TEAM HEALTH HOLDINGS, INC.
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the “Board”) of Team Health Holdings, Inc. (the “Company”) has adopted these governance guidelines, which describe the principles and practices that the Board will follow in carrying out its responsibilities. These guidelines will be reviewed by the Board from time to time to ensure that they effectively promote the best interests of both the Company and the Company’s stockholders and that they comply with all applicable laws, regulations and stock exchange requirements.
- Role and Responsibility of the Board
The Board directs and oversees the management of the business and affairs of the Company in a manner consistent with the best interests of the Company and its stockholders. In this oversight role, the Board serves as the ultimate decision-making body of the Company, except for those matters reserved to or shared with the stockholders. The Board selects and oversees the members of senior management, who are charged by the Board with conducting the business of the Company.
- Board Composition, Structure and Policies
- Board Size. Consistent with the Company’s certificate of incorporation, the Board intends to have six to fifteen members. The Nominating/Governance Committee shall consider and make recommendations to the Board concerning the appropriate size and needs of the Board. The Nominating/Governance Committee shall also consider candidates to fill new positions created by expansion and vacancies that occur by
- Independence of Directors. The Board shall make an affirmative determination at least annually as to the independence of each director. The Company defines an “independent” director in accordance with Section 303A.02 of the Listed Company Manual of the New York Stock Exchange (“NYSE”). The NYSE independence definition includes a series of objective tests, such as that the director is not an employee of the Company and has not engaged in various types of business dealings with the Company. In addition, the Board has established categorical standards to assist in making such determinations. Such standards are set forth in Annex A hereto. Because it is not possible to anticipate or explicitly provide for all potential conflicts of interest that may affect independence, the Board is also responsible for determining affirmatively, as to each independent director, that no relationships exist that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the Board will broadly consider all relevant facts and circumstances, including information provided by the directors and the Company with regard to each director’s business and personal activities as they may relate to the Company and the Company’s management. As the concern is independence from management, the Board does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.
- Director Qualification Standards. The Nominating/Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending those candidates to be nominated for election to the Board. The Nominating/Governance Committee will consider (a) minimum individual qualifications, including strength of character, mature judgment, industry knowledge or experience and an ability to work collegially with the other members of the Board and (b) all other factors it considers appropriate, which may include age, gender and ethnic background, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations such as antitrust issues, corporate governance background, financial and accounting background, executive compensation background and the size, composition and combined expertise of the existing Board. The Board should monitor the mix of skills and experience of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively. Stockholders may also nominate directors for election at the Company’s annual stockholders meeting by following the provisions set forth in the Company’s bylaws, whose qualifications the Nominating/Governance Committee will consider.
- Change in Present Job Responsibility. Upon a significant change of the director's principal current employer or employment, or other similarly significant change in professional occupation or association, directors must provide written notice to the Nominating/Governance Committee and volunteer to resign. Upon the Nominating/Governance Committee’s recommendation, the Board will decide whether to accept a resignation.
- Retirement Age for Directors. Directors are required to retire from the Board when they reach the age of 72. A director elected to the Board prior to his or her 72nd birthday may continue to serve until the annual stockholders meeting coincident with or next following his or her 72nd birthday. On the recommendation of the Nominating/Governance Committee, the Board may waive this requirement as to any director if it deems such waiver to be in the best interests of the Company.
- Director Orientation and Continuing Education. Management, working with the Board, will provide an orientation process for new directors and coordinate director continuing education programs. The orientation programs are designed to familiarize new directors with the Company’s businesses, strategies and challenges and to assist new directors in developing and maintaining skills necessary or appropriate for the performance of their responsibilities. As appropriate, management shall prepare additional educational sessions for directors on matters relevant to the Company and its business. All directors shall obtain director education no less than every three years through external or Company-provided programs.
- Board Meetings
- Frequency of Meetings. The Board currently plans at least four meetings each year, with further meetings to occur (or action to be taken by unanimous consent) at the discretion of the Board. During most of those meetings, most committees will meet, as well as the full Board.
- Selection of Board Agenda Items. The Chairman of the Board shall set the agenda for Board meetings with the understanding that the Board is responsible for providing suggestions for agenda items that are aligned with the advisory and monitoring functions of the Board. Agenda items that fall within the scope of responsibilities of a Board committee are reviewed with the chairperson of that committee. Any member of the Board may request that an item be included on the agenda.
- Access to Management and Independent Advisors. Board members shall have free access to all members of management and employees of the Company and, as necessary and appropriate, Board members may consult with independent legal, financial, accounting and other advisors, at the Company’s expense, to assist in their duties to the Company and its stockholders.
- Executive Sessions. To ensure free and open discussion and communication among the non-management directors of the Board, the non-management directors will meet in executive session at most Board meetings with no members of management present. Independent directors will meet in a private session that excludes management and affiliated directors at least once a year.
- Committees of the Board
The Board shall have at least three committees: the Audit Committee, the Compensation Committee and the Nominating/Governance Committee. Each committee shall have a written charter and shall report regularly to the Board summarizing the committee’s actions and any significant issues considered by the committee.
Each of the Audit Committee and the Compensation Committee shall be comprised of no fewer than three members. In addition, each committee member must satisfy the membership requirements set forth in the relevant committee charter. A director may serve on more than one committee.
The Nominating/Governance Committee shall be responsible for identifying Board members qualified to fill vacancies on any committee and recommend that the Board appoint the identified member or members to the applicable committee. The Board, taking into account the views of the Chairperson and the Nominating/Governance Committee, shall designate one member of each committee as chairperson of such committee. Committee chairpersons shall be responsible for setting the agendas for their respective committee meetings.
- Expectations of Directors
The business and affairs of the Company shall be managed by or under the direction of the Board in accordance with state and other applicable laws and regulations. In performing their duties, the primary responsibility of the directors is to exercise their business judgment in the best interests of the Company. The Board has developed a number of specific expectations of directors to promote the discharge of this responsibility and the efficient conduct of the Board’s business.
- Commitment and Attendance. All directors are expected to make every effort to attend all meetings of the Board, meetings of the committees of which they are members and the annual meeting of stockholders. Members are encouraged to attend Board meetings and meetings of committees of which they are members in person but may also attend such meetings by telephone or video conference.
- Participation in Meetings. Each director should be sufficiently familiar with the business of the Company, including its financial statements and capital structure, and the risks and competition it faces, to facilitate active and effective participation in the deliberations of the Board and of each committee on which he or she serves. Management will make appropriate personnel available to answer any questions a director may have about any aspect of the Company’s business. Directors should also review the materials provided by management and advisors in advance of the meetings of the Board and its committees and should arrive prepared to discuss the issues presented.
- Loyalty and Ethics. In their roles as directors, all directors owe a duty of loyalty to the Company. This duty of loyalty mandates that the best interests of the Company take precedence over any interests possessed by a director. The Company has adopted a Code of Conduct (the “Code”), which includes a compliance program to enforce the Code, and directors are expected to adhere to the Code.
- Other Directorships and Significant Activities. Serving on the Board requires significant time and attention. Directors are expected to spend the time needed and meet as often as necessary to discharge their responsibilities properly. Without specific approval from the Nominating/Governance Committee, no director may serve on more than five public company boards (including the Company’s Board), and no member of the Audit Committee may serve on more than three public company audit committees (including the Company’s Audit Committee). In addition, directors who also serve as CEOs or in equivalent positions generally should not serve on more than two public company boards, including the Company’s Board, in addition to their employer’s board. Directors must advise the Chairman of the Board and the chairperson of the Nominating/Governance Committee and obtain the approval of the Chairman of the Board and the chairperson of the Nominating/Governance Committee before accepting membership on other boards of directors or other significant commitments involving affiliation with other businesses, non-profit entities or governmental units.
- Contact with Management. All directors are invited to contact the Chairperson and CEO at any time to discuss any aspect of the Company’s business. Directors also have complete access to other members of management. The Board expects that there will be frequent opportunities for directors to meet with the Chairperson and CEO and other members of management in Board and committee meetings and in other formal or informal settings.
- Confidentiality. The proceedings and deliberations of the Board and its committees are confidential. Each director shall maintain the confidentiality of information received in connection with his or her service as a director.
- Management Succession Planning
At least annually, the Board shall review a succession plan, developed by management. The succession plan should include, among other things, an assessment of the experience, performance and skills for possible successors to the Chairperson and CEO.
- Evaluation of Board Performance
The Board should conduct a self-evaluation at least annually to determine whether it is functioning effectively. The Board should periodically consider the mix of skills and experience that directors bring to the Board to assess whether the Board has the necessary tools to perform its oversight function effectively.
Each committee of the Board should conduct a self-evaluation at least annually and report the results to the Board. Each committee’s evaluation must compare the performance of the committee with the requirements of its written charter.
- Board Compensation
The Compensation Committee will review the form and amount of director compensation from time to time and recommend any changes to the Board, as it deems appropriate. Independent directors are expected to receive a portion of their compensation in the form of equity. Employee directors are not paid additional compensation for their services as directors.
- Communications with Stockholders
The Chairperson and CEO are responsible for establishing effective communications with all interested parties, including stockholders of the Company. It is the policy of the Company that management speaks for the Company. This policy does not preclude outside directors from meeting with stockholders, but it is suggested that, in most circumstances, any such meetings be held with management present.
- Communications with Non-Management Directors
Anyone who would like to communicate with, or otherwise make his or her concerns known directly to the chairperson of the Audit, Compensation or Nominating/Governance Committees, or to the non-management or independent directors as a group, may do so by (1) addressing such communications or concerns to the Secretary of the Company, 265 Brookview Centre Way, Suite 400, Knoxville, Tennessee 37919, who will forward such communications to the appropriate party, or (2) sending an e-mail to the Company’s General Counsel at firstname.lastname@example.org. Such communications may be done confidentially or anonymously.
Categorical Standards of Director Independence
A director is considered independent if the Board makes an affirmative determination, after a review of all relevant information, that the director has no material relationship with the Company or any of its subsidiaries. The Board has established the categorical standards set forth below to assist it in making such determinations.
- A director will not be independent if:
- the director is, or has been within the last three years, an employee of the company;
- an immediate family member, as defined in the rules of the New York Stock Exchange, of the director is, or has been within the last three years, an executive officer of the company;
- the director has received, has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company, other than 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);
- (a) the director is a current partner or employee of a firm that is the Company’s internal or external auditor; (b) the director has an immediate family member who is a current partner of such a firm; (c) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (d) the director or an immediate family member was, within the last three years, a partner or employee of such a firm and personally worked on the Company’s audit within that time; and
- the director, or an immediate family member, is, or has been within in the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee.
- The following commercial relationships will be considered to be material relationships that would impair a director’s independence until three years after such relationships cease: a director is a current employee, or the director’s immediate family member is a current executive officer, of a company that does business with the Company and the payments to, or payments from, the Company for property or services are, in any single fiscal year, more than the greater of $1 million or 2% of the consolidated gross revenues of the other company, in each case measured by the last completed fiscal year of the other company. Any such commercial relationship involving payments of less than the greater of such amounts will be considered to be a relationship that does not impair independence.
The Board shall disclose the foregoing independence standards and may make a general disclosure for each director who meets these standards. Any determination of independence for a director who does not meet these standards must be specifically explained in the Company’s next proxy statement.