Humana’s earnings last year fell by more than half — but executive compensation roughly doubled.

That’s because top executives received huge stock and stock option awards that were tied to the company’s performance in the last three years — not just 2016.

The Louisville-based insurer’s top five executives received nearly $40 million last year, up from less than $21 million in 2015, according to filings with the Securities and Exchange Commission.

While the executives’ base salaries changed little, they received significantly higher stock awards, according to the insurer’s proxy filing, which was released Wednesday.

Bruce Broussard

CEO Bruce Broussard’s compensation last year exceeded $19.7 million, up from $10.4 million in 2015 and $10.2 million in 2014.

Stock and stock option awards accounted for more than 82 percent of Broussard’s compensation. The CEO’s stock awards last year were worth nearly $12 million, up from less than $4.4 million the year before.

Stock and stock option awards rose significantly for all five execs listed in the proxy, although the company’s diluted earnings per share, at $4.07, fell 52 percent compared to the prior year’s diluted EPS of $8.44.

Last year’s results also were the weakest, by far, since 2011. Diluted EPS in each of the years between 2011 and 2015 exceeded $7.

The difference between Humana’s reported and adjusted earnings was particularly large for 2016. Adjusted EPS were 135 percent higher in 2016 than Generally Accepted Accounting Principles, or GAAP, EPS. In 2015 and 2014, the difference was less than 10 percent. In 2015, the adjusted EPS figure, $7.75, was actually lower than the GAAP EPS, $8.44.

EPS according to Generally Accepted Accounting Principles, in blue, and adjusted for various measures and used as a basis for executive compensation, in red.

Company spokesman Tom Noland told Insider via email that while the stock compensation in 2016 “looks like a new, one-year grant … it is actually an old, three-year grant from 2014.”

Humana said in its proxy filing that it ties executives’ compensation to their competency and contribution and aligns their interests with those of stockholders by making sure that some of the compensation depends upon measures including operating results and stock price. Humana’s shares rose 14.5 percent last year, closing on Dec. 30 at $204.03. The S&P 500 rose 9.5 percent.

In the proxy filing, Humana said that its adjusted earnings per share last year were $9.57, which exceeded management’s initial projections. The company said it achieved those results “despite an extremely challenging operating environment due to our proposed merger agreement with Aetna.”

The $34 billion deal was scuttled after a federal judge sided with the U.S. Department of Justice, which said that the union would materially decrease competition and result in higher prices for consumers.

The adjusted EPS figure of $9.57 excludes costs associated with the proposed merger and a $591 million write-off related to Affordable Care Act money it was owed by the government but will not be able to collect.

Humana said in the filing that its executive compensation committee “determined that excluding the impact of certain items for purposes of calculating the payouts under performance-based restricted stock units granted in 2014 that vest in 2017 was consistent with past practice and appropriate as these events were not contemplated when establishing the relevant incentive targets for these awards, resulted from external events beyond our control, relate to the proposed transaction with Aetna, or relate to non-strategic assets of the company.

“As a result,” the company said, “the performance-based restricted stock units granted in 2014 vested at 111 percent of the target level, rather than at a 0 percent level had the adjustments not been applied.”

Kevin Murphy

Kevin Murphy, an executive compensation expert, said in an email exchange that using non-GAAP measures for compensation purposes is not “inherently evil or nefarious” but “can clearly be abused.”

“It makes sense, for example, to exclude one-time restructuring or other unanticipated charges,” said Murphy, who holds the Kenneth L. Trefftzs Chair in Finance and is professor of finance and business economics at the University of Southern California’s Marshall School of Business

“Proxy advisory groups, such as ISS, look unfavorably at non-GAAP measures, but again this likely reflects the suspicion that the company is making one-way ex-post adjustments that always favor managers,” the professor said. “My own belief is that it’s OK as long as the company lays out the rules of the game when the plan is first set up, or (uses) adjustments only for things truly outside of management control.”

In Humana’s case, adjusting the earnings for the merger expenses makes sense, he said.

“I’m a little more skeptical of adjusting for the ACA money they didn’t get: This sounds like an ‘unexpected event’ that we nonetheless want to hold management accountable for,” Murphy said.

Humana’s filing coincided with a report by MarketWatch that indicated that although the SEC has stepped up scrutiny of unaudited results — meaning those that do not conform with GAAP — 72 percent of S.&P. 500 companies “reported at least one non-GAAP EPS number” in the first quarter of last year.

“The Health Care and Information Technology sectors are the most prolific users of non-GAAP EPS metrics,” MarketWatch noted, “with approximately 84 percent of companies using the alternative EPS numbers.”