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Purpose
Over the course of Blue Cross and Blue Shield of North Carolina (“Blue Cross NC” or the “Company”) history, the Board of Trustees (the “Board”) has developed corporate governance policies and practices to help it fulfill its corporate obligations. These governance policies are memorialized in these guidelines.
The guidelines may change from time to time to reflect ongoing activities of the Board and are not meant to supersede or bind the Company in the same fashion as the Company Bylaws. Instead, these guidelines are meant to provide the Board with a set of working tools and to provide our stakeholders with additional information about the manner in which the Company is governed.
Role of the board
Management is responsible for the day-to-day business operations of Blue Cross NC; the Board provides general oversight and guidance. The basic responsibility of the Board is to exercise its business judgment by acting in what it reasonably believes to be in the best interests of the Company and its stakeholders.
Through oversight, review and counsel, the Board establishes and promotes Blue Cross NC business and organizational objectives. The Board oversees the Company’s business affairs and integrity, works with management to determine the Company’s mission and long-term strategy, performs the annual CEO evaluation, oversees CEO succession planning, establishes internal controls over financial reporting and assesses Company risks and strategies for risk mitigation.
Board composition and selection: Independent trustees
1. Board size
The Board must consist of not less than 12 or more than 20 trustees. The Board periodically evaluates whether a larger or smaller slate of trustees would be preferable.
2. Selection of board members
The Governance and Nominating Committee is responsible for recommending to the Board trustee candidates for nomination and election. In making its recommendations to the Board, the Governance and Nominating Committee considers, among other things, the qualifications of individual trustee candidates in light of the Board Membership Criteria described below.
3. Board membership criteria
The Governance and Nominating Committee works with the Board to determine the appropriate characteristics, skills, and experience needed for the Board as a whole and for its individual members with the objective of having a Board with diverse backgrounds and experience. The criteria weighed in the trustee selection process includes: The candidate’s integrity; high personal and professional ethics and sound business judgment; the relevance of the candidate’s experience to the business of the Company; the candidate’s impact on the collective diversity of the Board, including diversity of gender, race, ethnicity, and sexual orientation; the candidate’s independence from conflict or direct economic relationship with the Company; and the ability of the candidate to attend Board meetings regularly and devote an appropriate amount of effort in preparation for those meetings.
The Board evaluates each individual in the context of the Board as a whole, with the objective of maintaining a group that can best perpetuate the success of the Company’s business through the exercise of sound judgment that is reflective of a diversity of backgrounds and experience.
In furtherance of the Company’s commitment to having a diverse Board, the Governance and Nominating Committee will include in the pool of candidates from which a Board nominee is chosen, and will request that any search firm advising on prospective Board candidates include, candidates who would bring diversity of gender, race, ethnicity, or sexual orientation to the Board.
4. Trustee independence
Pursuant to the Board of Trustees Policy on Independence, a majority of the Board must be independent, and each of the Audit Committee, the Personnel and Compensation Committee, the Governance and Nominating Committee, and Investment Committee must be comprised entirely of independent trustees.
5. Conflict reporting
Annually, trustees are required to execute a statement setting forth any existing or potential conflicts of interest. At a minimum, any conflicts that do not materially offend the Policy on Independence require disclosure and may require abstention from participation in discussions or voting by such trustees on matters related to the conflict.
6. Fiduciary obligation
The Board, when making a business decision, must act in accordance with its fiduciary obligations and on an informed basis. Accordingly, trustees will not use their corporate positions for personal profit, gain or other personal advantage, and must recuse themselves from voting or participating in deliberations on matters in which a potential conflict of interest may arise.
7. Term limits
Trustees may serve for 12 consecutive years. In addition, a trustee may be elected to continue serving for up to 4 additional years in appropriate circumstances if approved by two-thirds of the trustees then in office. Thereafter, a person can be re-elected as a trustee after 1 full year has passed since the trustee ceased service pursuant to application of these limits. The Chair of the Board may serve 4 successive terms of 1 year each.
8. Retirement policy
No trustee may be elected to a term that begins after they have reached the age of 75, and the term of any trustee who reaches the age of 75 after election must end at the next annual meeting of the Company.
Board meetings: Involvement of senior management and independent advisors
9. Board meetings – frequency
The Board will generally hold 4 regularly scheduled meetings per year and will hold additional special meetings as necessary. Each trustee is expected to attend both scheduled and special meetings, unless circumstances make attendance impractical.
10. Board meetings – agenda
The Chair of the Board and the CEO will set the agenda for each Board meeting, taking into account recommendations from other members of the Board and senior management. The agenda and other materials for each Board meeting will be distributed in advance to each trustee.
11. Advance distribution of materials
All information relevant to the Board’s understanding of matters to be discussed at an upcoming Board meeting should be distributed to all members in advance, whenever feasible and appropriate. Each trustee is expected to review this information in advance of the meeting to facilitate the efficient use of meeting time.
12. Access to employees
The Board has access to Company management and employees to ensure that trustees can ask all questions and obtain all information necessary to fulfill their duties. Management is encouraged to invite Company personnel to any Board meeting at which their presence and expertise would help the Board obtain a fuller understanding of matters being considered.
13. Access to independent advisors
The Board and its committees have the right at any time to retain independent outside auditors and financial, legal or other advisors and to terminate such advisors.
14. Compensation consultant independence
The Personnel and Compensation Committee has sole authority to retain and terminate compensation consultants that advise the Committee, as it deems appropriate, including sole authority to approve the consultants’ fees and other retention terms. It is the policy of the Personnel and Compensation Committee that any compensation consultant it retains be independent of Company management.
15. Auditor independence
The Audit Committee has the sole authority retain and terminate the Company’s external auditors, including sole authority to approve the external auditors’ fees and retention terms. The Audit Committee will receive communications from the external auditors regarding their independence, and will review and communicate to the Board regarding the independence of the external auditors.
Training; performance evaluation: Succession planning
16. Orientation and continuing education
Blue Cross NC has a training program through which a new trustee is provided with the core materials and orientation to become knowledgeable about the business of Blue Cross NC and familiar with the senior management team.
As required by the Blue Cross and Blue Shield Association, within the first year of service, trustees participate in a training program on the fiduciary duties and other responsibilities of trustees and on the Association’s operations and governance. Consistent with our federal contract requirements, trustees are also provided with annual training on our Medicare obligations. Board members are also encouraged to visit Blue Cross NC facilities and meet with Blue Cross NC employees throughout their tenure. Continuing education programs for Board members may include a combination of internally developed materials and presentations, programs presented by third parties, and financial and administrative support for attendance at qualifying programs.
17. CEO evaluation
The Chair of the Board, in consultation with the Personnel and Compensation Committee, directs a review of the performance of the CEO annually. The evaluation results are reviewed and discussed with the Board and with the Personnel and Compensation Committee for its consideration and development of compensation recommendations to the Board. Thereafter, the results are communicated to the CEO, who is allowed to offer comments.
18. Succession planning
As part of the annual senior corporate officer evaluation process, the Executive Committee works with the CEO to plan for CEO succession, as well as to develop plans for interim succession for the CEO in the event of an unexpected occurrence. Succession plans are reviewed by the Board as frequently as the Board deems is warranted.
19. Board and committee self-evaluation
The Governance and Nominating Committee is responsible for conducting an annual evaluation of the performance of the Board and each of its committees. Individual trustees are encouraged to consider their own performance as trustees throughout this evaluation process. Evaluation results are reported to the Board.
Committees
20. Number and type of committees.
The Board has 5 standing committees: An Audit Committee, a Personnel and Compensation Committee, a Governance and Nominating Committee, an Investment Committee, and an Executive Committee.
As provided in the Company’s Bylaws, the Board may add new committees as it deems advisable in the fulfillment of its responsibilities. Each committee reports its recommendations, activities, and work product to the full Board on a regular and continuing basis. The Board is responsible for the appointment of committee members and committee chairpersons.
Compensation
21. Board compensation review
Generally, the Board believes that the level of trustee compensation should be based on time spent carrying out Board and committee responsibilities and be competitive with comparable companies. Company management should report to the Board every year how the Company’s trustee compensation practices compare with those of similarly situated corporations with a view toward attracting and retaining qualified trustees. The Board should make changes in its trustee compensation practices only upon the recommendation of the Personnel and Compensation Committee, and following discussion and concurrence by the Board.
22. Extension of credit to trustees or executive management
Neither Blue Cross NC nor its subsidiaries will extend to any trustee or executive officer any loan or any form of credit other than travel advances designed to cover nominal travel expenses within the guidelines of Blue Cross NC travel expenses.
Miscellaneous
23. Reporting concerns about abuse, violations of law, violations of the code of conduct
The Code of Conduct adopted by the Board allows for anonymous reporting of any suspected abuse, violation of law or violation of the Code of Conduct to the Director, Privacy, Ethics & Corporate Policy Offices at 888-486-1554.
The Company provides for independent reporting by the Chief Compliance Officer to the Board’s Audit Committee, and persons should feel comfortable that no retaliation for good faith reporting will occur. In the rare circumstance where a person wishing to make such a report simply does not feel comfortable reporting concerns (other than labor law concerns) through management channels, they may write directly to chair of the Audit Committee at jeffreytbarber@yahoo.com.
24. Review of corporate governance guidelines
The Board expects to review these guidelines from time to time as appropriate.
Revised: December 7, 2021
Blue Cross and Blue Shield of North Carolina does not discriminate on the basis of race, color, national origin, sex, age or disability in its health programs and activities. Learn more about our non-discrimination policy and no-cost services available to you.
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