MOLINA HEALTHCARE, INC.
Corporate Governance Guidelines
The following Corporate Governance Guidelines (the “Guidelines”) have been adopted by the Board of Directors (the “Board”) of Molina Healthcare, Inc. (the “Company”) to assist the Board in the exercise of its responsibilities. These Guidelines reflect the Board’s commitment to monitoring the effectiveness of policy and decision-making both at the Board and management level, and to enhancing stockholder value over the long term. These Guidelines are a statement of policy and are not intended to change or interpret any federal or state law or regulation, including the Delaware General Corporation Law, or the Certificate of Incorporation or Bylaws of the Company. The Guidelines are subject to periodic review by the Corporate Governance and Nominating Committee of the Board (the “Corporate Governance and Nominating Committee”) and to modification from time to time by the Board.
7. Chairman of the Board
The Chairman of the Board is the primary spokesperson for the Board. The Chairman shall have the following duties and responsibilities:
8. Vice-Chair of the Board
The Board may appoint a Vice-Chair of the Board. If the Board appoints a Vice-Chair, such Vice-Chair shall be an independent director. The Vice-Chair shall assist the Chairman of the Board in performing his/her duties and responsibilities, and perform such other duties as may be prescribed by the Board from time to time. The Vice-Chair shall perform the responsibilities of the Chairman of the Board during his/her absence or disability.
9. Directors Who Change Their Present Job Responsibility
The Corporate Governance and Nominating Committee shall review the continued appropriateness of Board membership if a Board member has a material change in employment circumstances.
10. Term Limits
The Board does not mandate term limits for its directors.
11. Board Compensation
The Company’s employees shall not receive additional compensation for their service as directors. Director compensation shall be reviewed annually as determined by the Compensation Committee.
The Company believes that compensation for non-employee directors should be competitive. Further, the Company believes is in the best interest of its stockholders that a portion of annual director compensation be paid in Company stock.
12. Evaluation of Board
Each year the Board shall conduct a self-evaluation. The Corporate Governance and Nominating Committee shall be responsible for establishing the criteria and implementing the process for that evaluation
13. Evaluation of Committees of the Board
The Corporate Governance and Nominating Committee shall each year cause to be conducted a review of each Board committee’s performance and contribution to the Company. The Corporate Governance and Nominating Committee shall be responsible for establishing the criteria and implementing the process for those evaluations.
14. Evaluation of Board Members
The Corporate Governance and Nominating Committee shall conduct a review of each Board member during the last year of the Board member’s term. It shall be responsible for establishing the evaluation criteria and implementing the evaluation process.
15. Board Contact with Management and Independent Advisors
Board members shall have complete access to management. Board members shall use sound business judgment to ensure that such contact is not distracting, and, if in writing, shall be copied to the Chief Executive Officer and the Chairman of the Board.
Furthermore, the Board encourages management, from time to time, to bring employees into Board meetings who: (a) can provide additional insight concerning the items being discussed because of personal involvement in these areas; (b) represent significant aspects of the Company’s business; (c) assure the Board of exposure to employees with future potential to assure adequate plans for management succession within the Company; and provide the Board with continuing education respecting the Company.
The Board shall designate a non-voting management liaison to each committee of the Board who shall attend committee meetings at the discretion of each committee.
The Board may retain independent advisors necessary for the performance of its duties to the Company.
16. Board Interaction with Institutional Investors and Press
The Board believes that management generally should speak for the Company, consistent with all regulations governing such communications and with common sense. Unless otherwise agreed to or requested by the Chairman of the Board, each director shall refer all inquiries from institutional investors and the press to designated members of senior management or to the Chairman of the Board.
BOARD MEETINGS17. Frequency of Meetings
There shall be at least four regularly scheduled meetings of the Board each year. It is the responsibility of the Directors to attend and prepare for the meetings.
18. Selection of Agenda Items for Board Meetings
The Chairman of the Corporate Governance and Nominating Committee, in consultation with the Chairman of the Board and the Chief Executive Officer, shall annually prepare a “Board of Directors Master Agenda.” This Master Agenda shall set forth an agenda of items to be considered by the Board at each of its specified regular meetings during the year. Each regular meeting agenda shall include an opportunity for each committee Chairperson to raise issues and report to the Board. Thereafter, the Chairman of the Board may, at his discretion, adjust the agenda to include special items not contemplated during the initial preparation of the Master Agenda.
Upon completion, a copy of the Master Agenda shall be submitted to the Board for approval. Before the Board takes a vote to approve the Master Agenda, each Board member may suggest inclusion of items on the Master Agenda for any given meeting. After approval of the Master Agenda, any Board member may suggest additional subjects that are not specifically on the agenda for any particular meeting. In that case, the Board member should contact the Chairman of the Board at least ten days prior to the relevant meeting.
19. Strategic Discussions and Approval of Annual Budget
One Board meeting will be primarily devoted to long-range strategic plans. It is also probable that specific short and/or long-range strategic plans will be discussed at other Board meetings throughout the year. One Board meeting will also be primarily devoted to consideration and approval of an annual Budget.
20. Executive Sessions
The Board’s policy is to have a separate meeting time for the independent directors regularly scheduled at least twice a year during the regularly scheduled Board meetings.
21. Board Materials Distributed in Advance
Information and data is important to the Board’s understanding of the business and essential to prepare Board members for productive meetings. Presentation materials relevant 7 to each meeting will be distributed in writing to the Board and where possible at least 5 days in advance of the meeting unless doing so would compromise the confidentiality of competitive information. In the event of a pressing need for the Board to meet on short notice, it is recognized that written materials may not be available in advance of the meeting. Management will make every effort to provide presentation materials that are brief and to the point, yet communicate the essential information.
COMMITTEE MATTERS22. Number and Names of Board Committees
The Company shall have six standing committees: Audit, Corporate Governance and Nominating, Compensation, Compliance and Quality, Cybersecurity, and Finance. The duties for each of these committees shall be outlined in each of the committee’s charter and by resolution of the Board. The Board may form a new committee or disband a current committee depending on circumstances.
23. Independence of Audit, Corporate Governance and Nominating, and Compensation Committees
The Audit, Corporate Governance and Nominating, and Compensation committees shall be composed entirely of independent directors.
The Audit Committee oversees internal and external audit coverage, reviews the annual audited financial statements and monitors the effectiveness of the audit effort, the Company’s internal financial and accounting organization and controls and financial reporting.
The Corporate Governance and Nominating Committee makes recommendations to the Board regarding the size and composition of the Board, establishes procedures for the nomination process, recommends candidates for nomination by the Board, and nominates officers for election by the Board. The Corporate Governance and Nominating Committee also reviews and reports to the Board on matters of corporate governance (that is, the relationships of the Board, the stockholders, and Management in determining the direction and performance of the Corporation) and reviews and addresses these Guidelines and recommends revisions as appropriate.
The Compensation Committee administers the Corporation’s equity incentive plans, including the review and grant of equity awards to all eligible employees under the Corporation’s existing equity incentive plans, reviews and approves salaries and other matters relating to compensation of the named executive officers of the Corporation, and conducts an annual evaluation of the Chief Executive Officer’s performance.
24. Assignment of Committee Members
The Corporate Governance and Nominating Committee shall be responsible, after consultation with the Chairman of the Board, for making recommendations to the Board with respect to the assignment of Board members to various committees. After reviewing the Corporate Governance and Nominating Committee’s recommendations, the Board shall be responsible for appointing the chairmen and members to the committees on an annual basis.
25. Annual Review by Committee
Each Board committee shall annually review its charter and recommend to the Board any changes it deems necessary. In addition, each Board committee shall annually review the Guidelines and recommend to the full Board any changes the committee believes necessary and such review shall be referred to in the Company’s Proxy Statement as aforesaid.
26. Succession Planning
CONFLICTS OF INTEREST27. Interest Matters
If a director, directly or indirectly, has a financial or personal interest in a contract or transaction to which the corporation is to be a party, or is contemplating entering into a transaction that involves use of corporate assets or competition against the corporation, the director is considered to be interested in the matter. The director should contact the Chief Executive Officer, the Corporate Secretary, or the Chairman of the Corporate Governance and Nominating Committee. The director’s involvement or interest will be reviewed by the Company’s Chief Legal Officer, and then referred for resolution to the Corporate Governance and Nominating Committee. Interested directors should be identified and/or disclosed, and they shall not participate in any discussion or any vote relating to the matter in which they have been deemed to be interested. The decision of the Corporate Governance and Nominating Committee on all matters of “interest” shall be final.
28. Loans to Directors
In accordance with Section 402 of the Sarbanes-Oxley Act of 2002, neither the Company nor any of its subsidiaries will make any personal loans or extensions, or arrangements for the extension, of credit to or for any member of the Board.
29. Policy on Poison Pill Plans
The Board must obtain stockholder approval prior to adopting a stockholder rights plan, or “poison pill,” unless the Board, including a majority of the independent members of the Board, in the exercise of its fiduciary responsibilities, determines that, under the circumstances then existing, it would be in the best interests of the Company and its stockholders to adopt a poison pill without prior stockholder approval. If a poison pill is adopted by the Board without prior stockholder approval, the poison pill must provide that it will expire within one year of adoption unless ratified by stockholders.