Getting big bucks to pay big bucks at Cigna…

The hefty pay package taken home last year by David Cordani, chief executive of Cigna (CI), got some attention late last week. Less noticed: his bosses’ big payday.

Cordani, of course, saw his total pay, as laid out in the proxy Cigna filed Friday afternoon, jump to $15.2 million from $6.7 million last year, driven by $4.5 million in stock awards, $2.2 million in options and $7.4 million in incentive pay (plus nearly $49,000 to install and maintain security alarms). This after a little over a year on the job — he was promoted to the top spot in late 2009, which could explain a good chunk of the increase. That, or the board is paying based on effort.

Still, that kind of pay package sends us to the charts, to check out whether the company’s shareholders are faring as well. The best we can say is that they at least beat inflation last year — total return for the insurer’s shares clocked in at 4.05%, trailing the health-care industry by 5 percentage points and the S&P 500 by 11 points.

Which raises the question of who’s minding the shop. In Cigna’s case, the answer is some very well-paid part-timers. Every member of Cigna’s board took home more than $240,000 in cash and stock, with Finance Committee Chairman Peter N. Larson taking $306,499 (including $50,000 given to charity in his name to mark his December 31 retirement after 14 years on the board). For what it’s worth, the board met eight times, its audit committee met 11 times, and each of its other committees met six times, except the executive committee, which didn’t meet at all.

Best paid of all, of course, was the board’s chairman, Isaiah Harris Jr. Like the other board members, he got $225,000 as a standard board retainer, as well as another $125,000 as an annual “Chairman Retainer.” Then there’s the $595,000 “Chairman Transition Retainer,” which the board determined was appropriate

“given the additional time and effort spent in the Independent Board Leadership Positions over and above regular service as a member of the Board and the general role and responsibilities of the independent Chairman of the Board…”

Harris, after all, had served as vice-chairman (the greatest job in business, as Michelle has noted) from July 2009 through December 2009, and then stepped up as chairman while the company changed the leadership of the board (that would be Harris’s own ascension) and management (Cordani’s promotion). The proxy elaborates:

“During the Transition Period, Mr. Harris spent considerable time focusing on these issues and providing guidance and support to management to assist with strategic planning for CIGNA’s business and to fulfill his role as the Board’s liaison to management.”

But, as Ron Popeil might say, wait — there’s more! For fulfilling his role, and going beyond it, Harris also received, in addition to the retainers above,

“other compensation for serving in the Independent Board Leadership Positions during the Transition Period consisting of: (1) a one-time cash award of $1,450,000; and (2) payout of a stock unit award with a grant date value of $1,450,000.”

The final tally, according to the proxy’s director compensation table: $2.4 million, all but a smidgen of it in cold, hard cash ($3,849 went to life-insurance premiums). That appears to omit the $1.45 million in stock units, which the board approved at 100% of its grant date value only this February, so presumably it counts toward 2011 pay.

No doubt Harris was immensely helpful in Cigna’s endeavors in 2010 (and the company did improve its bottom line), though we note that the only committee Harris seems to have served on was the executive committee, which didn’t meet last year. What really caught us by surprise, though, was finding Harris’ name on the list of the company’s independent directors.

After all, paychecks the size of his generally go to executives, not board members. In fact, at first glance, the company’s own threshold for independence appears to be considerably lower than $2.4 million. Cigna’s proxy says its director-independence standards disqualify anyone “who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from CIGNA”. That standard, however, explicitly exempts

“director and Committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service)…”

Presumably that bit about payment contingent on future service doesn’t encompass the condition attached in 2009 to Harris’s special retainers — that “No cash award or unit payment will be made to Mr. Harris unless he remains in active service as a member of the Board through the earlier to occur of December 31, 2010, death or disability,” to quote page 46 of last year’s proxy.

Now that Cigna’s transition is winding down, we’ll see whether Harris and Cordani keep their outsized paychecks. We doubt it, judging from an executive vice-president’s severance package we footnoted last September. For one thing, the board has already decided to increase annual Chairman Retainer by $100,000 to $225,000.