At Community Health Systems, Inc., we recognize that investor confidence in the governance of public companies is essential and must be earned every day. We have adopted and are committed to corporate governance guidelines and practices that protect our shareholders’ interest. Community Health Systems, Inc. is fortunate to have a very strong board of independent directors who are actively involved in the leadership and oversight of our business, with particular attention to our compliance with accounting, financial and regulatory standards. We have the highest confidence in our system of internal controls, practices, and policies and, above all, in the integrity of our employees.
In order to ensure the utmost transparency in our governance processes and to instill confidence in our investors, our Board of Directors is continuously monitoring best practices in corporate governance, including in areas such as director independence, director qualifications, the election of directors, committee duties and governance, committee composition and qualifications, codes of conduct, policies regarding stock trading and the reporting of stock trading, policies regarding reporting of complaints involving accounting matters, and hiring practices with respect to the employees of a company’s independent auditors. Our Board of Directors has taken the following actions in furtherance of its goals and objectives:
- Adopted governance guidelines for the Board of Directors, including independence standards for our directors.
- Determined that our Board of Directors is comprised of a super-majority of directors who meet the independence standards of our governance guidelines and the applicable rules of the New York Stock Exchange, NASDAQ and the Securities and Exchange Commission (“SEC”). Our Board of Directors has determined that all of the current members of our Board of Directors except for Messrs. Smith and Hingtgen, who are employee-officers of the Company, are independent.
- Entire Board of Directors is elected annually to one year terms.
- Adopted a policy which limits the number of other public company boards on which each director may serve and a policy which requires a director to tender his or her resignation from the Board upon a significant change in circumstances, such as a change in his or her primary occupation or if, in an election in which the standard for election of directors is a majority vote in accordance with our bylaws, the director receives a greater number of “against” votes than “for” votes.
- Selected a lead director from among the Board’s independent directors who serves as the principal liaison between the independent directors and the Board chair and other members of management. The lead director is also available for consultation and direct communication with major stockholders.
- Adopted procedures for independent directors to meet in executive session. The Board of Directors has authorized the lead director to preside at such executive sessions.
- Adopted a Code of Conduct that is applicable to all directors, officers, and employees of the organization. A variation of this Code of Conduct has been in effect at our Company since 1997.
- Adopted a risk oversight mechanism pursuant to which our management team is primarily responsible for risk management, which it administers through a broad-based committee that includes executives from our operations, internal audit, quality, revenue management, accounting, finance and legal departments, while our Board of Directors is responsible for the overall supervision of our Company’s risk oversight activities at both the full Board level and at the Board committee level. Our risk oversight requires our management team to provide regular updates throughout the year to the respective Board committees regarding the oversight of the risks each Board committee oversees, and further requires each of these committees to discuss these risks with our full Board either regular meetings of the Board or at committee meetings in which all Board members participate. In addition to the reports from the committees, the Board receives presentations throughout the year from various department and business unit leaders that include discussions of risks as necessary. At each Board meeting, the Chair and CEO addresses matters of particular importance or concern, including any areas of risk that require Board attention. Additionally, through dedicated sessions focusing entirely on corporate strategy, the full Board reviews in detail the Company’s short- and long-term strategies, including consideration of risks facing the Company and their potential impact.
- Adopted an Audit and Compliance Committee Charter, which goes beyond the requirements of the Sarbanes-Oxley Act and regulations. Our Audit and Compliance Committee is comprised solely of independent directors, who also meet specific qualifications for service on this committee. All four members of our Audit and Compliance Committee are “audit committee financial experts” as defined by the SEC.
- Empowered our Audit and Compliance Committee with oversight responsibility for financial reporting with respect to our major financial exposures and the steps our management team has taken to monitor and control such exposures as well as for the effectiveness of our management team’s enterprise risk management process that monitors key business risks facing our Company.
- Adopted a policy for the pre-approval of all non-audit services to be performed by our independent auditors.
- Adopted a policy that prohibits us from employing individuals who were engaged in our audit during the most recent two years.
- Created a dual reporting relationship for our internal audit department so that it separately reports to our Chief Financial Officer and our Audit and Compliance Committee and adopted an Internal Audit Department Charter.
- Adopted a procedure for handling complaints regarding accounting matters.
- Adopted a Compensation Committee Charter to strengthen the duties of this committee. The Compensation Committee is comprised solely of independent directors, who also meet specific qualifications for service on this committee.
- The Compensation Committee utilizes an independent compensation consultant and has sole authority to retain such consultants and other advisors. The Compensation Committee annually evaluates all relevant factors to ensure its advisors’ continued independence.
- Adopted a statement of policy regarding securities trading to ensure that all persons subject to the reporting requirements of Section 16 of the Exchange Act will be able to comply with all applicable filing requirements in a timely manner.
- Adopted a policy requiring our directors and officers, until they satisfy certain stock ownership guidelines, to hold for at least one year 100% of the shares received upon the exercise of stock options or the vesting of restricted stock units, net of shares required to pay the exercise price and any taxes.
- Adopted a policy requiring that, in certain circumstances, our elected officers reimburse us for the amount and/or value of performance-based cash, stock or equity based awards received by such elected officers, and/or gains realized by such elected officers in connection with these awards upon a determination by our Board of Directors or an appropriate committee of the Board of Directors that fraud by such elected officers materially contributed to us having to restate all or a portion of our financial statements. Further revised this policy, to require that, for all periods commencing on or after January 1, 2017, in the event of a restatement of the Company’s financial statements required under applicable statutes, rules and regulations of the SEC, the Company will, to the extent permitted by applicable law, require the Company’s Chief Executive Officer and Chief Financial Officer to reimburse the Company for any performance-based cash, stock or equity-based award paid or granted to, or gains realized by the CEO and CFO, to the extent that the amount paid, granted or realized during the two year period preceding the date of the restatement exceeded the amount that would have been paid, granted or realized under the Company’s financial statements, as restated.
- Adopted a policy, in accordance with the Sarbanes-Oxley Act, prohibiting us from making any loans to our directors or executive officers (no such loans were outstanding at the date the policy was adopted).
- Adopted a Governance and Nominating Committee Charter. The Governance and Nominating Committee is comprised solely of independent directors.
- Revised our existing policy on the selection criteria for directors to specify certain factors our Governance and Nominating Committee considers in selecting and nominating individuals to serve on our Board. These factors include, without limitation: (a) our Board’s and our Company’s needs for input and oversight about the strategy, business, regulatory environment, and operations of our Company; (b) our management directors’ views as to areas in which additional advice and counsel could be provided by our Board; (c) the mix of perspectives, experience, and competencies currently represented on our Board (while this is primarily directed to the professional acumen of an individual, it may also include gender, ethnic, and cultural diversity); (d) the results of our Board’s annual self-assessment process; and (e) as to our incumbent directors, meeting attendance, participation and contribution, and each director’s current independence status.
- Amended our By-Laws to permit stockholders, or a group of up to 20 stockholders, who have held at least 3% of our outstanding stock continuously for at least three years, to nominate and include in the Company’s proxy materials for our annual meeting of stockholders nominees for election to our Board of Directors constituting up to the greater of two individuals or 20% of the number of directors currently serving on our Board of Directors, provided that the stockholder(s) and the nominee(s) comply with the proxy access procedures described in our By-Laws.
- Subject to the exercise of its fiduciary duties, the Board of Directors will include two independent directors who are nominated by the Governance and Nominating Committee from a pool of qualified candidates who are identified by one or more of our stockholders who have continuously held at least 1% of our outstanding stock for at least one year. The requirement to include these two director positions and the process for nomination and service will continue through December 31, 2020. Recommendations for candidates to fill these positions are subject to the same evaluation process as all other director candidates. Directors Michael Dinkins and K. Ranga Krishnan were identified pursuant to this process.
- Adopted procedures for the annual review of governance guidelines, committee charters, and board and committee performance.
- Adopted procedures for all interested parties who wish to communicate directly with our non-employee directors and/or members of our Audit and Compliance Committee. Correspondence should be mailed to the director(s) at:c/o Community Health Systems, Inc.
4000 Meridian Boulevard
Franklin, TN 37067
Attention: Corporate Secretary
In the alternative, interested parties may communicate with our directors by accessing the Confidential Disclosure Program set forth in our Code of Conduct.
- Adopted additional policies regarding spending authorizations, board education and evaluations.