meeting?

If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting login page for assistance. Technical support will be available beginning approximately 15 minutes prior to the start of the Annual Meeting through its conclusion. The virtual Annual Meeting platform is fully supported across browsers (Edge, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. You should ensure that you have a strong internet connection if you intend to attend and/or participate in the Annual Meeting.

Why is the Annual Meeting virtual only?

In order to make the Annual Meeting accessible to a large number of our stockholders, the Annual Meeting will be conducted virtually via audio-only webcast. We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing the virtual-only Annual Meeting platform, including any difficulties voting or submitting questions, you may call the technical support number that will be posted in your instruction email.

How do I cast my vote?

Beneficial Stockholders. If you hold your shares through a broker, trustee or other nominee, you are a beneficial stockholder. In order to vote your shares, please refer to the materials forwarded to you by your broker, bank or other nominee for instructions on how to vote the shares you hold as a beneficial stockholder.

Registered Stockholders. If you are a stockholder of record, you may vote at the Annual Meeting, vote by proxy over the telephone, vote by proxy through the Internet or vote by proxy card. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote even if you have already voted by proxy.

TO VOTE DURING THE ANNUAL MEETING: To vote during the live webcast of the Annual Meeting, you must first register at www.proxydocs.com/ALHC. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the Annual Meeting and, if you are a stockholder, to submit questions during the meeting. Please be sure to follow the instructions found on your proxy card and/or voting authorization form and subsequent instructions that will be delivered to you via email. Stockholders will be able to attend the Annual Meeting platform beginning at 7:00 a.m. Pacific Time on June 6, 2023 pursuant to the unique access instructions they receive following their registration at www.proxydocs.com/ALHC.
TO VOTE BY PHONE: To vote by telephone, dial toll-free 866-314-3346 using any touch-tone telephone and follow the recorded instructions.
TO VOTE BY INTERNET: To vote through the Internet, you may complete an electronic proxy card at www.proxydocs.com/ALHC.

The Board has appointed John Kao and Thomas Freeman to serve as proxy holders to vote your shares according to the instructions you submit. If you properly submit a proxy but do not indicate how you want your shares to be voted on one or more items, your shares will be voted on such items in accordance with the recommendations of our Board as set forth above under “What will I be voting on?” With respect to any other matter properly presented at the Annual Meeting, your proxy, if properly

3


 

submitted, gives authority to the proxy holders to vote your shares on such matter in accordance with their best judgment.

Can I access the proxy materials electronically?

Yes. Your notice, proxy card or voting instruction card will contain instructions on how to:

1.
view our proxy materials for the Annual Meeting on the Internet; and
2.
instruct us to send our future proxy materials to you electronically by e-mail.

Our proxy materials are also available at www.proxydocs.com/ALHC and our proxy materials will be available starting on April 26, 2023.

Instead of receiving future copies of our proxy statements and annual reports by mail, stockholders of record and most beneficial owners can elect to receive an email that will provide an electronic link to these documents. Your election to receive future proxy materials by email will remain in effect until you revoke it.

How may I change or revoke my proxy?

Beneficial Stockholders. Beneficial stockholders should contact their broker, trustee or nominee for instructions on how to change their proxy vote.

Registered Stockholders. Registered stockholders may change a properly executed proxy at any time before its exercise by:

1.
delivering written notice of revocation to the General Counsel and Secretary at our principal executive offices at 1100 W. Town & Country Rd., Suite 1600, Orange, CA 92868;
2.
submitting another proxy that is dated later than the original proxy (including a proxy via telephone or Internet); or
3.
voting via the Internet at the Annual Meeting.

4


 

What is the voting requirement to approve each of the proposals, and how are the votes counted?

Proposal

Vote Required for Approval(1)

Effect of Abstentions(2)

Effect of Broker Non-Votes(2)

(1) Election of Directors

Plurality of the votes cast at the Annual Meeting(3)

Not applicable

No effect

(2) Ratification of Appointment of Independent Registered Public Accounting Form

Affirmative vote of a majority of the voting power present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter

Vote “Against”(4)

Not applicable (brokers may vote uninstructed shares)

(3) Approval, on an Advisory Basis, of Executive Compensation

Affirmative vote of a majority of the voting power present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter

Vote “Against”(4)

No effect

(1)
Proxy cards that are signed and returned but include unmarked votes will be voted in accordance with our Board’s recommendations.
(2)
If you are a beneficial owner whose shares are held of record by a broker or other New York Stock Exchange (“NYSE”) member organization, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” A broker non-vote will not affect the outcome of the vote for Proposal 1 or Proposal 3, because they are not considered to be shares entitled to vote on these “non-routine” matters. Proposal 2 is a “routine” matter, and so brokers are permitted discretionary authority to vote.
(3)
A plurality of the votes cast by the shares of common stock present or represented by proxy at the 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.
(4)
Abstentions will be counted as present and entitled to vote on the proposals and will therefore have the effect of a negative vote.

What is a “broker non-vote”?

A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner, but does have discretionary voting power over other items and submits votes for those matters. As discussed above, if you hold shares through a broker or other nominee and do not provide voting instructions to your broker, your shares may not be voted with respect to certain proposals, including the proposals listed above that are not considered “routine” and therefore discretionary voting by the broker or other NYSE member is not permitted. Among the matters submitted to the vote of stockholders at the Annual Meeting, only Proposal 2 is considered a “routine” matter.

What constitutes a “quorum”?

A “quorum” is the presence at the Annual Meeting, virtually or by proxy, of a majority of the outstanding shares entitled to vote at the Annual Meeting. Shares may be voted at the Annual Meeting by a signed proxy card, by telephone instruction, or electronically on the Internet. There must be a quorum for the Annual Meeting to be held. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining whether a quorum exists.

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When will the results of the vote be announced?

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be published in a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting.

What is the deadline for submitting a stockholder proposal or director nomination for the 2024 Annual Meeting?

Stockholder proposals pursuant to SEC Rule 14a-8 for inclusion in the proxy statement and form of proxy for Alignment’s Annual Meeting of Stockholders to be held in 2024 must be received by us at our principal executive offices at 1100 W. Town & Country Rd., Suite 1600, Orange, CA 92868 no later than the close of business on December 28, 2023. Stockholders wishing to make a director nomination or bring a proposal before the annual meeting to be held in 2024 (but not include it in our proxy materials) must provide written notice of such proposal to the General Counsel and Secretary at our principal executive offices no later than March 8, 2024 and not earlier than February 7, 2024, assuming we do not change the date of the 2024 annual meeting of stockholders by more than 30 days before or after the anniversary of the 2023 Annual Meeting. If we do, we will release an updated time frame for stockholder proposals. Any stockholder proposal or director nomination must comply with the other provisions of our Amended and Restated Bylaws and be submitted in writing to the General Counsel and Secretary at our principal executive offices in the form provided for in our Amended and Restated Bylaws.

Additionally, to comply with the SEC’s universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 7, 2024.

 

6


 

PROXY SUMMARY

This summary highlights certain information contained elsewhere in our proxy statement. This summary does not contain all of the information that you should consider, and you should carefully read the entire proxy statement and our 2022 Annual Report to Stockholders before voting.

About Us

Alignment is a next generation, consumer-centric platform designed to improve the health care experience for seniors. We deliver this experience through our Medicare Advantage plans, which are customized to meet the needs of a diverse array of seniors. Our innovative model of consumer-centric health care is purpose-built to provide seniors with care as it should be: high quality, low cost and accompanied by a vastly improved consumer experience. We combine a proprietary technology platform and a high-touch clinical model that enhances our members’ lifestyles and health outcomes while simultaneously controlling costs, which allows us to reinvest savings back into our platform and products to directly benefit the senior consumer. As of January 1, 2023, we had approximately 108,300 members enrolled in our health maintenance organization and preferred provider organization contracts in 52 markets across six states. Our ultimate goal is to bring this differentiated, advocacy-driven health care experience to millions of senior consumers in the United States and to become the most trusted senior health care brand in the country.

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Our platform was developed to align with the six core principles that we believe will be required to successfully deliver health care in the 21st century and that we believe represent our key competitive strengths. Our platform enables us to:

leverage data, technology and analytics to power all aspects of our model;
engage consumers directly and develop products to meet their needs;
proactively manage and coordinate care for our most vulnerable members;
empower providers and employ flexible care delivery models;
design and deploy innovative value-based payment models; and
cultivate a culture of innovation.

Voting Matters and Board Recommendations

 

Voting Matter

Vote Standard

Board Vote Recommendation

See Page

Proposal 1

Election of Directors

Plurality of votes cast

FOR EACH NOMINEE

12

Proposal 2

Ratification of Independent Registered Public Accounting Firm

Majority of voting power present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter

FOR

78

Proposal 3

Non-Binding, Advisory Vote on Executive Compensation

Majority of voting power present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter

FOR

81

 

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Our Director Nominees

You are being asked to vote on the election of the four Class II 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 2026 Annual Meeting” beginning on page 12.

Name

Age

Director Since

Independent

Selected Skills and
Qualifications

Committees

Jody Bilney

61

2022

Yes

Executive Leadership
Health Care Industry Expertise
Direct Consumer Markets Experience

Nominating, Corporate Governance and Compliance (“NCGCC”)

David Hodgson

66

2018

Yes

Nominating / Governance Experience
Health Care Industry Expertise
Capital Markets

NCGCC (Chair)

Jacqueline Kosecoff

73

2017

Yes

Executive Leadership
Health Care Industry Expertise
Compensation Committee Experience

Compensation

NCGCC

Jeffrey Margolis

59

2014

Yes

Executive Leadership Experience
Audit Committee Experience / Accounting & Finance Expertise
Health Care Industry Expertise

Audit (Chair)

Board Diversity

The Board believes that a diverse board is better able to effectively oversee the Company’s management and strategy and better positions us to deliver long-term value for our stockholders. Our Board recognizes that gender, racial or ethnic diversity, tenure and experience add to the overall mix of perspectives of our Board as a whole. The following charts present the diversity profile of the directors currently serving on our Board:

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Stockholder Engagement Highlights

In 2022-2023, we continued our robust stockholder engagement program. We proactively engage with stockholders and other stakeholders throughout the year to learn more about their perspectives on significant issues, including company performance and strategy, executive compensation and environmental, social and governance ("ESG") matters. We take feedback and insights from our engagement with stockholders and other stakeholders into consideration as we review and evolve our practices and disclosures, and share this feedback with our Board, as appropriate. For more information, see “Corporate Governance—Stockholder Engagement” on page 33.

Corporate Governance Highlights

We are committed to governance practices that promote the long-term interests of our stockholders, strengthen Board and management accountability and continue to build trust in our Company. The Board regularly reviews our governance profile to ensure that it reflects the evolving governance landscape applicable to our Company and appropriately supports and serves the best interests of the Company and our stockholders. For more information, see “Corporate Governance” beginning on page 22.

Board Structure & Composition

9 of 11 Directors, and all Board Committee members, are independent
Board composed of a mix of long-tenured and new directors
Directors reflect a variety of experiences and skills that give the Board the collective capability necessary to oversee the Company’s activities
Lead Independent Director empowered with agenda-setting authority and active involvement in oversight of Board functions, elected annually by the independent directors
Active and empowered committee chairs, all of whom are independent
Annual assessment and determination of optimal Board leadership structure
Commitment to Board diversity of perspective, gender, and race or ethnicity
Directors attended about 96% of Board and Committee meetings combined in 2022

Good Governance Practices

Ongoing Board assessment and refreshment led by the NCGCC
Annual Board and Committee self-assessments
Insider trading policy
Clawback policy implementation in process
Regular executive sessions of the independent directors at meetings of the Board, without management present
Non-employee director stock ownership requirements
Code of Conduct overseen by Board
Robust stockholder engagement program, with the participation of our Chairman, to share our perspectives and solicit feedback
Lead Sponsors can call special stockholder meetings

Board Operations and Oversight

Active board oversight of strategic planning
Robust oversight framework to assess and manage risks
Revised charters recently adopted to clarify committee and full Board oversight roles
Regular talent and succession planning discussions
Audit Committee oversight of financial risks, cybersecurity
NCGCC oversight of nominating process and criteria, legal and regulatory compliance
Compensation Committee oversight of compensation program, annual CEO evaluation
Direct access by the Board to members of management, including Chief Compliance Officer
Regular briefings on corporate governance practices and emerging corporate governance issues
Monthly “teach-ins” addressing key strategic areas

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Commitment to Environmental, Social & Governance Principles

Strong commitment to ESG principles as part of Company’s core mission, including focus on social determinants of health
Establishment of a management-led, interdepartmental ESG steering committee
Annual reporting via standalone Environmental, Social and Governance Report

Executive Compensation Highlights

Our executive compensation philosophy is to forge critical connections between performance, long-term value creation, employee engagement and retention, compensation governance and our cultural values. The Compensation Committee reviews and approves the elements of our compensation program at least annually, with input from an independent compensation consultant. Our 2022 executive compensation program remained largely consistent with our 2021 program. Recent changes to the program are described in the “Compensation Discussion and Analysis” section of this proxy statement beginning on page 39. We believe the following practices and policies within our program promote sound compensation governance and are in the best interests of our stockholders and executives:

What We Do

What We Don’t Do

Set total direct compensation within a competitive range of our peer group to ensure that it is aligned with the level of position, experience, skills and performance of the executive

No guaranteed or uncapped incentive payouts in our annual bonus plan

Emphasize variable pay over fixed pay, with a significant portion tied to our financial results

No repricing or exchange of underwater options without stockholder approval

Disclose our corporate performance goals and achievements relative to these goals

No option or stock appreciation rights granted below fair market value

Use an independent compensation consultant

No significant perquisites

Maintain anti-hedging and anti-pledging policies

No tax gross-ups, other than for certain relocation expenses

Conduct an annual advisory vote on the compensation of our NEOs

 

 

The following table illustrates the elements of pay we currently employ, the manner in which we position these elements relative to the market and the objectives achieved by each element:

Element

Target
Positioning vs.
Market

Primary Objective

Determination Factors

Base Salary

Target at Median

 

Attract and retain high-performing and experienced individuals
Provide steady source of income so executives can focus on the needs of the business
Value of role in competitive marketplace
Value of role to the Company
Skills, experience and performance of individual compared to the market as well as others in the Company

10


 

Element

Target
Positioning vs.
Market

Primary Objective

Determination Factors

Annual Cash Incentives

Target at Median

 

Motivate executives to achieve challenging short-term performance goals
Align with annual financial objectives
Target awards based on competitive marketplace, level of position, skills and performance of executive
75% of actual awards based on achievement against the corporate metrics
25% of actual awards based on achievement of individual goals (other than for the CEO)
For 2022, awards were subject to a modifier (-20% to +50%) based on the Company’s CMS Star Ratings, with potential payouts ranging from 0% to 250% of target

Long-Term Equity Incentives

Target at

50th - 75th percentile

 

Align executives’ interests with those of stockholders
Align with long-term business strategy
Retain executive talent through multi-year vesting schedules
Motivate sustainable performance that creates long-term value for stockholders
Foster our purpose and values to build teams that think and act like owners
Awards based on competitive marketplace, level of position, skills and performance of the executive

For more information regarding our executive compensation program, please see “Compensation Discussion and Analysis—2022 Executive Compensation Program in Detail” beginning on page 45. For information regarding the 2022 compensation paid to our Named Executive Officers, please see “Executive and Director Compensation” beginning on page 53.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS

Our Board recommends that the nominees below be elected as Class II members of the Board at the Annual Meeting for a term expiring at the 2026 Meeting of Stockholders:

Name

Age

Director Since

Independent

Committees

Other Public Company Boards

Jody Bilney

61

2022

Yes

NCGCC

Chuy’s Holdings, Inc.
Masonite International Corp.
Cracker Barrel Old Country Store, Inc.

David Hodgson

66

2014

Yes

NCGCC (Chair)

TriNet Group, Inc.
Royalty Pharma plc

Jacqueline Kosecoff

73

2017

Yes

Compensation

NCGCC

GoodRx Holdings, Inc.
Houlihan Lokey, Inc.
Steris plc
TriNet Group, Inc.

Jeffrey Margolis

59

2014

Yes

Audit (Chair)

NextGen Healthcare, Inc.

Each nominee was recommended for re-election by the NCGCC for consideration by the Board and our stockholders. Mr. Hodgson has been nominated to serve on our Board by General Atlantic, L.P. (“General Atlantic”), one of our Lead Sponsors (defined below). See “Corporate Governance—Board Composition and Director Independence.”

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 2026 Annual Meeting

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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.

 

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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.

 

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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., Houlihan Lokey, Inc. and GoodRx Holdings, Inc. From May 2005 through May 2021, Dr. Kosecoff served on the board directors of Sealed Air Corporation. From July 2012 through February 2019, Dr. Kosecoff served on the board of directors of athenahealth, Inc. 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.

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Jeffrey Margolis

Mr. Margolis has served as a member of our Board since 2014. Mr. Margolis has served as Chairman of NextGen Healthcare, Inc. since November 2015 and as a member of the board since May 2014, as Vice Chairman of TriNetX, Inc. since October 2014, as a director of Get-Grin Inc. since December 2021 and as a director of Hydrogen Health since April 2021. 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 and is Chairman of the Hoag Clinic in Newport Beach, California. He also 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 on 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

13


 

 

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.

Vote Required and Recommendation of the Board of Directors

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.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” EACH OF THE ABOVE DIRECTOR NOMINEES.

 

14


 

Continuing Directors

The following table summarizes key facts regarding the members of our Board whose terms are continuing beyond the Annual Meeting:

Name

Class

Age

Director Since

Term Expires

Independent

Committees

Other Public Company Boards

Thomas Carella

I

48

2017

2025

Yes

Compensation

Mark McClellan

I

59

2014

2025

Yes

Cigna Corporation
Johnson & Johnson

Robbert Vorhoff

I

44

2014

2025

Yes

Compensation (Chair)

Oak Street Health, Inc.

Yon Jorden

III

68

2022

2024

Yes

Audit

Cohu, Inc.
Capstone Green Energy Corp.

John Kao

III

61

2014

2024

No

Joseph Konowiecki, Chairman

III

69

2014

2024

No

Margaret McCarthy, Lead Independent Director

III

69

2020

2024

Yes

Audit

American Electric Power Co. Inc.
First American Financial Corp.
Marriott International

 

 

 

 

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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 Healthcare. 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. Mr. Carella currently serves on the board of directors of private health care companies including Aetion, Bond Vet, Polyplus, Quantum Health, Ensemble Health Partners 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.

15


 

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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.

 

 

 

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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 the board of one public health care company, Oak Street Health, Inc., and of several private health care companies, including Equality Health, Included Health, Marathon Health, NationsBenefits, OneOncology, and WelbeHealth. Mr. Vorhoff previously was a member of the boards of Align Networks, Alternate Solutions Health Network, A Place for Mom, eviCore Healthcare, Landmark Health, 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.

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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 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.

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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.

17


 

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Joseph Konowiecki

Mr. Konowiecki has served as chairman of the Board since 2014. In October 2022, he was appointed to 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.

 

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Margaret McCarthy

Ms. McCarthy has served as a member of our Board since December 2020 and was appointed 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.

Nomination Criteria and Director Experience

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

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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 General Counsel and Corporate Secretary 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 2024 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.

Director Skills and Qualifications

The NCGCC has identified qualifications, attributes, skills and experience that are important to be represented on the Board as a whole, in light of the Company’s current needs and business priorities. The NCGCC recognizes that our Board should represent a diverse group of experience, skills and other qualities, and as a collective group should have expertise in certain substantive areas including: corporate governance, finance/capital markets, board of directors experience, health care industry experience, clinical practice, CEO or other C-suite experience with significant business acumen, direct to consumer marketing, diversity, experience with complex organizations, technology/business processes, government relations and/or public policy and regulatory knowledge and other skills and expertise that are likely to enhance the Board’s ability to manage and direct the affairs and business of the Company. Certain directors or director nominees may possess expertise in the designated areas, however a director or director nominee need not individually possess the experience, skill or other requisite qualification in all areas. Among other key areas, the NCGCC seeks directors with the following types of experience:

Leadership experience. We believe that directors who have held significant leadership positions over an extended period provide the Company with unique insights. We believe such people have the ability to identify and develop leadership qualities in others. They demonstrate a practical understanding of organizations, processes, strategy and risk management, and they know how to drive change and growth.
Technology and business processes experience. As a technology-enabled Medicare Advantage platform, we seek directors with backgrounds in technology because our success depends on developing our platform and introducing it into new markets. We also value expertise in business processes as we continue to build into new markets and scale our operations, as well as expertise in data privacy and cybersecurity matters which represent important elements of our risk management strategy.

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Financial experience. We believe that an understanding of finance and financial reporting processes is important for our directors, as we measure our operating performance by reference to certain financial goals, including non-GAAP measures. Accurate financial reporting and robust auditing are critical to our success. We seek to have a number of directors who qualify as audit committee financial experts and we expect that all of our directors will be financially knowledgeable. As part of this qualification, we also seek directors who have relevant risk management experience.
Industry experience. We seek to have directors with experience as executives or directors or in other leadership positions in the Medicare Advantage space. We believe that this experience will help us effectively enhance our product offerings and successfully enter new markets.
Regulatory experience. Because we operate in a heavily regulated industry, we seek directors with significant government regulatory experience.
Marketing experience. As a consumer-facing business that is seeking to grow organically through new product offerings and in new markets, having directors with significant marketing experience is important to us.

Additionally, director nominees must possess high integrity and ethical standards; standing and reputation in the individual’s field; risk oversight ability with respect to the particular skills of the individual director; understanding of and experience with complex public companies or like organizations; and ability to work collegially and collaboratively with other directors and management. The NCGCC charter requires that candidates are to be selected for, among other things, their independence, diversity of experience, demonstrated leadership and the ability to exercise sound judgment.

Our director nominations are subject to an agreement with our Lead Sponsors (defined below). See “Corporate Governance—Board Composition and Director Independence.”

The NCGCC developed and maintains a skills matrix to assist in considering the appropriate balance of experience, skills and attributes required of a director and to be represented on the Board as a whole. The skills matrix is consistent with the Company's long-term strategic plan and is regularly reviewed and updated by the NCGCC. The NCGCC evaluates Board candidates against the skills matrix on an annual basis to determine whether to recommend candidates for initial election to the Board and whether to recommend currently serving directors for reelection to the Board. The NCGCC has determined that our Board collectively satisfies all of the above criteria, complementing each other’s skills, background and perspectives to create a collection of diverse, knowledgeable and experienced directors.

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The following chart represents the skills matrix as currently constituted by the NCGCC:

 

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Director Diversity

In addressing issues of diversity, the NCGCC considers a nominee’s gender, ethnicity, tenure, skills and experience. The NCGCC believes that diversity of backgrounds and viewpoints is a key attribute for a director nominee. While the NCGCC carefully considers diversity when determining Board composition, it has not established a separate formal policy regarding diversity.

Board Diversity Matrix (as of April 26, 2023)

Board Size:

 

Total Number of Directors

11

 

Female

Male

Gender Identity:

 

 

Directors

4

7

Demographic Background:

 

 

Asian

1

1

White

3

6

 

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CORPORATE GOVERNANCE

Board and Corporate Governance Highlights

We are committed to governance practices that promote the long-term interests of our stockholders, strengthen Board and management accountability and continue to build trust in our Company. Our governance framework is described throughout this proxy statement and includes the following highlights:

Board Structure & Composition

9 of 11 Directors, and all Board Committee members, are independent
Board composed of a mix of long-tenured and new directors
Directors reflect a variety of experiences and skills that give the Board the collective capability necessary to oversee the Company’s activities
Lead Independent Director empowered with agenda-setting authority and active involvement in oversight of Board functions, elected annually by the independent directors
Active and empowered committee chairs, all of whom are independent
Annual assessment and determination of optimal Board leadership structure
Commitment to Board diversity of perspective, gender, and race or ethnicity
Directors attended about 96% of Board and Committee meetings combined in 2022

Good Governance Practices

Ongoing Board assessment and refreshment led by the NCGCC
Annual Board and Committee self-assessments
Insider trading policy
Clawback policy implementation in process
Regular executive sessions of the independent directors at meetings of the Board, without management present
Non-employee director stock ownership requirements
Code of Conduct overseen by Board
Robust stockholder engagement program, with the participation of our Chairman, to share our perspectives and solicit feedback
Lead Sponsors can call special stockholder meetings

Board Operations and Oversight

Active board oversight of strategic planning
Robust oversight framework to assess and manage risks
Revised charters recently adopted to clarify committee and full Board oversight roles
Regular talent and succession planning discussions
Audit Committee oversight of financial risks, cybersecurity
NCGCC oversight of nominating process and criteria, legal and regulatory compliance
Compensation Committee oversight of compensation program, annual CEO evaluation
Direct access by the Board to members of management, including Chief Compliance Officer
Regular briefings on corporate governance practices and emerging corporate governance issues
Monthly “teach-ins” addressing key strategic areas

Commitment to Environmental, Social & Governance Principles

Strong commitment to ESG principles as part of Company’s core mission, including focus on social determinants of health
Establishment of a management-led, interdepartmental ESG steering committee
Annual reporting via standalone Environmental, Social and Governance Report

 

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Board Composition and Director Independence

Our business and affairs are managed under the direction of our Board, which is composed of eleven directors. Our certificate of incorporation provides that the authorized number of directors may be changed only by resolution of our Board. In addition, the Stockholders Agreement among us, funds managed by General Atlantic and Warburg Pincus LLC (“Warburg Pincus” and, together with General Atlantic, the “Lead Sponsors”; such agreement, the “Stockholders Agreement”) prohibits us from increasing or decreasing the size of our Board without the prior written consent of General Atlantic.

Our certificate of incorporation also provides that our Board will be divided into three classes of directors, with the classes as nearly equal in number as possible. Subject to any earlier resignation or removal in accordance with the terms of our certificate of incorporation and bylaws, our Class I directors are Mr. Carella, Dr. McClellan and Mr. Vorhoff, who will serve until our 2025 annual meeting of stockholders, our Class II directors are Ms. Bilney, Mr. Hodgson, Dr. Kosecoff and Mr. Margolis, who are nominees for election at the Annual Meeting to a three-year term ending in 2026, and our Class III directors are Ms. Jorden, Mr. Kao, Mr. Konowiecki and Ms. McCarthy, who will serve until our 2024 annual meeting of stockholders. This classification of our Board could have the effect of increasing the length of time necessary to change the composition of a majority of the Board. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the Board. In addition, our certificate of incorporation provides that directors may be removed for cause and only upon the affirmative vote of stockholders representing at least sixty-six and two-thirds percent (662⁄3%) of the voting power of the then-outstanding shares of voting stock, at a meeting of our stockholders called for that purpose.

Our Board has also determined that all directors (except Mr. Kao and Mr. Konowiecki, who both serve as employees of the Company) meet the requirements to be independent directors. In making this determination, our Board considered the relationships that each non-employee director has with the Company and all other facts and circumstances that our Board deemed relevant in determining their independence, including beneficial ownership of our common stock and affiliations with our Lead Sponsors.

The Stockholders Agreement provides (x) General Atlantic the right to designate: (i) four of the nominees for election to our Board for so long as its beneficially owns at least 35% of our common stock then outstanding; (ii) three of the nominees for election to our Board for so long as it beneficially owns less than 35% but at least 25% of our common stock then outstanding; (iii) two of the nominees for election to our Board for so long as it beneficially owns less than 25% but at least 15% of our common stock then outstanding; and (iv) one of the nominees for election to our Board for so long as it beneficially owns less than 15% but at least 5% of our common stock then outstanding and (y) Warburg Pincus the right to designate one of the nominees for election to our Board for so long as Warburg Pincus beneficially owns at least 5% of our common stock then outstanding.

In addition, until such time as any Lead Sponsor ceases to beneficially own at least 10% of our common stock then outstanding, such Lead Sponsor shall have the right to designate one member of each committee of the Board; provided, that any such designee shall be a director and shall be eligible to serve on the applicable committee under applicable law or stock exchange listing standards, including any applicable independence requirements (subject in each case to any applicable exceptions, including those for newly public companies and any applicable phase-in periods).

The Stockholders Agreement also provides that until such time as General Atlantic ceases to beneficially own at least 15% of our common stock then outstanding, General Atlantic may select the chairperson of the Compensation Committee of the Board from among the directors then in office.

 

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Board Leadership Structure

We structure leadership of our Board in a manner that we believe is best suited to benefit the Company and its performance. We separate our chair of the Board (the “Board Chair”) and Chief Executive Officer to ensure that the Board maintains robust, independent processes with respect to oversight of our business and affairs. The Board Chair has the following duties:

Duties of our Board Chair

Presides as chair of regular sessions of the Board and manages overall Board process
Sets Board meeting agendas and approves materials distributed to Board
Leads response of Board to risks and opportunities and may call special meetings
Meets directly with other members of the Board as needed
Oversees board engagement and continued education
Partners with and supports the NCGCC in director selection process and enterprise risk management
Engages regularly with stockholders and presides over annual meeting of stockholders
Partners with the Compensation Committee to structure and implement the annual evaluation of our CEO

In October 2022, our current Board Chair, Mr. Konowiecki, assumed a role as an executive officer leading our strategic network and business development, and accordingly he is no longer considered an independent director under Nasdaq and SEC rules. Given his longstanding role as Board Chair, his expertise in the health care industry and his strong oversight of the Company’s legal, compliance and risk management functions, among others, the Board determined that it would be appropriate and in the best interests of the Company and its stockholders for Mr. Konowiecki to continue to serve concurrently as the Board Chair. Upon Mr. Konowiecki’s appointment to the executive role, in order to reinforce the independence of our Board in its guidance of the Company’s strategic direction and its oversight role, the Board also appointed Ms. McCarthy to serve as a lead independent director (“Lead Independent Director”). In considering her appointment, the Board determined that Mr. McCarthy’s expertise, independence and integrity qualified her to serve as Lead Independent Director. The Board determined that the Lead Independent Director would have the following duties and authority:

Duties of our Lead Independent Director

Provide input on Board meeting agendas and schedules and materials distributed to the Board
Preside over periodic meetings of the Company’s independent directors
Consult directly with significant stockholders, upon request
Serve as a liaison between our Board Chair, CEO and other management, on the one hand, and the independent directors, on the other
Assume leadership role in the Board’s annual evaluation of its composition, processes and design
Participate in and oversee the annual evaluation of our CEO
Consult directly with Company management as appropriate
Such additional duties as our Board may otherwise determine and delegate

Collectively, we believe that our Board Chair and Lead Independent Director are well positioned to objectively evaluate and oversee management’s performance, ensure management accountability, implement and enforce strong corporate governance and align management with the best interests of the Company and its stockholders.

The Board believes the advisability of having separate or combined Board Chair and Chief Executive Officer positions, or of appointing to Board Chair to an executive role, is dependent upon the

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strengths of the individual or individuals that hold these positions and the most effective means of leveraging these strengths, to lead the Board, set Board agendas, augment the Company’s strategic efforts, support management, and identify and oversee key risks in light of the challenges and circumstances facing the Company, which may change over time. At any time during which the Chief Executive Officer and Board Chair positions are combined, or during which the Board Chair is not independent, the Board would appoint a Lead Independent Director. Our stockholders would be notified promptly upon the occurrence of any changes to our current Board leadership structure. We are continually seeking stockholder input on important matters, including our governance structure, through our stockholder engagement program.

The independent directors have the opportunity to meet in executive session without members of management as often as they deem appropriate, but at a minimum do so at each regularly scheduled quarterly Board meeting. Our Board leadership structure also includes active and empowered committee chairs, who lead oversight of specific risk areas, regularly provide reports and make recommendations to the Board and who consult directly with members of Company management on a variety of matters.

The Board’s Role in Risk Oversight

One of our Board’s key functions is informed oversight of our risk management process. Our Board administers this oversight function directly as well as through the Board’s standing committees. Our officers are responsible for day-to-day management of the material risks that the Company takes. Management and the Board and committees view their respective risk management roles, and the collaboration amongst them in the identification, oversight, evaluation and management of risk, as paramount to the Company’s short-term viability and long-term sustainability.

 

Board of Directors

The Board as a whole has overall responsibility for risk oversight. It routinely monitors the nature and severity of significant risk exposures, potential mitigation measures and the quality and effectiveness of our enterprise risk management (“ERM”) program. On at least a quarterly basis and more frequently as needed, our Board and committees assess the Company’s risk environment, consult with management and relevant outside advisors, review and analyze key risk areas, including new business, financial, operations and compliance, and analyze regulatory developments affecting such risks. Oversight includes both short-term operational risks and long-term strategic risks.

 

 

 

Nominating, Corporate Governance and Compliance Committee

Audit Committee

Compensation Committee

Has primary responsibility for oversight of our ERM program, consults with management and other Board committees as needed.
Oversees governance risks, such as director independence and conflicts of interest.
Monitors our health care and other legal compliance activities, including regulatory audits and other touchpoints.
Oversees our major financial risk exposures and management actions to monitor and control these exposures.
Oversees the performance of our external auditors and internal audit function.
Monitors risk related to data privacy and cybersecurity.
Assesses and monitors risks related to our compensation policies and programs, such as retention risk.
Oversees management incentives and potential for excessive risk taking.
Responsible for management succession risk and planning.

 

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Management

Manages day-to-day risk and regularly confers with the Board and committees regarding the risks and risk management processes.
Systematically monitors risk exposure and mitigation planning through an ERM committee, a broad, interdepartmental group led by the Company’s Chief Compliance & Privacy Officer and Director, Enterprise Risk Management, and including, among others, our CEO, CFO and at least one independent member of the Board.

Both our Board and our Board committees receive periodic and incidental reports as matters may arise directly from our Chief Compliance and Privacy Officer, our General Counsel, and our accounting personnel overseeing our internal audit function. Our Chief Compliance and Privacy Officer reports to our President, Markets, and our General Counsel reports to our Chief Executive Officer. Such reports include information regarding potential violations of our Code of Conduct, our ethics hotline activity and other complaints we may receive regarding potential ethics violations or our financial controls, accounting and other auditing matters.

Our approach to risk oversight takes into account the immediacy of the risk assessed and its potential severity. Management and our committee chairs are responsible for promptly reporting findings regarding material risk exposures to the Board. Our Board, with leadership from the NCGCC, assesses, at least annually, our committee structure and the appropriateness of delegation of particular areas of risk oversight to such committees.

The Company’s risk oversight process is also integrated into the Company’s disclosure controls and procedures, including risk disclosures contained within our Annual Report on Form 10-K. The Company utilizes a cross-functional enterprise team to review and draft the Company’s disclosures, including a Disclosure Committee that provides reports to executive management and the Board.

Management and the Board and Board Committees engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing the Company. These outside advisors include the Company’s independent registered public accounting firm, external legal counsel and insurance providers, and the independent compensation consultant retained by the Compensation Committee.

 

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Board Committees

The composition, duties and responsibilities of our committees are as set forth below. In the future, our Board may establish other committees, as it deems appropriate, to assist it with its responsibilities.

Board Member

Audit Committee

Compensation Committee

Nominating, Corporate Governance & Compliance Committee

Jody Bilney

 

 

M

Thomas Carella

 

M

 

David Hodgson

 

 

C

Yon Jorden

M#

 

 

John Kao

 

 

 

Joseph Konowiecki

 

 

 

Jacqueline Kosecoff

 

M

M

Jeffrey Margolis

C#

 

 

Margaret McCarthy

M

 

 

Mark McClellan

 

 

 

Robbert Vorhoff

 

C

 

M = Committee Member C = Committee Chair # = Financial Expert

Audit Committee

Our Audit Committee is composed of Ms. Jorden, Mr. Margolis and Ms. McCarthy, with Mr. Margolis serving as chair of the committee. We comply with the audit committee requirements of the SEC and Nasdaq, which require that the Audit Committee be composed entirely of independent directors. Our Board has determined that each of the current members of the Audit Committee meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable listing standards of Nasdaq. In addition, our Board has determined that each of Mr. Margolis and Ms. Jorden is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose on any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our Board. Furthermore, by virtue of their designation as “audit committee financial experts,” Mr. Margolis and Ms. Jorden meet the applicable “financial sophistication” requirement of the Nasdaq listing standards.

The written charter for our Audit Committee is available on the investor relations section of our website at https://ir.alignmenthealth.com/. The Audit Committee’s responsibilities include:

appointing, approving the compensation of, and assessing the qualifications, performance and independence of our independent registered public accounting firm;
pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
discussing the scope and results of the audits with our independent registered public accounting firm and reviewing, with management and that accounting firm, our interim and year-end operating results;
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;
reviewing the adequacy of our internal control over financial reporting;
establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

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monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;
overseeing all matters related to the Company’s program, policies, and procedures related to information technology systems, data protection and cyber security;
reviewing the adequacy and effectiveness of our disclosure controls and procedures;
preparing the Audit Committee report required by the rules of the SEC to be included in our annual proxy statement; and
reviewing all related party transactions for potential conflict of interest situations and approving all such transactions.

The Audit Committee has the sole authority, at its discretion, to engage independent counsel and other advisors as the committee deems necessary to carry out its duties.

Compensation Committee

Our Compensation Committee is composed of Mr. Carella, Ms. Kosecoff and Mr. Vorhoff, with Mr. Vorhoff serving as chair of the committee. All members of our Compensation Committee are independent as defined by Section 10(c) of the Exchange Act, Rule 10C under the Exchange Act and the applicable Nasdaq rules.

The written charter for our Compensation Committee is available on the investor relations section of our corporate website at https://ir.alignmenthealth.com/. The Compensation Committee’s responsibilities include:

annually reviewing and approving corporate goals and objectives relevant to the compensation of our executive officers;
evaluating the performance of our executive officers in light of such corporate goals and objectives and determining and approving the compensation of our executive officers;
conducting the independence assessment outlined in applicable rules with respect to any compensation consultant, legal counsel or other advisor retained by the compensation committee;
overseeing and administering our compensation and similar plans;
reviewing and making recommendations to our Board with respect to director compensation; and
reviewing and discussing with management the compensation discussion and analysis and other compensation-related disclosure to be included in our annual proxy statement or Annual Report on Form 10-K.

The Compensation Committee has the sole authority, at its discretion, to retain and terminate compensation consultants to assist in the evaluation of director or executive officer compensation and the sole authority to approve the fees and other retention terms of such compensation consultants. The Compensation Committee may also retain independent counsel and other independent advisors to assist it in carrying out its responsibilities.

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Nominating, Corporate Governance and Compliance Committee

Our NCGCC is composed of Ms. Bilney, Mr. Hodgson, and Ms. Kosecoff, with Mr. Hodgson serving as chair of the committee. All members of our NCGCC are independent as defined by applicable Nasdaq rules.

The written charter for our NCGCC is available at the investor relations section of our corporate website at https://ir.alignmenthealth.com/. The NCGCC’s responsibilities include:

developing and recommending to our Board criteria for board and committee membership;
subject to the rights of the Lead Sponsors under the Stockholders Agreement, identifying and recommending to our Board the persons to be nominated for election as directors and to each of our Board’s committees;
developing and recommending to our Board best practices and corporate governance principles;
reviewing and recommending to our Board the functions, duties and compositions of the committees of our Board;
overseeing the Company’s major risk exposures, including financial, operational, privacy, security, business continuity and legal and regulatory risks and the Company’s risk assessment and risk management policies;
overseeing the Company’s strategy, initiatives, risks, opportunities and related reporting on material ESG matters;
overseeing the annual evaluation of the Board and its committees and reporting the results of such evaluation, including any recommendations for proposed changes, to the Board; and
overseeing compliance with the laws and regulations applicable to the Company’s business, including, without limitation, Centers for Medicare and Medicaid Services rules, fraud and abuse laws, and state health plan licensure requirements.

The NCGCC has the sole authority, at its discretion, to retain and terminate any search firm to assist in the identification of director candidates and the sole authority to set the fees and other retention terms of such search firms. The committee may also retain independent counsel and other independent advisors to assist it in carrying out its responsibilities.

Board Oversight of Environmental, Social and Governance Matters

Following the closing of our initial public offering (“IPO”) in March 2021, we began to more formally align our ESG efforts with our long-standing commitment to operating our business in a socially responsible and sustainable manner that takes into account the interests of all our stakeholders. Our Board has formally designated our NCGCC with the responsibility for Board-level oversight of the Company’s ESG strategy, practices and reporting. In addition, our executive management team established an ESG steering committee to guide the integration of our ESG efforts with our long-term business strategy.

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Our Mission and Values

Alignment Healthcare was founded in 2013 with one mission in mind: improving healthcare one senior at a time. We pursue this mission by relentlessly focusing on our core values:

always put the senior first;
support the doctor;
use data and technology to improve care; and
act with a serving heart.

We created Alignment based on the frustrating experiences we had when our parents and other loved ones needed health care. We saw firsthand the complexity they faced as seniors attempting to navigate care delivery and insurance without an advocate to create an integrated consumer experience that provides holistic and quality care at an affordable price. Our parents and seniors across the country are systemically and disproportionately impacted by the absence of care coordination, poor information transparency and misaligned incentives that characterize the health care system.

Our team of highly experienced health care leaders created the Alignment model to incorporate the lessons we have learned over decades spent serving senior consumers. We believe that by combining our experienced, mission-driven team with purpose-built technology we have found a way to address the unmet needs of senior consumers and to do well by doing good. Our ultimate goal is to bring this differentiated, advocacy-driven health care experience to millions of senior consumers in the United States and to become the most trusted senior health care brand in the country.

Our ESG Focus: Serving People, Serving the Environment and Serving Responsibly

Our company name, Alignment Healthcare, reflects one of our founding principles: to align all stakeholders in the health care ecosystem around doing what is best for the senior. Our belief in the importance of alignment goes beyond our business model—we believe it’s the right thing to do. In order to achieve our mission and sustain business excellence, we approach each aspect of our business and operations with integrity, corporate responsibility, and ethics in mind to protect and enhance the interests of each of our stakeholders—every one of our seniors and their families, our regulatory constituents including the CMS, our team of passionate employees and clinicians, our external provider and delivery system partners and our stockholders.

We believe that proactively managing our ESG impacts supports our mission and reflects our commitment to best serve the long-term interests of our stakeholders. The alignment of our ESG strategy with our corporate strategy amplifies and strengthens the positive long-term impact we can have on our members, employees, stockholders, and the environment. It also promotes long-term value creation for our stockholders and other stakeholders. To support our efforts in this area, we created an ESG steering committee in 2021, consisting of dedicated internal resources and external advisors to address the ESG factors that are material to our business and our stakeholders.

The three pillars to our ESG approach are the following:

Serving People – We are committed to serving our members, health care providers, employees, caregivers and broader communities. Our employees are our most valuable asset, and we are dedicated to providing them with an organization where they feel a sense of engagement and belonging. See “—Human Capital” below. We work together and put our members first in everything we do, and we strive to support our health care providers with the tools and resources needed to provide the best care.

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Serving the Environment – Our company is focused on understanding and improving our carbon footprint in order to mitigate our environmental impact as well as expanding telehealth and supporting hybrid and remote work.
Serving Responsibly – We are committed to maintaining a high level of transparency and accountability across our operations. Our Board of Directors includes a strong and diverse mix of experienced business leaders and is committed to providing effective oversight of the Company’s activities.

Our aim is to continue fortifying each pillar and to operate with transparency in a way that always puts seniors first, and respects all people, communities and the environment.

Serving Seniors with Our Differentiated Model

Medicare Advantage allows one entity to influence the entirety of a senior’s health care experience through a singular, direct-to-consumer product. Our value of acting with a serving heart supports our efforts to drive the convergence between traditional Medicare Advantage benefits with social determinants of health and consumerism, ultimately for the long-term wellbeing of our seniors.

We contract with CMS under the Medicare Advantage program to provide health insurance coverage to Medicare-eligible people in exchange for a payment per member per month ("PMPM"). The economic construct of the Medicare Advantage program is designed to reward plans that achieve the triple aim of high-quality care, low costs and a better experience. Under these value-based contracts, we assume the economic risk of funding our members’ health care, supplemental benefits and related administration costs. By transferring the economic risk to managed care companies like Alignment, CMS has enabled us to focus on proactive, cross-disciplinary care targeted at improving health outcomes and lowering unnecessary health care expenditures. Due to the competitive nature of CMS’s bidding system, only those plans that are able to provide low cost and high-quality outcomes will be able to offer enhanced benefit options, which is critical to achieving sustainable membership and growth on a long-term basis. This value-based business model capitalizes on health outcomes, not fees, and is designed to serve all members while emphasizing preventative care and benefits.

We achieve our differentiated outcomes through the utilization of AVA, our proprietary technology platform. AVA leverages a vast amount of data to curate insights which we use to allocate health resources to our members, driving the creation of an end-to-end, low-cost, high-quality care model. Our focus on driving clinical care through our employed clinical teams to high-risk members, while supporting and enabling preventative care through our network of providers for the remaining population, allows our value-based care model to optimize the utilization of resources and strengthen sustainability of our product offering. Our improved health outcomes allow us to provide individualized, supplemental benefits and products that meet the needs of our seniors, including critical-health support, transportation services, financial support for groceries and non-prescription products, and demographic-based and culturally relevant resources.

The health outcomes of our members, due to our differentiated model, has resulted in approximately 93% of our members reporting their overall satisfaction with Alignment’s case management services, in addition to exceptional quality outcomes, including 37% lower inpatient admissions per thousand than traditional Medicare.*

* Estimated 2022 At-Risk member inpatient utilization relative to 2019 Medicare FFS inpatient utilization representative of Alignment’s population mix by county (based on membership as of 2022).

Human Capital

We are focused on building a company that is transforming health care by putting seniors first, and our employees are critical to our success. Our human capital strategy focuses on meeting business objectives by attracting, developing, engaging and retaining a high-performing, diverse workforce. As of

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December 31, 2022, we had 1,037 full-time employees, in addition to seasonal employees who assist with the Medicare annual enrollment period.

We believe that an engaged, innovative and productive workforce is essential to supporting our company’s mission of changing health care one senior at a time, as well as our values of putting our members first, supporting our physicians, applying technology to improve care and having a serving heart. Each year, we conduct an employee survey that enables our leaders to develop action plans to further enhance employee engagement and productivity.

We recognize that diversity, equity and inclusion (“DEI”) is crucial as we scale and build our high-performing team. We intend for our DEI strategy to be embedded in each aspect of the processes, programs and structures that drive our talent lifecycle: attraction, recruitment, onboarding, development and retention efforts. As of December 31, 2022:

71% of our employees were women
66% of our employees were ethnically diverse
50% of our executive team was ethnically diverse
30% of our executive team were women
18% of our Board of Directors was ethnically diverse
36% of our Board of Directors were women

The future success of our company will depend, in part, on our continued ability to attract, develop and retain the best talent as we grow and scale the organization. Our talent acquisition and management strategies are designed to ensure that we create and develop a pipeline of outstanding physicians, clinical employees, and business leaders. A key component of our corporate sustainability and success is learning and development. We are intentional in our efforts to provide all employees opportunities to grow. Our training and development programs for employees focus on enhancing and developing talent within the Company. All of our employees can access the training of their choice on-demand through our learning and development platform. We are currently designing additional training programs and resources for both new hires and longer-tenured employees that will educate them on critical functional areas within the organization.

Our compensation and incentive plans are designed to attract, retain and reward employees by granting cash-based performance and stock-based awards. By motivating individuals to achieve business objectives and perform to the best of their abilities, they support the success of the Company and the increase of stockholder value. We also provide comprehensive medical benefits, a positive work/life balance, generous paid time off, health and wellness programs, and learning and development opportunities. We regularly evaluate each aspect of compensation and benefits to ensure they align with the market and our peers.

We value the safety of our employees and have created a largely remote-work environment during the pandemic. Our current workforce model has employees working in a hybrid-remote fashion, with some member-facing employees having returned to an in-person work environment. We plan on implementing a workforce strategy that further enhances our ability to attract the best talent nationally and continues to provide our employees with a healthy work-life balance.

Our Board believes that human capital management is an essential component of our continued growth and success. Management regularly reports to our Board for input on important decisions related to human capital, including corporate culture, safety, compliance, talent management, organizational development, compensation and benefits.

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Protecting Data Privacy

As we are a company that leverages data, technology and analytics to improve health care, we invest in long-term solutions to address current and foreseeable risks and threats to data security and privacy, while also enabling technological development that enhances the member experience.

Our data security and privacy program is overseen by our Chief Information Security Officer who reports to our Chief Information Officer and Audit Committee of the Board. Our strict protection and security measures have resulted in zero security incident-related disruptions or downtime to our business continuity. In 2021, we received the externally validated HITRUST certification, the gold standard compliance framework in the health care industry.

Our data security and privacy program is aligned to National Institute of Standards and Technology and Center for Internet Security frameworks and is directly managed by our Chief Information Security Officer, who assesses and reports on data protection and privacy risks to the Audit Committee and the Company’s IT leadership. Through our data security and privacy program and policies, we adhere to the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), other federal regulations and best-practices within the health care industry.

To successfully operate and monitor our security readiness, we maintain a data security and privacy team with substantial real-world experience to detect and respond to cybersecurity threats. Our multi-layered security is bolstered by technologies and partners and includes annual employee and vendor security awareness trainings, enhanced access control, data loss protection and vulnerability management, among other technical and process security controls.

Our proprietary data architecture, AVA, encompassing over 170 artificial intelligence models and 250 business intelligence dashboards across all aspects of our health plans and clinical operations, is a core component of our information systems. AVA incorporates high security controls around member data, including running regular vulnerability testing, adhering to application development security best practices and implementing fine grained access controls, ensuring only authorized individuals can access member health data.

Stockholder Engagement

We are committed to effective corporate governance that is designed to promote the long-term interests of our stockholders. We proactively engage with stockholders and other stakeholders throughout the year to learn more about their perspectives on significant issues, including company performance and strategy, executive compensation and ESG matters. This engagement helps us better understand stockholder priorities, gives us an opportunity to elaborate upon our initiatives and practices, and fosters constructive dialogue. Our senior management and investor relations teams maintain regular contact with a broad base of investors through quarterly earnings calls, investor conferences and roundtables and individual meetings. We take feedback and insights from our engagement with stockholders and other stakeholders into consideration as we review and evolve our practices and disclosures, and share this feedback with our Board, as appropriate. Our Lead Sponsors, our two largest stockholders, are represented by directors they have nominated to serve on our Board. See “—Board Composition and Director Independence” above.

Family Relationships

There are no family relationships between any of our executive officers or directors.

Compensation Committee Interlocks and Insider Participation

Our Compensation Committee is composed of Mr. Carella, Ms. Kosecoff and Mr. Vorhoff. None of the directors who served on our Compensation Committee at any time during fiscal 2022 were officers or associates of the Company or were former officers or associates of the Company. Further, none of the members who served on our Compensation Committee at any time during fiscal 2022 had any

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relationship with our Company requiring disclosure under the section of this proxy statement entitled “Certain Relationships and Related Party Transactions.”

None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.

Code of Business Conduct and Ethics

We adopted a written code of business conduct and ethics that applies to our directors, executive officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of the code is posted on the investor relations section of our corporate website at https://ir.alignmenthealth.com/. To the extent required by applicable rules adopted by the SEC and Nasdaq, we intend to disclose future amendments to certain provisions of the code, or waivers of such provisions granted to executive officers and directors, in this location on our website at https://ir.alignmenthealth.com/.

Insider Trading Policy; Hedging and Other Transactions

Our Insider Trading Policy prohibits all officers, directors, employees, family members and affiliated parties from buying, selling or engaging in transactions in our securities at any time while aware of material non-public information about the Company. It also prohibits them from disclosing material non-public information to persons outside the Company, i.e., “tipping.” These prohibitions apply to purchases and sales, as well as other types of transactions such as gifts, loans, contributions to a trust and broker-assisted cashless exercises of stock options.

Although we discourage speculative hedging transactions, under our Insider Trading Policy, we permit long-term hedging transactions that are designed to protect an individual’s investment in Company securities (i.e., the hedge must be for at least six months and relate to stock or options held by the individual). If an employee wishes to engage in any such transaction, the employee is required to pre-clear it in accordance with the procedures described in our Insider Trading Policy (even if the employee is not one of the persons otherwise required to submit his or her transaction in Company securities to pre-clearance). Alignment personnel and related parties are prohibited from purchasing Company securities on margin, pledging or otherwise granting a security interest in Company securities in margin accounts, engaging in short-sales and buying or selling puts, calls, options or other derivatives in respect of securities of the Company.

 

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Board Evaluation Practices

The Board is committed to a rigorous self-evaluation process. Through evaluation, directors annually review the Board’s performance, including areas where the Board feels it functions effectively, and most importantly, areas where the Board can improve. The NCGCC, with additional leadership from our Chairman and Lead Independent Director, initiates the annual Board evaluation process. We believe that having a review process for the Board and each committee helps to (i) ensure an adequate representation of requisite skills; (ii) encourage high levels of engagement from directors; and (iii) strengthen the overall effectiveness of our Board. These evaluations are typically in written form, although they may also be in oral questionnaire form and may be administered by Board members, management or third-party consultants.

1.

Review of Evaluation Process

The NCGCC develops and oversees an annual self-evaluation process of the Board and its committees and determines the content of the evaluation questionnaires. The NCGCC may also consider whether to engage third-party consultants.

2.

Questionnaires

The Board evaluation typically consists of a written questionnaire containing qualitative scaled and open-ended questions related to the effectiveness of the Board during the prior year. The questionnaire hones in on specific areas of responsibility and critical attributes of the Board in order to solicit candid feedback from each director. Questionnaires include topics such as:

Board Performance
Board Composition, Skills and Diversity
Board and Committee Meetings and Structure
Management Relations
Risk Oversight by Board and Committees
Process and Resources
Board Culture

The questionnaire also seeks practical input as to what the Board is doing well, areas in which the Board could improve and any undertakings that the Board should commence or terminate.

Another benefit of the questionnaire is that it allows each Board member to evaluate the effectiveness of the Chairman of the Board and the Lead Independent Director.

3.

Board Review

Results of the evaluations are shared with the Chairman of the Board, the Lead Independent Director and the Chairman of the NCGCC and then later discussed with the entire Board in an aggregated manner.

 

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Each of our Board committees similarly engages in an annual performance evaluation and a general charter adequacy review. Each committee is responsible for determining the manner of evaluation and for carrying out the evaluation. Further, the Board evaluation questionnaire includes a section specifically concerning Board committee structure and performance, which is an opportunity for Board members to provide feedback on each committee, regardless of their individual committee membership. As a result of their annual review of the adequacy of their charters, the Board approved revised charters for each of our standing committees in February 2023.

Board and Committee Meetings

For the year ended December 31, 2022, our Board held seven regular and special meetings. Our Audit Committee, Compensation Committee and NCGCC held four, ten and four meetings, respectively during the year ended December 31, 2022. In 2022, each director attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors of the Company (held during the period for which he or she was a director) and (2) the total number of meetings of all committees of the Board of Directors of the Company on which the director served (during the periods that he or she served). Directors are expected to attend the annual meeting of stockholders and all or substantially all of the Board meetings and meetings of committees on which they serve. All directors attended the annual meeting of stockholders in 2022.

Communications by Stockholders and Other Interested Parties with the Board

Stockholders and other interested parties may contact an individual director, the Board as a group, or a specified Board committee or group, including the non-management or non-Lead Sponsor directors as a group, by sending regular mail to:

Alignment Healthcare, Inc.

1100 W. Town & Country Rd., Suite 1600

Orange, CA 92868

ATTN: Board of Directors

c/o General Counsel and Secretary

Each communication should specify which director or directors the communication is addressed to, as well as the general topic of the communication. Alignment will receive the communications and process them before forwarding them to the addressee. Alignment may also refer communications to other departments within the Company. Alignment generally will not forward to the directors a communication that is primarily commercial in nature, relates to an improper or irrelevant topic, or requests general information regarding Alignment.

 

 

 

 

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EXECUTIVE OFFICERS

Below is a list of the names, ages, positions, and a brief account of the business experience of the individuals who serve as executive officers of Alignment as of April 26, 2023:

Name

Age

Position

John Kao

61

Director and Chief Executive Officer

Dawn Maroney

55

President, Markets

Thomas Freeman

34

Chief Financial Officer

Dinesh Kumar

55

Chief Medical and Operating Officer

Joseph Konowiecki

69

Chairman of the Board

Hakan Kardes

36

Chief Technology Officer

Robert L. Scavo

58

Chief Information Officer

Richard Cross

59

General Counsel and Corporate Secretary

 

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_22.jpg 

John Kao

Mr. Kao has served as our Chief Executive Officer and as a member of our Board since 2014. Please see “Proposal 1—Election of Directors—Continuing Directors” for Mr. Kao’s biographical information.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_23.jpg 

Dawn Maroney

Ms. Maroney has served as our President, Markets since 2014. Prior to that, she was chief Medicare officer for Blue Shield of California (formerly known as Care1st Health Plan) from 2011 to 2014, and was chief sales and marketing officer for CareMore Health Plan from 2005 to 2011. Ms. Maroney also served as vice president, Medicare, at Secure Horizons from 2003 to 2005, and as regional vice president of HealthNet from 1994 to 2003.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_24.jpg 

Thomas Freeman

Mr. Freeman has served as our Chief Financial Officer since 2017. Mr. Freeman first joined Alignment in 2015 where he served as our Vice President of Corporate Development. Prior to joining Alignment, Mr. Freeman was a growth investor on the health care team at General Atlantic. Before joining General Atlantic, Mr. Freeman worked in the Investment Banking division at Morgan Stanley & Co. LLC where he also focused on the health care sector. He earned his Bachelor of Science in finance from the University of Kansas, where he graduated with Highest Distinction from the School of Business and University Honors.

 

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https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_25.jpg 

Dinesh Kumar

Dr. Kumar has served as our Chief Medical Officer since 2019, overseeing provider operations, member services and technology infrastructure, among other matters. In 2022, his title was changed to Chief Medical and Operating Officer. Prior to joining Alignment, Dr. Kumar served as a principal in the health care consulting practice of DK Healthcare Advisors from 2018 to 2019, and as senior vice president, clinical transformation for DaVita Medical Group from 2015 to 2018. He also served as chief medical officer of Healthcare Partners Medical Group from 2014 to 2015. Dr. Kumar received his Bachelor of Medicine, Bachelor of Surgery (M.B.B.S.) from the University of Madras, Kilpauk Medical College & Hospital.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_26.jpg 

Joseph Konowiecki

Mr. Konowiecki has served as chairman of the Board since 2014. In October 2022, he was appointed to an executive role with the Company, leading strategic network and business development. Please see “Proposal 1—Election of Directors—Continuing Directors” for Mr. Konowiecki’s biographical information.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_27.jpg 

Hakan Kardes

Mr. Kardes has served as our Chief Technology Officer since January 2019, overseeing data management, technology engineering, and artificial intelligence strategy and execution. From 2015 to 2018, Mr. Kardes was vice president of data science and advanced analytics at Cambia Health Solutions, where he headed up the data science, engineering, product and analytics division. Before joining Cambia, Mr. Kardes was a principal data scientist at Intelius and was responsible for building their proprietary data and insights engine. Mr. Kardes holds a Bachelor of Science in computer science from Bogazici University in Turkey and a Ph.D. in computer science from the University of Nevada, Reno. He has published over 15 papers and holds several patents.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_28.jpg 

Robert L. Scavo

Mr. Scavo has served as our Chief Information Officer since September 2020, overseeing data management, technology engineering, artificial intelligence strategy and execution and claims operations. From January 2017 to April 2020, Mr. Scavo was President and Chief Operations Officer at Welltok, Inc., where he headed up sales, client delivery, product management, software engineering, product implementation and consulting, operations and IT. Before joining Welltok, Inc., Mr. Scavo spent 17 years at the TriZetto Group (now Cognizant). He also spent over seven years with Andersen Consulting (now Accenture) and holds a Bachelor of Science in business administration from the University of Colorado, Boulder.

https://cdn.kscope.io/8845c5a9b932eb2c0f56f9aea96a8b7c-img21730382_29.jpg 

Richard Cross

Mr. Cross joined Alignment as general counsel in April 2019. Prior to joining Alignment, Mr. Cross served as a consultant to various companies from April 2018 to March 2019. From March 2006 to March 2018, Mr. Cross was deputy general counsel of OptumRx, a health care company. From July 2002 to March 2006, he served as assistant general counsel of PacifiCare Health Systems, a health insurance provider. Prior to joining PacifiCare Health Systems, Mr. Cross was an associate attorney in the business transactions group of K&R Law Group. Mr. Cross also is a certified public accountant, and before becoming an attorney, he worked as a senior accountant for PacifiCare Health Systems and Security Pacific National Bank.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (“CD&A”) explains our executive compensation program for our named executive officers (“Named Executive Officers” or “NEOs”) listed below. This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to the fiscal year ended December 31, 2022.

Name

Position

John Kao

Chief Executive Officer (“CEO”)

Thomas Freeman

Chief Financial Officer

Dawn Maroney

President, Markets

Dinesh Kumar

Chief Medical and Operating Officer

Richard Cross

General Counsel and Corporate Secretary

Executive Summary

Alignment is a next generation, consumer-centric platform designed to improve the healthcare experience for seniors. We deliver this experience through our Medicare Advantage plans, which are customized to meet the needs of a diverse array of seniors. Our innovative model of consumer-centric health care is purpose-built to provide seniors with care as it should be: high quality, low cost and accompanied by a vastly improved consumer experience. Our platform was developed to align with the six core principles that we believe will be required to successfully deliver health care in the 21st century and that represent our key competitive strengths. Our platform enables us to:

leverage data, technology and analytics to power all aspects of our model;
engage consumers directly and develop products to meet their needs;
proactively manage and coordinate care for our most vulnerable members;
empower providers and employ flexible care delivery models;
design and deploy innovative value-based payment models; and
cultivate a culture of innovation.

2022 Business Highlights

 

Our focus on quality allowed us to deliver strong financial results in fiscal 2022. We believe that ongoing strategic investments in our people and technology will continue to drive meaningful improvements in the health and quality of life of all those we serve. The following key operational and financial highlights demonstrate our strong performance for 2022:

Health plan membership, which we define as members enrolled in our HMO and PPO contracts, as of December 31, 2022, was approximately 98,400, up 14.3% year over year, representing a 29% compound annual growth rate since 2014 across 52 markets and six states.
Total revenue was $1,434.2 million, up 22.8% year over year.
Health plan premium revenue of $1,372.3 million, up 22.4% year over year.
Adjusted gross profit was $193.6 million and loss from operations was ($128.6) million.
Adjusted gross profit excludes depreciation and amortization of $17.5 million and selling, general, and administrative expenses of $295.6 million (which includes $72.6 million of

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equity-based compensation). Adjusted gross profit also excludes an additional $9.1 million of equity-based compensation recorded within medical expenses.
Medical benefits ratio based on adjusted gross profit was 86.5%.
Adjusted EBITDA was ($26.7) million and net loss was ($149.6) million.

Adjusted gross profit and adjusted EBITDA are non-GAAP measures. An explanation of these measures, how they are calculated and reconciliations to the most directly comparable GAAP financial measures can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in the Appendix to this proxy statement.

2022 Compensation Highlights

Our executive compensation program has three primary elements: base salary, annual cash incentives and long-term equity incentives. Based on our performance and consistent with the design of our program, the Compensation Committee made the following executive compensation decisions for fiscal 2022:

Base Salaries. For 2022, each of our executives received base salary increases, as further described below, in order to align their compensation with the market for similar roles and responsibilities.

 

Annual Cash Incentives. Following our IPO, the Compensation Committee established an Annual Incentive Plan which provides for annual cash bonuses based in part on the achievement of corporate goals. The goals, which remained consistent for 2022, have been selected and weighted to align our executives’ incentives with a strategic growth agenda. Based on our financial performance in 2022, the Compensation Committee determined that corporate goals under the Annual Incentive Plan were achieved at 125% 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 committee also made determinations regarding the achievement of individual performance goals for our NEOs, which ranged from 83% to 93% (individual goals determine 25% of overall payout for NEOs other than the CEO, whose payout is not influenced by individual goal performance).
Long-Term Equity Incentives. In February 2022, the Compensation Committee approved a regular annual equity award to Company employees to recognize and reward performance. The annual grants were granted using a mix of restricted stock units (75% of grant value) and nonqualified stock options (25% of grant value) for the Named Executive Officers. Stock options only share in appreciation above the exercise price. In September 2022, the Compensation Committee approved additional equity awards to a broad group of senior-level Company employees, including our NEOs, designed to recognize our recent strong financial performance and to support our talent retention objectives. The Compensation Committee continued to evaluate its approach to long-term equity incentive compensation and affirmed its commitment to designing a program that aligns the interests of our executives and stockholders each year. Details on our anticipated regular long-term equity incentives are described further below. See “—2022 Executive Compensation Program in Detail—Long-Term Equity Incentives.”

Advisory Vote on Executive Compensation (“Say on Pay”)

We are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act. As such, our stockholders will have their first opportunity to cast a non-binding advisory vote to approve our executive compensation at the Annual Meeting. Our largest investors are represented on

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our Board of Directors and our Compensation Committee and have been instrumental in the design of our executive compensation program. As we continue to mature as a public company, we intend to broaden our stockholder engagement efforts and facilitate open and ongoing dialogues with key stakeholders with respect to executive compensation to help ensure that we remain apprised of investor perspectives. In the future, we will consider the feedback we receive from our major stockholders as well as the outcome of say-on-pay votes when making compensation decisions regarding our NEOs. We intend to conduct say-on-pay votes on an annual basis.

Compensation Best Practices & Policies

We believe the following practices and policies within our program promote sound compensation governance and are in the best interests of our stockholders and executives:

What We Do

What We Don’t Do

Set total direct compensation within a competitive range of our peer group to ensure that it is aligned with the level of position, experience, skills and performance of the executive

No guaranteed or uncapped incentive payouts in our annual bonus plan

Emphasize variable pay over fixed pay, with a significant portion tied to our financial results

No repricing or exchange of underwater options without stockholder approval

Disclose our corporate performance goals and achievements relative to these goals

No option or stock appreciation rights granted below fair market value

Use an independent compensation consultant

No significant perquisites

Maintain anti-hedging and anti-pledging policies

No tax gross-ups, other than for certain relocation expenses

Conduct an annual advisory vote on the compensation of our NEOs.

 

 

Recent Changes to Our Compensation Program

Our compensation programs continue to evolve as we mature as a public company and the Compensation Committee continues to implement sound governance practices. Recent changes to our compensation program include the following:

In February 2022, the Compensation Committee recommended, and the full Board approved, stock ownership guidelines for non-employee directors in line with market best practices.
For fiscal 2023, the Compensation Committee determined that cash payouts under our Annual Incentive Plan will be capped at 200% of bonus target. See “—Annual Incentives—2022 Annual Incentive Plan Payouts” for more information.
For fiscal 2023, the Compensation Committee modified the Annual Incentive Plan bonus modifier to provide greater incentive for achievement of high CMS Star Ratings. Among other changes, for the 2023 fiscal year, 75% of each NEO’s payout will be paid in March 2024, with the remaining 25% held back and subject to achievement of CMS Star Ratings-related performance measures. See “—Annual Incentives—2022 Annual Incentive Plan Payouts—Adjustment for CMS Star Ratings” for more information.
In April 2023, following the Nasdaq Stock Market’s issuance of its proposed listing standard, we began the process of implementing a compliant executive compensation clawback policy and intend to have a policy in place at the required time as put forward by the SEC and Nasdaq.

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What Guides Our Program

 

Executive Compensation Philosophy and Objectives

Our executive compensation philosophy is to forge critical connections between performance, long-term value creation, employee engagement and retention, compensation governance and our cultural values. To that end, our executive compensation program is grounded in the following principles:

 

 

Attraction and Retention

Our compensation program should enable the Company to attract and retain highly talented people with exceptional leadership capabilities.

Competitiveness

We seek to provide total compensation opportunity levels that are competitive with those being offered to individuals holding comparable positions at other companies with which we compete for business and leadership talent.

Stockholder Alignment

We employ pay elements that are designed to create long-term value for our stockholders, as well as foster a culture of ownership in the Company.

Pay for Performance

Our program is designed to ensure that a significant portion of an executive’s total compensation is variable (“at risk”) and dependent upon the attainment of certain specific and measurable short-term and long-term business performance objectives.

Responsible Governance

Decisions about compensation should be guided by best-practice governance standards and rigorous processes that encourage prudent decision-making.

Elements of Pay

The executive compensation program uses a mix of fixed and variable pay, with an emphasis on variable pay. The program is structured to create a meaningful balance between achieving strong short-term annual results while ensuring long-term viability and success. Therefore, the mix of incentives is reviewed and determined regularly by the Compensation Committee based on the short- and long-term objectives of the business. The following table illustrates the elements of pay we currently employ, the manner in which we position these elements relative to the market and the objectives achieved by each element:

Element

Target
Positioning vs.
Market

Primary Objective

Determination Factors

Base Salary

Target at Median

 

Attract and retain high-performing and experienced individuals
Provide steady source of income so executives can focus on the needs of the business
Value of role in competitive marketplace
Value of role to the Company
Skills, experience and performance of individual compared to the market as well as others in the Company

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Element

Target
Positioning vs.
Market

Primary Objective

Determination Factors

Annual Cash Incentives

Target at Median

 

Motivate executives to achieve challenging short-term performance goals
Align with annual financial objectives
Target awards based on competitive marketplace, level of position, skills and performance of executive
75% of actual awards based on achievement against the following annual corporate metrics:
o
Health Plan membership
o
Adjusted gross profit
o
Adjusted EBITDA
25% of actual awards based on achievement of individual goals for the NEOs other than the CEO
For 2022, awards were subject to a modifier (-20% to +50%) based on the Company’s CMS Star Ratings, with potential payouts ranging from 0% to 250% of target bonus

Long-Term Equity Incentives

Target at

50th - 75th percentile

 

Align executives’ interests with those of stockholders
Align with long-term business strategy
Retain executive talent through multi-year vesting schedules
Motivate sustainable performance that creates long-term value for stockholders
Foster our purpose and values to build teams that think and act like owners
Awards based on competitive marketplace, level of position, skills and performance of the executive

For fiscal 2022, using the base salaries, the annual incentive targets at the end of the year, and the long-term incentives granted throughout the course of the fiscal year, the vast majority of executive compensation was variable (98% for our CEO and an average of 92% for our other NEOs). As our Compensation Committee continues to evaluate its approach to long-term equity incentive compensation, we expect that in subsequent years the compensation of our NEOs will consist of an appropriately balanced mix of fixed pay and variable, success-based pay. For more information, please see “—2022 Executive Compensation Program in Detail.”

Executive Compensation Decision-Making Process

The Role of the Compensation Committee

The Compensation Committee oversees the executive compensation program for our NEOs. The committee is composed solely of independent members of the Board. The Committee works closely with its independent compensation consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed on the investor relations section of our corporate website at https://ir.alignmenthealth.com/. The committee makes all final compensation decisions and equity award recommendations regarding our NEOs.

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The Role of Management

Members of our management team attend regular meetings where executive compensation, corporate and individual performance, and competitive compensation levels and practices are discussed and evaluated; however, they are not present in the board room for, nor do they participate in, discussions about their own pay. Only the Compensation Committee members are allowed to vote on decisions regarding NEO compensation. The CEO reviews his recommendations pertaining to other executives (non-NEO) pay with the Committee providing transparency and oversight. Decisions on non-executive officer pay are made by the CEO in collaboration with the executive officers who manage such employees. The CEO does not participate in the deliberations of the Committee regarding his own compensation. The Compensation Committee makes all final determinations regarding CEO compensation.

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 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 2022 compensation levels, in conjunction with the recommendation of Pearl Meyer, the Compensation Committee took into account publicly available data for a group of peer companies (the “2022-23 Compensation Peer Group”) listed below, along with industry specific survey data, where appropriate. Selection criteria for determining/reviewing the 2022-23 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 revenues ranging from approximately 1/5 times to 4 times Alignment Healthcare’s revenues (i.e., ~$228 million - $4,990 million) at the time of peer group approval.

 

 

 

1Life Healthcare, Inc.

 

Health Catalyst, Inc.

 

agilon health, inc.

 

HealthEquity, Inc.

 

Allscripts Healthcare Solutions, 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.

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.

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2022 Executive Compensation Program in Detail

 

Base Salary

 

Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain executive leadership talent. In making base salary decisions, the Compensation Committee considers the CEO’s recommendations, as well as each NEO’s position and level of responsibility within the Company. The Committee takes into account factors such as competitive market data as well as individual performance, experience, tenure, internal equity and employee potential. For 2022, our NEOs received base salary increases, as further described below, in order to align their compensation with the market for similar roles and responsibilities.

In March 2022, each of our NEOs’ base salaries increased, as follows:

Name

Pre-Adjustment

Base Salary(1)

Post-Adjustment

Base Salary

Market Adjustment (%)

John Kao

$675,000

$750,000

11%

Thomas Freeman

$450,000

$500,000

11%

Dawn Maroney

$550,000

$560,000

2%

Dinesh Kumar

$500,000

$560,000

12%

Richard Cross

$350,000

$400,000

14%

(1)
Each pre-adjustment base salary applied from January 1 through March 26, 2022 and each adjusted base salary took effect as of March 27, 2022.

Annual Incentives

The 2022 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 (100% of the award for the CEO and 75% of the award for the other NEOs), as well as individual performance (25% of the award for the NEOs other than the CEO). Based on results, payouts can range from 0% to 250% of target award amounts. In addition, a modifier (-20% 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 2022 Annual Incentive Plan occur as follows: (i) 80% of each NEO’s total annual incentive payout based on corporate and individual performance was paid in March 2023; and (ii) the remaining 20% of each NEO’s total annual incentive payout is held back and is expected to be paid in the fourth quarter of 2023, subject to achievement of CMS Star Ratings-related performance measures. See “—2022 Annual Incentive Plan Payouts —Adjustment for CMS Star Ratings” below.

The applicable base salary rates and target bonus percentages for our NEOs were increased in 2022. Target bonus opportunities for the full 2022 year reflect the weighted average of the target bonus opportunity percentages applicable to each NEO for each applicable period throughout the year, summarized as follows:

 

 

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Pre-Adjustment
Annual Incentives

Post-Adjustment
Annual Incentives

 

Name

Initial Base Salary Rate

Target to Maximum Bonus Opportunity (%)

Adjusted Base Salary Rate

Target to Maximum Bonus Opportunity (%)(1)

2022 Target Bonus Opportunity – Full Year ($)

John Kao(2)

$675,000

100% - 200%

$750,000

100% - 200%

$729,827

Thomas Freeman(2)

$450,000

50% - 100%

$500,000

85% - 170%

$413,558

Dawn Maroney(2)

$550,000

85% - 170%

$560,000

85% - 170%

$473,712

Dinesh Kumar(2)

$500,000

85% - 170%

$560,000

85% - 170%

$462,269

Richard Cross(2)

$350,000

50% - 100%

$400,000

50% - 100%

$193,269

(1)
For 2022, bonus opportunities were subject to further modification based on performance, with payouts ranging from 0% to 250% of target amounts, subject to a modifier (-20% to +50%) to the total bonus payout based on the Company’s CMS Star Ratings.
(2)
Amounts under “Pre-Adjustment Annual Incentives” represent base salary and target and maximum bonus opportunity applicable to the bonus calculation from January 1 to March 26, 2022. Amounts under “Post-Adjustment Annual Incentives” represent base salary and target and maximum bonus opportunity applicable to the bonus calculation from March 27 to December 31, 2022. Base salary and target/max bonus opportunities were increased in connection with the Compensation Committee’s annual review of NEO compensation.

2022 Corporate Performance Metrics, Weightings and Results

In 2022, we used 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:

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.
Adjusted gross profit keeps us focused on efficient delivery and execution.
Adjusted EBITDA provides a clear view of our total operational profitability—it focuses on growth, while continuing to provide strong accountability for returns.

The Compensation Committee chose to remove revenue, which had previously served as a corporate performance metric in 2021, as a corporate performance metric for 2022, as it was viewed as duplicative in light of the focus on membership growth.

The table below sets forth the relative weighting of the metrics selected for our 2022 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:

 

2022 Performance Metrics and Levels

Health Plan Membership as of January 1, 2023

Adjusted Gross Profit(1)

Adjusted EBITDA(1)

(50% Weighting)

(30% Weighting)

(20% Weighting)

Threshold

106,596

$162.0M

($52.0M)

Target

111,230

$174.9M

($36.4M)

Maximum

120,500

$195.0M

($10.0M)

Actual Results(2)

68% of
Target

197% of Target

158% of Target

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Funded Amount(3)

125% of Target

 

(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.”
(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.
(3)
Represents percentage of corporate objectives achieved. Actual payouts to NEOs were adjusted to reflect level of achievement of individual objectives, which ranged from 83% to 93% (which the exception of our CEO, whose payout is entirely based on achievement of corporate objectives).

2022 Annual Incentive Plan Payouts

Based on the above performance results, the funding of the Annual Incentive Plan was set at 125% of each NEO’s applicable target based on the achievement of corporate objectives and subsequently adjusted based on each NEOs individual performance (excluding the CEO whose bonus entirely based on achievement of corporate objectives). Target bonus opportunities for the 2022 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 following table lists the actual awards earned by the NEOs in 2022 (and paid in 2023):

Name

Weighted-Average Bonus Target(1) (%)

Corporate Performance Results
(%)

Individual Performance Results
(%)

2022 Target Bonus Opportunity – Full Year
($)

Actual Payout Amount(2)  
($)