When Daniel Amos, Aflac’s chairman and chief executive, looked at the shareholder proposals for the US health insurer’s annual meeting two years ago, one item jumped out.

A small shareholder wanted the US health insurer to give investors a vote on executive pay. In his 16 years in charge of the Georgia-based company, Mr Amos had never been faced with such a request.

Having presided over a huge expansion in the company’s profits and the share price during his tenure, Mr Amos found it almost offensive that a shareholder would quibble over his compensation.

“My first reaction was: what have we done wrong? What don’t you like about us?” he recalls.

But Mr Amos’ attitude quickly changed from defensiveness to curiosity.

In the ensuing months, he set out to ask leading shareholders whether they would favour a non-binding annual vote on executive compensation, as in the UK.

His findings led him to a groundbreaking move: on May 5, Aflac will be the first US-listed company to hold an investor vote on executive pay.

Aflac’s vote will be a test case that has the potential to shape the debate on the increasingly controversial issue of how much say investors should have on executive compensation.

Activist shareholders and other “socially responsible” investors, who have filed requests for similar votes at over 100 companies, hope the insurer’s example will trigger a domino effect across corporate America.

Opponents of the measure argue that Aflac’s decision is a dangerous cave-in to a coalition of union-funded shareholders that want to wrestle control away from management.

Mr Amos is at pains not to take sides. Although investors had never raised executive compensation with him before that fateful proposal, he says none of Aflac’s large shareholders opposed the measure when he asked them.

“We weren’t being naïve. We realised that was groundbreaking for the US,” Mr Amos says. “But I did not want people to think we were scared of it.”

But he also concedes that not every company would follow the path blazed by Aflac.

“I don’t think it is right for every other company: I just think you have got to listen to your shareholders,” he says. “This isn’t a popularity contest. No matter what America at large feels, the only things that matter are shareholders’ opinions.”

For his part, Mr Amos says he will listen to shareholders’ views on executive pay on May 5, even though the vote is non-binding.

He expresses confidence that investors who have seen Aflac’s shares rise more than 36 per cent in 2007 will approve of his $14.8m total compensation package – a 5 per cent increase over the previous year.

Some may have problems with Mr Amos’ retirement benefits which were worth more than $50m at the end of 2007 but others may regard them as just reward for 34 years of service.

Mr Amos says he would be “very disappointed” if more than 40 per cent of the votes were cast against his pay and would overhaul the company’s pay structure if a majority of shareholders rejected it.

“Let me be clear: this is an election, if you get 50.1 per cent you win the election,” he says. “But if shareholders really say ‘no’, we have to go back to the drawing board because it means that something is wrong.”

In practice, Aflac’s executives are likely to survive the vote unscathed, partly because large institutional investors are loath to vote against management on such a sensitive issue unless there are serious problems with the company.

Indeed, Mr Amos’s likely victory in the vote has led other companies’ executives to question the motives for his surprise decision to grant shareholders a vote on compensation.

He dismisses suggestions that the move was a clever ruse to pre-empt a shareholder campaign and position the company as a model corporate governance citizen in the eye of potential opponents.

“I didn’t start this process. If it was a publicity stunt I would have thought about it myself and done it. But I only did it after I got the proposal,” Mr Amos argues. But he does admit that the move has raised Aflac’s profile – the company’s previous claim to fame was a US advertising campaign featuring ducks – and benefited the company’s public image.

“I saw the writing on the wall and became pro-active and did it,” he says. “It has given us a good press. It has become a symbol of how we are trying to be transparent.”

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