Compensation Committee Charter
I. Purpose of Committee
The Compensation Committee (the “Committee”) is established to ensure the Society’s Board of Directors (the “Board”) determines the adequacy and reasonableness of the total compensation paid to the Chief Executive Officer (“CEO”) and other employees who are Disqualified Persons within the meaning of section 4958 of the Internal Revenue Code (“Disqualified Executives”). Consistent with the Society’s Executive Compensation Philosophy set forth as EXHIBIT A, total compensation includes, but is not limited to, salary, membership fees, incentives, bonuses, retention payments, severance payments and all forms of deferred compensation, whether vested or unvested, and all benefits whether or not included as income for tax purposes (e.g. medical, dental, life insurance, disability benefits). In this context, the term “Disqualified Executive” includes:
any individual who is, or within the prior five years has been, in a position to exercise substantial influence over the affairs of the Society;
any individual who is the spouse, brother or sister (whether whole or half-blood), ancestor, child (whether natural or adopted), grandchild, great-grandchild, or the spouse of a brother or sister, child, grandchild, or great-grandchild, of an individual referenced in subparagraph 1; and
any organization in which an individual described in subparagraph 1 or 2 has a 35% ownership or control interest, or in the case of a partnership, or a professional corporation, a direct or indirect ownership interest in excess of 5%.
II. Committee Membership
The Committee is composed of the Chair of the Board, the Vice Chair, the Board Scientific Officer, the Secretary/Treasurer, the Immediate Past Chair, and up to two additional members, all of whom must be “independent voting members” of the Board without a “conflict of interest”, as such terms are defined in the attached EXHIBIT B. The Chair of the Board will appoint the Committee chair from its members. Any question regarding a Committee member’s independence, conflict of interest or appearance of a conflict of interest will be reviewed by the Board for final resolution. Committee members are appointed by the Chair of the Board and approved by the Board. Committee members serve one-year terms beginning January 1st and ending December 31st of that same year or until the new Committee is appointed by the Chair of the Board.
III. Committee Authority and Responsibilities
The Committee has the authority and responsibility to do the following:
(a) Conduct an annual review of the CEO’s performance and assure the reasonableness of his or her total compensation in relation to the marketplace; (b) solicit Board input regarding the CEO’s performance; (c) develop and recommend for Board approval any changes in the CEO’s total compensation; (d) decide on any changes in the CEO’s employment agreement, severance and/or retention agreement, if any are in effect; (e) work collaboratively with the CEO to establish the CEO’s annual performance goals; (f) oversee development and recommend Board approval of the CEO’s annual Incentive Plan and determine what Incentive Plan award, if any, is payable each year;
Review, and as appropriate approve Management’s designation of the Society’s other Disqualified Executives;
Review, approve and assure the reasonableness of total compensation ranges, and the terms of any employment agreements, severance and/or retention agreements of all Disqualified Executives (in addition to the CEO). The CEO is empowered to set the total compensation and the terms of any severance/and or retention agreements for all other Disqualified Executives within the ranges determined by the Committee. Approve participation in and payout potential for any Disqualified Executive incentive plan. The CEO will either certify to the Committee that the total compensation of each Disqualified Executive is within the range approved by the Committee, or obtain the prior approval of the Committee to provide compensation to a Disqualified Executive that is outside the approved range. The Committee must review and approve in advance any severance and/or retention agreement for any Disqualified Executive that is not covered by a severance or retention policy previously approved by the Committee;
With respect to Disqualified Executives (including the CEO), select, engage and work with appropriate professionals (as described in section IV) to gather and review in advance appropriate market comparability data on the amount and form of compensation paid for comparable executive positions by other comparable employers, including those organizations with which the Society may be competing for executive talent, and to assure that the comparability data so gathered and reviewed meets the standard for “appropriate data as to comparability” to qualify for the rebuttable presumption of reasonableness under section 4958 of the Internal Revenue Code;
Work with appropriate professionals (as described in section IV) to annually evaluate all elements of economic benefit provided (or potentially to be provided) to each Disqualified Executive (including the CEO). Such evaluation will include a tally sheet displaying the maximum annualized value of total remuneration for the upcoming year, as well as the potential maximum value of total remuneration under multiple scenarios (such as retirement, termination with or without cause, death, disability, and severance in connection with business combinations or the sale of a business). Further, the Committee will review and maintain an inventory of all documents pertaining to all elements of economic benefit (including, but not limited to, plan documents, summary plan descriptions, employment agreements, severance agreements, retention awards and any other documents that could potentially provide economic benefit to a Disqualified Executive).
Before the later of (i) its next meeting or (ii) sixty (60) days after making its determination of reasonableness with respect to the total compensation of all Disqualified Executives (including the CEO) document in a written report: (a) the terms that were approved and the date approved; (b) the members of the Committee present during the discussion and those who voted in favor and those who dissented or abstained; (c) the comparability data obtained and relied upon by the Committee and how the data were obtained; and (d) any actions taken with respect to the determination by anyone who is otherwise a member of the Committee but who had a conflict of interest. The report must be approved by the Committee as reasonably accurate and complete within a reasonable time thereafter and reported to the Board for its consideration;
Review and act on reports of conflicts of interest from the Board or the Audit Committee of the Board as such reports relate to the compensation of Disqualified Executives and/or Committee members;
Oversee the CEO succession process, working with the CEO to assure an orderly succession, whether via an external search or the identification and development of leaders within the organization. Assure that there are designated successors who are qualified and prepared to undertake and discharge the CEO’s responsibilities on an interim basis should that become necessary, and report to the Board annually with respect to the foregoing;
Determine whether all of the Society’s compensation and benefit plans, including but not limited to the Society’s Retirement Plans, Medical and Dental, Retiree Medical and Retiree Life Insurance, and other such plans are appropriate to market for the skills employed and, if not, make appropriate recommendations to the Board;
At least annually provide a report to the Board concerning the actions and recommendations of the Committee as described in paragraphs 1 through 9 above. If the Board declines to approve all or part of the Committee’s report or recommendations, the Committee will undertake further review of the part in question on the basis of the comments from the Board and submit a revised or restated report or recommendation to the Board for its review and approval;
Oversee enterprise risk management related to assigned risk area and submit a report to the Audit Committee each year;
Review and monitor compliance with the Emergency CEO Succession Policy and recommend new policies to the Board as necessary;
Review the Compensation Committee Charter and Executive Compensation Philosophy for adequacy annually and recommend any changes to the Governance Committee for approval by the Board; and
Accomplish such additional tasks as are assigned to the Committee by the Chair of the Board.
IV. Resources and Authority of the Committee
The Committee will have the resources and authority it deems appropriate to discharge its duties and responsibilities, including the sole authority to select, retain, terminate, and approve the fees and other retention terms of appropriate professionals with relevant expertise, without seeking approval of the Board or management. Any such engagement shall be reported to the Board. Appropriate professionals are limited to: in-house and outside legal counsel; certified public accountants or accounting firms with expertise regarding the relevant tax law matters; and experienced independent compensation valuation experts who certify in their written opinion that they meet the standards set forth in the regulations implementing section 4958 of the Internal Revenue Code. All outside professional advisors selected by the Committee will be independent, and have primary and direct reporting relationship with and accountability to the Committee. Copies of all documents material to the Committee’s responsibilities (including without limitation Committee meeting minutes, employment, severance and retention agreements, employee benefit policies and documents received from legal counsel and consultants) shall be maintained and made available for the review and inspection of Committee members.
V. Committee Meetings
The Committee will meet at least annually and as often as its chair or a majority of its members deems necessary or appropriate, either in person, telephonically or electronically, and at such times, places and manner as its chair and chair’s staff may determine. Deliverables, budget, and alternative meeting methods should be included in the decision making process. The chair and chair’s staff will develop an agenda in advance of each meeting and communicate meeting details to Committee members in a timely fashion.
As necessary, the Committee will meet in a joint session with other committees regarding items of concern to both committees.
VI. Committee Reports
The Committee will produce a written report at the conclusion of each meeting, which will include an attendance record, a copy of the agenda and a full report of Committee discussions with documented recommendations and decisions. These reports will be completed no more than three weeks following the meeting and forwarded to the Committee membership and the Office of Enterprise Governance for proper filing.
VII. Committee Evaluation
The Committee will conduct periodic performance evaluations to review the performance of the Committee in relation to the requirements of this Charter and such other matters as the Committee deems appropriate.
Executive Compensation Philosophy
This document is a declaration of the American Cancer Society’s intent, as a nationwide organization, with respect to the principles, goals, and structure of executive compensation programs for Disqualified Executives. It serves as the foundation for the specific components of such programs for Disqualified Executives.
The American Cancer Society Board of Directors (the “Board”) is responsible for the administration of the Society’s compensation program. The Board assigns some aspects of this responsibility to its Compensation Committee, which is governed by the Compensation Committee Charter.
The Compensation Committee is primarily responsible to:
Ensure the reasonableness of executive compensation levels of Disqualified Executives;
Enact policies that balance the need for appropriate safeguards with the need to ensure an effective program that enables the Society to retain, attract, and reward executives, and
Recommend the Chief Executive Officer’s (“CEO”) compensation package to the Board.
In order to ensure a functioning and effective program, the Board delegates the authority to the CEO to determine total compensation for other Disqualified Executives so long as the total compensation conforms to the policies and ranges established by the Compensation Committee.
Overview and Guiding Principles
The American Cancer Society (the “Society”) is a nationwide, community-based, voluntary health organization. It requires top executive talent with a wide range of skills, education, experience, and leadership qualities. The Society recognizes the need to pay competitively in all forms to assure the retention and attraction of executive talent. The Society fundamentally believes that executive compensation should be market-based and performance-based. It also believes in the principle of a fair value exchange; that is, the organization’s interest must be considered and must be proportional to the monetary value conveyed to executives.
When establishing executive compensation levels, the Society defines the appropriate peer group to be a mix of other non-profit organizations, health care organizations, and for-profit organizations, all of similar size and complexity. Where appropriate, these industry segments will be weighted based on each position’s market for talent and role in the organization.
The Society recognizes that it must continue to provide a competitive compensation package to retain existing talent and to attract executives as needed. The Society believes this approach supports the advancement of its charitable mission and protects its brand and its tax-exempt status. As such, the Society has adopted a set of key principles that guide its executive compensation decision-making process, as follows:
- The Society will develop, maintain and administer programs that recognize the roles of various elements of total remuneration in attracting, retaining and motivating executives. Each compensation element should have a specific role in meeting the objectives articulated in the philosophy and, thus, advancing the organization’s mission. Together, the combination of elements should meet all of the objectives of the Executive Compensation Philosophy.
The Society will ensure that the executive compensation program is designed to focus, motivate and retain its executives through a combination of reward elements, including market-aligned base salaries, variable compensation aligned with the organization’s performance against its objectives and mission, and competitive benefits and retirement programs.
The Society will uphold a competitive, yet reasonable and defensible compensation position relative to the market.
The Society will competitively compensate, compared to the appropriate market for talent, each executive who is fully qualified and performing the duties and responsibilities of the position.
The Society recognizes that while providing competitive compensation to executives is a business imperative, as a tax-exempt, non-profit and highly visible organization it must ensure that compensation is not excessive.
The Society will establish and implement the highest standards of governance over executive compensation in order to meet the rebuttable presumption of reasonable executive compensation under Internal Revenue Code §4958.
The Society will expect vigorous goal-setting tied to its strategic, mission-related, and financial objectives and will objectively evaluate executive performance against these objectives.
The Society will pay for expected performance and reward the achievement of high performance.
The Society will require timely and accurate documentation of executive compensation decisions.
The Society will require complete disclosure and transparency of executive compensation levels, expect the Compensation Committee to regularly inform the Board of its actions, and make available compensation information related to Disqualified Executives.
The Society will demand and monitor management’s compliance with policies established by the Compensation Committee.
Market Competitive Positioning and Primary Program Components
In aggregate, the competitive positioning of executive compensation will be targeted at the 50th percentile of total remuneration. Individual competitive positioning shall not exceed the 75th percentile unless extraordinary circumstances warrant such positioning.
Flexibility around this targeted positioning will be exercised as necessary to recruit, retain and motivate the required executive talent. Therefore, individual total remuneration levels may vary below or above this target positioning based on individual qualifications, experience and performance.
Components of the executive compensation program include, but are not limited to, salary, incentives, bonuses, severance payments and all forms of deferred compensation, whether vested or unvested, and all benefits whether or not included as income for tax purposes (e.g. medical, dental, life insurance, disability benefits).
- Base Salary – Base salary ranges will be based on the 50th percentile of the market for comparable positions, as established through generally accepted compensation methods, and through the use of available surveys, and/or other appropriate forms of data as prepared by an independent compensation consultant. The base salary of each executive will be managed using an approach which guides the salary of a fully seasoned and high performing executive to the midpoint of the salary range. The approach will take into account specific attributes and factors related to the individual executive. Recognizing that individual factors will vary, the approach will provide guidance for targeting salaries either below or above the midpoint within the salary range. The objective is to position salaries at the proper rate for the individual and to achieve the appropriate alignment with the market.
Incentive Compensation – Incentive compensation will reward outstanding executive performance. Target incentive compensation levels will be competitive with market median levels and should be generally consistent for comparable positions. The incentive program is intended to reinforce the behaviors and actions required of each leader to achieve the Society’s goals and objectives. The amount of leverage provided by the established incentive plan will be commensurate with the executive’s level of responsibility and impact on the organization. The incentive program design will be evaluated on its ability to align leadership’s interests with those of the organization. The program also will allow for discretion to adjust incentive awards upward or downward at the enterprise and/or individual level, based on factors such as external market pressure, organizational performance and/or individual performance/behavior. Separate, discretionary bonus awards may be considered to recognize exemplary performance not captured by the annual incentive program goals or to recognize exemplary performance when the incentive plan does not trigger.
Total Cash Compensation – Total cash compensation (the combination of base salary and incentive compensation) will be targeted at the market 50th percentile of the appropriate talent market, and may approach the 75th percentile when exceptional performance warrants.
Benefits and Perquisites - The Society provides market competitive (50th percentile) total benefits and minimal perquisites (based strictly on business need). In addition to the benefits made available to all employees, executives whose compensation exceeds the Internal Revenue Code limits are eligible to be considered for supplemental retirement benefits (“SERP”) subject to the approval of the Compensation Committee. The SERP is a standard agreement that is coordinated with the Society’s qualified defined contribution plan and is designed to provide retirement benefits that would otherwise not be payable due to the compensation limit in the Internal Revenue Code. Executive-only perquisites (e.g. membership in professional organizations, reimbursement of professional advisory services, etc.) should be provided only if warranted based on business need.
Other - The Compensation Committee may also authorize unique program components which support the achievement of the Society’s mission. These unique components (for example, individual retention agreements, special severance arrangements, etc.) may be selectively applied.
Independent Voting Members:
A voting member of the Board of Directors or a committee will be considered “independent” only if he or she satisfies the following criteria:
The member has not been, and is not currently being compensated as an officer or other employee of the Society or of a related organization1; nor was the member compensated by an unrelated organization or individual for services provided to the Society or to a related organization, if such compensation is required to be reported in Part VII, Section A of the Society’s Form 990.
The member did not receive total compensation or other payments exceeding $10,000 during the Society’s tax year from the Society and related organizations as an independent contractor.
Neither the member, nor any family member2 of the member, was involved in a transaction with the Society (whether directly or indirectly through affiliation with another organization) that is required to be reported on Schedule L of the Society’s Form 990.
Neither the member, nor any family member of the member, was involved in a transaction with a taxable or tax-exempt related organization (whether directly or indirectly through affiliation with another organization) of a type and amount that would be reportable on Schedule L of the Form 990 or 990-EZ, if required to be filed by the related organization. .
Committee members who are associated with institutions that receive grants pursuant to the Society’s various Independent Peer Review Committees and the Council for Extramural Grants will not be treated as failing to satisfy the above criteria on the basis of their relationship to the recipient institutions.
Absence of a Conflict of Interest:
A member of the Committee does not have a conflict of interest with respect to a compensation arrangement if the member:
Is not a Disqualified Executive participating in or economically benefitting from the compensation arrangement and is not a family member of any such Disqualified Executive;
Is not in an employment relationship subject to the direction or control of any Disqualified Executive participating in or economically benefitting from the compensation arrangement;
Does not receive compensation or other payments subject to approval by any Disqualified Executive participating in or economically benefitting from the compensation arrangement;
Has no material financial interest affected by the compensation arrangement; and
Does not approve a transaction providing economic benefits to any Disqualified Executive participating in the compensation arrangement, who in turn has approved or will approve a transaction providing economic benefits to the member.
1. For purposes of these criteria, a “related organization” is an organization (1) that controls or is controlled by the Society; (2) is controlled by the same persons that control the Society (i.e., shared directors and officers); or (3) that qualifies (or claims to qualify) as a “supporting organization” for the Society within meaning of Internal Revenue Code Section 509(a)(3).
2. Family members include spouses, ancestors, brothers and sisters (whether whole or half-blood), children (whether natural or adopted), grandchildren, great grandchildren, and spouses of brothers, sisters, children, grandchildren and great grandchildren.