Corporate Governance at BCBSAZ
Blue Cross and Blue Shield of Arizona, Inc., a local and nonprofit health insurance
company, has voluntarily adopted Corporate Governance Guidelines and Charters for
several of its key board committees to demonstrate its commitment to best practices
in financial and business integrity. Blue Cross Blue Shield of Arizona welcomes
the opportunity to share its view of corporate governance with you. These documents
reflect changes approved at the Dec. 7, 2005 Board of Directors' meeting.
If you have any questions concerning these documents, please contact Senior Vice
President Corporate Services and General Counsel Susan Navran at (602) 864-4179.
Corporate Governance Guidelines
The following Corporate Governance Guidelines (Guidelines) have been adopted by
the Board of Directors (Board) of Blue Cross Blue Shield of Arizona, Inc. (Company)
to assist the Board in the exercise of its responsibilities. These Guidelines reflect
the Board's commitment to monitor the effectiveness of policy and decision-making,
both at the Board and management level. These Guidelines are in addition to and
are not intended to change or interpret any Federal or state law or regulation,
or Articles of Incorporation or Bylaws of the Company. The Guidelines are subject
to modification annually by the Board.
General Responsibilities
Under Arizona law, "All corporate powers shall be exercised by or under the authority
of and the affairs of the Corporation shall be managed under the direction of its
Board of Directors" (A.R.S. §10-3801).
Directors' Responsibilities: Due Care – Attention and Investigation
The Board fulfills its mission by:
- Providing advice and counsel to the Chief Executive Officer (CEO) and senior executives;
- Selecting, regularly evaluating, fixing the compensation of, and, where appropriate,
replacing the CEO;
- Overseeing the conduct of the Company's business and strategic plans to evaluate
whether the business is being properly managed;
- Reviewing and approving the Company's financial objectives, annual budget and major
corporate plans and actions;
- Reviewing and approving major changes in applicable auditing and accounting principles
and practices;
- Providing oversight of internal and external audit processes and financial reporting;
- Providing oversight of risk assessment and protection processes and adopting a code
of conduct and compliance program designed to detect and prevent violations of law;
- Reviewing and approving an annual compensation program for employees and senior
management;
- Appointing a compliance officer or officers to conduct an on-going compliance program
including establishing policies and procedures for reporting violations, investigating
and resolving violations and receiving suggestions to update the Code of Conduct
and compliance program;
- Establishing policies to detect and prevent conflicts of interest; and
- Performing such other functions as are required under the Articles of Incorporation,
Bylaws or prescribed by law.
To carry out these responsibilities, BCBSAZ Directors recognize that they have fiduciary
obligations, individually and collectively as the Board, to pay careful attention
and be fully informed of all relevant facts and information on a particular matter
prior to making a decision as a Board.
Directors' Responsibilities: Loyalty – Candor and Avoidance of Conflicts
BCBSAZ Directors recognize that candor and the avoidance of conflicts interest are
an essential part of a Director's duty of loyalty. Accordingly, members of the Board
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. Nevertheless, after
full disclosure of the circumstances giving rise to the potential conflict the disinterested
Board Members may, at their option, ask questions, or seek input from the conflicted
Director. In order to effect full disclosure of all potential or actual conflicts
of interest, members of the Board shall complete on a yearly basis a Conflict of
Interest Questionnaire and update such questionnaire as changes occur.
Independent Directors
A majority of the Directors shall be independent Directors. The Board shall affirmatively
determine the independent status of each Director annually. The following individuals
shall not be deemed an "independent" Director of the Company:
- A Director who receives or whose immediate family member receives more than $100,000
per year in direct compensation from the Company (other than Director or Committee
fees, pension or other forms of deferred compensation for prior service, provided
such compensation is not contingent in any way on continued service) until five
years after he or she ceases to receive more than $100,000 per year in such compensation;
-
A Director who is affiliated with or employed by, or whose immediate family member
is affiliated with or employed in a professional capacity by a present or former
internal or external auditor of the Company until five years after the end of either
the affiliation or auditing relationship;
- A Director who is employed or whose immediate family member is employed as an executive
officer of another Company where any of the Company’s present executives serve on
that Company's Human Resources and Compensation Committee until five years after
the end of such service or employment relationship;
- A Director who is an executive officer or an employee, or whose immediate family
member is an executive officer of another Company: (A) that accounts for at least
2% or $1,000,000, whichever is greater, of the Company's consolidated gross revenues,
or (B) for which the Company accounts for at least 2% or $1,000,000, whichever is
greater, of such other Company's consolidated gross revenues until five years after
falling below such threshold;
- A Director who is a "Nonpublic" member as defined by the Blue Cross Blue Shield
Association who has a contract with the Company.
- Nonpublic shall mean:
- Is engaged or has engaged at any time in the practice of a health care
profession (other than an employee of the Plan);
- Is a director, partner or employee of an organization that primarily
sells health care services (other than the Plan or an organization
controlled by the Plan);
- Is a director, officer, partner or employee of an organization of health
care providers;
- Has a direct or indirect beneficial interest of more than five percent
of the equity of an organization that sells or delivers health
care services;
- A Director who is affiliated1 with a tax-exempt entity
that has received significant contributions from the Company or its subsidiaries
at the request of the Director.
An "Immediate Family Member" means husband, wife, father, mother, brother, sister,
grandparents, grandchildren, in-laws, children, step-children (whether any live
with you or not), domestic partner and any other persons living in your household.
Board Member Criteria
Director Qualifications:
The Nominating and Governance Committee is responsible for identifying and recommending
to the Corporate Membership2 qualified Directors.
In nominating candidates, the Committee shall take into consideration such factors
as it deems appropriate, and consult with the CEO. These factors may include judgment,
skill, diversity, knowledge of the health benefits industry, experience with businesses
and other organizations of comparable size, conformity with any requirements of
the Blue Cross and Blue Shield Association and state law, the interplay of the candidate's
experience with the experience of other Board Members, financial expertise, and
the extent to which the candidate would be a desirable addition to the Board and
any Committees of the Board.
Responsibilities of Individual Directors:
- General. Each Director is expected to individually contribute to the Board's satisfaction
of its principal responsibilities.
- Attendance. Any Director who fails to attend two meetings of the Board in any year
of office forfeits the office of Director unless within 30 days of notification
of the notice of forfeiture the Director sends a written request for reconsideration
to the Nominating and Governance Committee. Upon consideration of such request,
the Nominating and Governance Committee may excuse the absence if it determines
that the absences were the result of just cause and that further absence is not
likely to occur.
- Commitment of sufficient time. Each Director is expected to spend the necessary
time to properly discharge his or her responsibilities as a Director, including
reviewing any written materials provided to the Board or Committee in advance of
Board or Committee meetings.
Chairman as CEO
The Chairman of the Board shall be an independent member of the Board so the positions
of Chairman and CEO shall not be joined.
Formal Evaluation of the CEO
The Human Resources and Compensation Committee shall undertake an annual evaluation
of the CEO and report their findings and recommendations to the Board. The Chairman
of the Human Resources and Compensation Committee shall communicate the Board's
conclusions to the CEO. The evaluation shall be used by the Human Recourses and
Compensation Committee in formulating for Board approval the CEO’s compensation.
Succession Planning and Management Development
The CEO shall report annually to the Board on succession planning and management
development.
CEO Succession Planning
The Board shall establish and annually review a CEO succession plan based upon the
recommendations of the Human Resources and Compensation Committee.
Commitment and Limits on Other Activities
Directors shall limit the number of other Boards on which they serve so as to ensure
that they have adequate time to devote to the performance of their duties as Directors
of the Company. Members of the Company's Audit Committee shall not serve simultaneously
on more than three (3) Audit Committees, excluding the Audit Committee of a charitable
Corporation.
Board Service by Former CEO; Change of Position by a Director
The Board does not believe that Directors who retire or change the position they
held when they became a Director of the Board should necessarily leave the Board.
The Director shall notify the CEO of any such change in position or retirement within
30 days. The Nominating and Governance Committee periodically shall review the continued
appropriateness of such Board membership, considering the requirements under state
law to maintain a physician, dentist, and hospital administrator or trustee.
Director Retirement
Upon achieving age 72, a Director shall no longer be eligible for renomination to
a new term. Directors who are not yet 72 but will achieve age 72 during a term are
eligible for re-nomination and may serve the entire term. Certain Directors are
grandfathered from application of the retirement age and may serve until age 80
as specified in the Bylaws. No Director first elected after June 5, 1991 may serve
more than three (3) consecutive three-year terms without at least a one-year break
in service.
Regular Executive Sessions of Directors
The Directors of the Board shall have the opportunity to meet in executive session
at each regular meeting of the Board. Executive sessions shall be chaired by the
Chairman of the Board. The format of these meetings shall include a discussion with
the CEO and an opportunity for discussion without the CEO and other employees of
the Company.
Annual Board and Committee Evaluations
The Nominating and Governance Committee shall undertake annually an evaluation of
the Board’s performance and report the results to the full Board for discussion.
All standing Committees will conduct an annual self-assessment and report the findings
to the full Board. These evaluations shall include consideration of the Board's
contribution as a whole and areas in which the Board and/or the management believe
improvement could be had.
Corporate Governance Guidelines
The Nominating and Governance Committee shall review these Guidelines annually and
recommend amendment to the Board as necessary. These Guidelines shall be communicated
to the public on the Company website.
Board Compensation
The Board shall request management to report periodically to the Human Resources
and Compensation Committee the status of Board compensation in relation to comparable
Blue Cross and Blue Shield Plans and/or U.S. companies. Changes in Board compensation,
if any, should come at the recommendation of the Human Resources and Compensation
Committee for discussion with, and approval by, the full Board. An employed officer
of the Company shall not receive additional compensation for service on the Board.
The Company shall not engage in any business transaction with any current Director
of its Board (except provider contracts with Directors that are licensed health
care providers) nor shall it employ for compensation the services of any current
Director of its Board for any purpose which is not directly in furtherance of the
Director's performance of duties as a Director. This does not prohibit employment
of executives of the Company who are also current Directors of its Board. It also
does not prohibit the purchase of insurance or insurance services from the Company.
Board Meeting Materials and Presentations
Discussion during Board meetings will be encouraged. Presentations on specific subjects
should generally be sent to the Board members in advance so that Board meeting time
may be conserved and discussion time focused on questions that the Board has about
the material.
Board Access to Senior Managers
Directors shall have access to management. It is assumed that Directors will use
good judgment to ensure that this contact is not distracting to the business operation
of the Company and that such contact, if in writing, generally will be copied to
the CEO except in those unusual occasions where the Director deems this to be inappropriate.
Board Interaction with Press
Management, and, in particular, the CEO speaks for the Company. Individual Board
members may, from time to time at the specific request of the CEO, meet or otherwise
communicate with the press on behalf of the Company.
Number, Structure and Independence of Board Committees
At a minimum the Company will maintain the following three standing Committees composed
of independent members: Audit Committee, Human Resources and Compensation Committee
and Nominating and Governance Committee. Each of these Committees will maintain
a charter describing the Committee's responsibilities. These charters will be posted
on the Company's website. Other Board standing Committees including the Finance
Committee, Executive Committee, Professional Committee and Bylaws Committee may
include Board members that are not classified as independent. All Committees will
maintain accurate minutes and report their activities to the full Board on a regular
basis.
Director Orientation and Continuing Education
All new Directors will participate in the Company’s orientation program, which will
be conducted shortly after a new Director is elected or appointed, and shall include
background materials, meetings with senior management and a visit to the Company
facilities. Continuing education shall be available to Directors in areas related
to their service on the Board.
- Affiliated shall mean a Director who is an officer, director or employee of or whose
Immediate Family Member is an officer, director or employee of a tax-exempt entity.
- The Corporate Membership is the body specified in the Articles of Incorporation,
Article VI, that are charged with the authority to elect Directors to the Board
and to amend the Articles of Incorporation. Currently the Directors of BCBSAZ serve
as the Corporate Membership.