EXHIBIT 99
HCA CORPORATE GOVERNANCE PLAN
I. ADOPTION AND AMENDMENT
A. This Corporate Governance Plan shall be adopted by HCA Inc.
("HCA" or the "Company") pursuant to a stipulation of settlement
among all parties to the action captioned H. Carl McCall, etc.
v. Richard L. Scott, et al., No. 3-97-0838 (the "Action") and
upon approval thereof by the United States District Court for
the Middle District of Tennessee (the "Court").
B. This Corporate Governance Plan may be amended from time-to-time.
An amendment to this Corporate Governance Plan shall be
effective only upon satisfaction of the following procedure:
1. The proposed amendment must be recommended to the
Independent Directors, as defined in Section III.A.2.
below, by a vote of two-thirds of the members of the
Nominating and Corporate Governance Committee, as
defined in Section V.D.2. below;
2. Any proposed amendment must then be approved by a vote
of two-thirds of the Independent Directors;
3. For a period of five years from the date of approval by
the Court of the settlement of the Action, the Company
shall provide notice of any proposed amendment to this
Plan to counsel for the Lead Derivative Plaintiff, and
if such counsel objects to the proposed amendment within
ten business days, such amendment shall not be effective
unless approved by the Court.
II. CORPORATE CONTROL AND COMPLIANCE
A. There shall be a Senior Vice President of Internal Audit who
shall report to the Chief Executive Officer and to the
Chairperson of the Audit Committee. The Senior Vice President of
Internal Audit shall be responsible for examining and evaluating
the adequacy and effectiveness of the Company's internal control
procedures, shall have no other significant Company
responsibilities, and shall not have any Company
responsibilities incompatible with responsibility for the
Company's internal control procedures.
B. There shall be a Senior Vice President of Ethics, Compliance and
Corporate Responsibility who shall report to the Chief Executive
Officer and to the Chairperson of the Ethics and Compliance
Committee. The Senior Vice President of Ethics, Compliance and
Corporate Responsibility shall be responsible for
developing and implementing the Company's Ethics and Corporate
Compliance Program.
C. There shall be at least an Audit Committee, a Compensation
Committee, a Nominating and Corporate Governance Committee, and
an Ethics and Compliance Committee, each as described in Section
V.D. below.
III. COMPOSITION OF NOMINEES TO THE BOARD
A. Independence
1. The incumbent Board shall propose nominees to the Board
such that, should the Company's shareholders elect the
nominees proposed by the Board, a substantial majority
of the Board shall be independent, as defined below in
Section III.A.1.(b).
a. A "substantial majority" of the Board shall be
independent when at least two-thirds of the
Directors are "Independent Directors."
b. An "Independent Director" is a Director who:
(1) is not, or in the past five years has
not been, employed by the Company;
(2) does not, and in the past five years has
not had contracts with the Company
pursuant to which the Director himself
or herself directly performed personal
services for the Company; provided,
however, that nothing in this subsection
shall prohibit any current director from
being an Independent Director so long as
his or her income from personal services
contracts for the Company during the
past five years did not, or in the
future years does not, exceed $8,500 in
any one year;
(3) is not, and in the past five years has
not been, affiliated with or employed by
a present or former independent auditor
of the Company or an affiliate thereof;
(4) is not, and in the past five years has
not been, part of an interlocking
directorate in which an executive
officer of the Company serves on the
compensation committee of another
company that concurrently employs the
Director;
(5) is not a member of the immediate family
(i.e., spouse; parent; child; sibling;
father- or mother-in-law; son- or
daughter-in-law; brother- or
sister-in-law; or any person,
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other than a household employee, living
in such person's home) of a person who
is, or in the past five years has been,
employed by the Company in an officer
position, or who is barred from being an
Independent Director by subsections (3)
or (4) above; and
(6) is determined by the affirmative action
of the Nominating and Corporate
Governance Committee to have no material
relationship with the Company. Without
limiting the foregoing, the following
are relationships which must be reviewed
by the Committee to determine if such
relationships are material:
(i) as an officer, director or owner
of more than 10% of a business
enterprise that is a consultant
or advisor to the Company;
(ii) as an officer, director or owner
of more than 10% of a
significant supplier to the
Company;
(iii) as a person with any business
relationship with the Company
that is required to be disclosed
under Section 404 of Regulation
S-K of the rules and regulations
promulgated by the Securities
and Exchange Commission;
(iv) as a person who has any other
significant commercial,
industrial, banking, consulting,
legal, accounting, or charitable
relationship with the Company;
(v) as a member of the immediate
family (as defined in Section
III.A.1.b.(5) above) of a
person with any of the
relationships described in
subdivision (i) through (iii)
of this subsection.
If a person has one or more of the relationships
described in any of the subdivisions (i) through (v) of
this Section III.A.1.b.(6), that person is not an
Independent Director, unless the Nominating and
Corporate Governance Committee affirmatively determines
that such relationship or relationships are not
material. Any such determination and the bases therefore
shall be disclosed in the Company's annual proxy
statement.
2. Should any independent Director learn that he or she no
longer satisfies the criteria for independence set forth
in section III.A.1. above, such Director as soon as
practicable shall notify the Chairperson of the
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Nominating and Corporate Governance Committee that the
Director no longer satisfies such criteria for
independence.
B. The Independent Directors
1. The Independent Directors shall meet as a group in
executive session, without the Chief Executive Officer
or any other non-Independent Director, at least four
times in each calendar year.
2. The Independent Directors shall be entitled, acting as a
group by vote of a majority of such Independent
Directors, to retain legal counsel, accountants, health
care consultants, or other experts, at the Company's
expense, to advise the Independent Directors concerning
issues arising in the exercise of their functions and
powers.
3. When the Board Chairperson does not serve as the
Company's Chief Executive Officer and is otherwise an
Independent Director, such Independent Board
Chairperson, in addition to the duties of all Board
members as set forth in this Corporate Governance Plan,
shall preside at all executive sessions of the
Independent Directors.
4. When the Board Chairperson also serves as the Company's
Chief Executive Officer, or otherwise is not an
Independent Director, an Independent Director shall be
designated by the Independent Directors to preside at
all executive sessions of the Independent Directors and
shall have the power to call meetings of the Independent
Directors.
5. The Independent Directors shall consider objective and
subjective performance criteria to be established within
their discretion for the Chief Executive Officer. At
least annually, the Chair of the Compensation Committee
shall meet with the Chief Executive Officer to discuss
the Board's evaluation of the Chief Executive Officer's
performance. In connection with this responsibility, the
Independent Directors shall have access to advisors who
are independent from management.
C. Director Compensation
Director compensation shall be considered by the Directors
annually and may consist of a combination of cash and the
Company's common stock (including restricted share units and
options to purchase common stock). Director compensation shall
be the only compensation Audit Committee members receive from
the Company.
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D. Director Election
All Directors shall stand for election annually.
IV. DIRECTOR CHARACTERISTICS
A. Performance Criteria
1. The Board shall establish Performance Criteria for
Directors of the Company. Such Performance Criteria
shall at least include:
a. Attendance at Board and Committee meetings;
b. Preparedness for Board and Committee meetings;
c. Objectivity in exercising business judgment;
d. Participation at Board and Committee meetings;
and
e. Candor toward other Directors, management and
professionals retained by the Company.
2. The Nominating and Corporate Governance Committee shall
use these criteria, among others, if applicable, to
evaluate the potential nominees to the Board. Such
evaluations shall provide the basis for the Committee's
recommendation of Directors to the Company's Board and
shareholders.
B. Independence
At least two-thirds of the Directors, as nominated by the Board,
shall be Independent Directors, as defined in Section III.A.1.
of this Corporate Governance Plan. Should the Board receive
notification from the Chair of the Nominating and Corporate
Governance Committee pursuant to Section V.D.2.g. of this Plan
that an Independent Director no longer satisfies the criteria
for independence set forth in Section III.A.1. herein, the Board
shall, as soon as practicable, take any and all steps necessary
and permitted by law to cause the Company to remain in
compliance with the provisions of this Corporate Governance
Plan. Such steps shall include, to the extent necessary, adding
or removing Directors, or modifying Board committee memberships.
C. Core Competencies
1. While it is not necessary that each Director possess all
Core Competencies described herein, each Director shall
contribute some knowledge, experience, or skill in at
least one domain that is important to the Company.
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2. Directors shall possess experience in one or more of the
following:
a. Business or management for complex and large
consolidated companies or other complex and
large institutions;
b. Accounting or finance for complex and large
consolidated companies or other complex and
large institutions;
c. Leadership, strategic planning, or crisis
response for complex and large consolidated
companies or other complex and large
institutions;
d. The health care industry; and
e. Other significant and relevant areas deemed by
the Nominating and Corporate Governance
Committee to be valuable to the Company.
3. Directors also should possess:
a. Significant experience in their respective
fields of endeavor;
b. Useful knowledge, background and judgment; and
c. The commitment to learn the Company's business.
4. Directors shall take all reasonable steps to keep
informed on corporate governance "best practices" and
their application in the complex, rapidly evolving
health care environment.
5. Consideration shall be given to obtaining a diversity of
experience and perspective within the Board.
D. Time Commitment
1. Because each person serving as a Director must devote
the time and attention necessary to fulfill the
obligations of a Director, the Board shall adopt
guidelines that address the competing time commitments
that are faced when directors serve on multiple boards,
and shall disclose those guidelines on the Company's
website. The Company's annual report shall state that
this information is available on its website, and that
the information is available in print to any shareholder
who requests it.
2. The Time Commitment Guidelines shall at least state
that -
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a. Candidates for election or re-election to the
Board who are Chief Executive Officers or senior
executives of public corporations may serve on
the Board only if they hold no more than two
other public company directorships;
b. Candidates for election or re-election to the
Board who are employed full-time other than as
Chief Executive Officers or senior executives of
public companies may serve on the Board only if
they hold no more than four other public company
directorships; and
c. All other candidates for election or re-election
to the Board may serve on the Board only if they
hold no more than six other public company
directorships.
E. Re-nomination of Directors
1. In re-nominating Directors, the Nominating and Corporate
Governance Committee shall consider the Performance
Criteria described in subsection A. of this Section, as
well as the Core Competencies, as described in
subsection C. of this Section.
2. Prior to accepting re-nomination, a Director also should
evaluate for himself or herself whether he or she
satisfies the Performance Criteria and Core Competencies
set forth herein in Sections IV.A. and IV.C.,
respectively, of this Plan.
F. Composition of the Current Board
Nothing in this Plan shall prohibit the continued service or
re-election of any current member of the Board of Directors;
provided, however, that the Company shall take the steps
necessary, including nominating additional directors and
modifying Committee participation, to assure that at least two -
thirds of the Board is comprised of Independent Directors, as
set forth in Section III.A. herein, that at least two members of
the Audit Committee have accounting or financial experience, as
set forth in Section V.D.1. herein, and that all Committees
required herein are composed exclusively of Independent
Directors.
V. BOARD PROCESSES AND EVALUATION
A. The Board and Company Executive Officers
1. The Board (or appropriate Committee consisting
exclusively of Independent Directors) shall, at least
annually, evaluate, and, if necessary, replace, the
Chief Executive Officer.
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2. The Board (or appropriate Committee consisting
exclusively of Independent Directors) shall, at least
annually, consider a Chief Executive Officer succession
plan and receive periodic reports from appropriate
executive officers on the development of other members
of the Company's senior management.
3. The Board (or the Audit Committee) shall, at least
annually, evaluate, and, if necessary, recommend the
replacement of, the Senior Vice President of Internal
Audit.
4. The Board (or the Ethics and Compliance Committee)
shall, at least annually, evaluate, and, if necessary,
recommend the replacement of, the Senior Vice President
of Ethics, Compliance and Corporate Responsibility.
5. The Board (or the Compensation Committee) shall review
and approve senior officers' compensation.
6. All Directors shall have access to Company senior
executive officers employed in policy-making capacities.
The Chair of the Audit Committee or another Independent
Director may be designated as liaison between Directors
and executive officers.
7. The Board (or a Committee comprised of two-thirds
Independent Directors) shall review, and, where
appropriate, approve, the fundamental operations, major
financial commitments, and other major corporate
strategic plans of the Company.
B. Internal Control and Corporate Compliance
The Board (or appropriate Committee or Committees consisting
exclusively of Independent Directors) shall have oversight
responsibility for internal control and corporate compliance. In
particular, the Board (or responsible committee or committees)
shall:
1. Review the five components of internal control - control
environment, risk assessment, control activities,
information and communication, and monitoring - to
determine that such components are designed to provide
reasonable systems to provide:
a. Adequate financial reporting; and
b. Compliance with corporate policies and legal and
regulatory requirements.
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2. Oversee internal control systems and corporate
compliance programs, including the creation,
distribution and/or implementation of:
a. a code of business conduct based upon corporate
policies and legal and regulatory requirements;
b. procedures for monitoring compliance with that
code; and
c. methods for disseminating information regarding
such programs.
3. If the Board becomes aware of any material departure
from corporate compliance programs or internal control
programs, or of material violations of established
corporate policies or legal and regulatory requirements,
whether or not embodied in the Ethics and Compliance
Program, the Board (or the Ethics and Compliance
Committee) shall:
a. Reasonably determine that all appropriate
corrective actions have been taken in response
thereto;
b. Review any management override (which shall not
include waivers permitted by policies or
procedures) of corporate compliance programs and
internal control programs, and take the steps
necessary to reasonably determine that such
action or override will not occur in the future
without Board approval; and
c. Review the process for reporting deficiencies in
the Company's internal control structure or
violations of corporate compliance polices to
reasonably assure that the Senior Vice President
of Internal Audit and the Senior Vice President
of Ethics, Compliance and Corporate
Responsibility are informed of any such
deficiencies or violations.
4. Review corrective actions taken by the Company when
significant internal control or corporate compliance
problems are reported to reasonably determine that such
actions are sufficient under the circumstances.
5. Require and review periodic evaluations of the Company's
internal control and corporate compliance structures to
reasonably determine, at a minimum, that:
a. components of the Company's internal control and
corporate compliance structures are regularly
evaluated;
b. such evaluations are performed by qualified
personnel; and
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c. such evaluations have reasonable scope and depth
of coverage and are conducted with sufficient
frequency.
6. Review the Company's internal audit function, including:
a. The charter of the internal audit function, to
reasonably assure that it is consistent with
that recommended by the Institute of Internal
Auditors; and
b. The resources provided to the internal audit
group, to reasonably assure that the internal
audit group has sufficient resources to carry
out its charter.
C. Regulatory Compliance
The Board (or appropriate Committee consisting exclusively of
Independent Directors) shall have oversight responsibility for
regulatory compliance. In particular, the Board (or appropriate
Committee consisting exclusively of Independent Directors)
shall:
1. Review the Ethics and Compliance Program to reasonably
determine that it is designed to provide adequate
protection against violations of applicable laws and
regulations; and
2. Review the record keeping and reporting systems to
measure and monitor regulatory compliance requirements.
D. Board Committees
The Board shall constitute - solely with Independent Directors -
and maintain an Audit Committee, a Compensation Committee, a
Nominating and Corporate Governance Committee, and an Ethics and
Compliance Committee.
1. The Audit Committee shall (a) be comprised of at least
three Directors all of whom are Independent, at least
two of whom have accounting or financial experience, and
(b) support the oversight function of the Board by
reviewing on a periodic basis the Company's procedures
for preparing financial statements, its internal
controls, and the independence of the Company's external
auditor. The Audit Committee shall:
a. Meet at least four times per year;
b. Review the Company's internal audit functions at
least annually;
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c. Have exclusive authority to retain the firm to
be employed as the Company's external auditor,
and to discharge any such firm. Such retained
firm:
(1) Shall be prohibited from providing to
the Company any of the following
non-audit services:
(a) bookkeeping or other services
related to the accounting
records or financial statements
of the Company;
(b) financial information systems
design and implementation;
(c) appraisal or valuation services,
fairness opinions, or
contribution-in-kind reports;
(d) actuarial services;
(e) internal audit outsourcing
services;
(f) management functions or human
resources;
(g) broker or dealer, investment
adviser, or investment banking
services;
(h) legal services and expert
services unrelated to the audit;
or
(i) any other service that the Audit
Committee determines is
impermissible or ought to be
prohibited; and
(2) Shall obtain approval from the Audit
Committee (or from a designated member
of the Audit Committee) prior to
performing any non-audit service,
including tax services, that is not
described in any of paragraphs (a)
through (i) of subsection (1) above;
except, however, that such firm may
prepare or review income tax forms,
registration statements and cost reports
without such pre-approval;
(3) Shall be rotated every 7 years, unless
the Audit Committee determines, based
upon its consideration of the
information obtained through the Audit
Committee activities described in
subsections d, f, g, and i-m of this
Section, that not rotating external
auditing firms is in the Company's best
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interests. This determination (i) shall
be documented, setting forth the reasons
therefore; (ii) shall be made after an
external auditing firm has performed
three consecutive audits of the
Company's annual financial statements
after the effective date of this
agreement, and (iii) shall be repeated
and documented every three years
thereafter until the Audit Committee
selects another external auditing firm.
d. Obtain and review, at least annually, a report
by the Company's external auditor describing:
that firm's internal quality control procedures;
any material issues raised by the most recent
internal quality-control review or peer review
of the firm, or by any inquiry or investigation
by governmental or professional authorities,
within the preceding five years, respecting one
or more independent audits carried out by the
firm, and any steps taken to deal with any such
issues; and (to assess the auditor's
independence) all relationships between the
auditor and the Company;
e. Cause the Company to refrain, without the
approval of the Audit Committee, from hiring any
partner or senior manager of the Company's
external auditor within two years of that
person's performance of audit services for the
Company;
f. Review the external auditor's compensation, the
proposed terms of its engagement, and its
independence;
g. Serve as a channel of communication between the
external auditor and the Board, and between the
Senior Vice President of Internal Audit and the
Board;
h. Have full access to all Company books and
personnel;
i. Meet separately with management and the
Company's external auditor prior to the filing
of each Form 10-K or Form 10-Q to discuss, among
other things, the appropriateness of the
Company's accounting policies;
j. Meet, without the presence of any Company
employees, at least annually with the Company's
external auditor to review the results of each
external audit of the Company, the report of the
audit, any related management letter,
management's responses to recommendations made
by the external auditor in connection with the
audit, all significant reports of the internal
auditing department, and management's responses
to those reports;
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k. Review the Company's annual financial
statements, any certification, report, opinion,
or review rendered by the external auditor in
connection with those financial statements, and
any significant disputes between management and
the external auditor that arose in connection
with the preparation of those financial
statements;
l. Consider, in consultation with the external
auditor and the Senior Vice President of
Internal Audit, the adequacy of the Company's
internal controls; and
m. Consider major changes and other major questions
of choice respecting the appropriate auditing
and accounting principles and practices, whether
under Generally Accepted Accounting Principles
or regulatory accounting principles, to be used
in the preparation of the Company's audited
financial statements.
2. The Nominating and Corporate Governance Committee shall
recommend to the Board candidates for all directorships,
have oversight responsibility for the evaluation of
Directors, and have principal responsibility for
recommending revisions to this Corporate Governance
Plan. In particular, the Nominating and Corporate
Governance Committee shall:
a. Periodically review the governance structure of
the Board;
b. Prior to each Director's re-nomination, evaluate
each Director based upon established Performance
Criteria, and upon established Core
Competencies, each as set forth in Section IV.
of this Corporate Governance Plan;
c. Consider, in making its recommendations,
candidates for directorships proposed by the
Chief Executive Officer and, within the bounds
of law and practicability, by any other senior
executive officer or any Director or
shareholder;
d. Recommend to the Board the Director nominees to
serve on Board Committees;
e. Periodically review the size of the Board;
f. Review the independence of all directors
pursuant to the Independence Guidelines set
forth in Section III.A.1. of this Corporate
Governance Plan; and
g. Through its Chair, notify the entire Board
should the Chair receive notification from a
Director, pursuant to Section III.A.2. of this
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Corporate Governance Plan, that such Director no
longer satisfies the criteria for independence
set forth in section III.A.1. of this Plan.
3. The Compensation Committee shall support the oversight
function of the Board in the area of compensation. The
Compensation Committee shall:
a. Review and recommend to the Board, or determine,
the annual salary, bonus, stock options, and
other benefits, direct and indirect, of the
Company's senior executive officers employed in
policy-making capacities; provided, however,
that shareholders shall be given the opportunity
to vote on (i) all stock option plans, except
for pre-existing plans (excluding any material
amendments thereto), plans related to employment
inducement or promotion options, option plans
acquired in mergers or acquisitions, and tax
qualified and excess benefit plans, as defined
by the applicable NYSE rules, unless a vote on
such plans is otherwise required by law; and
(ii) the issuance of any equity compensation to
any executive who, at the time of such issuance,
is one of the Company's five highest paid
executives, unless the equity compensation is
issued pursuant to a plan previously approved by
the Company's shareholders.
b. Review new executive compensation programs;
review on a periodic basis the operation of the
Company's executive compensation programs to
determine whether they are appropriately
coordinated; establish and periodically review
policies for the administration of executive
compensation programs;
c. Review policies in the area of management
perquisites; and
d. Through its Chair, meet with the Chief Executive
Officer to discuss the annual evaluation of the
Chief Executive Officer's performance. In
connection with this responsibility, the
Independent Directors shall, in their
discretion, have the right to retain, at the
Company's expense, advisers of their choice.
4. The Ethics and Compliance Committee (the "Compliance
Committee") shall:
a. Review, on a periodic basis, the Company's
Ethics and Compliance Program;
b. Review the work of the Senior Vice President of
Ethics, Compliance and Corporate Responsibility
and other appropriate
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Company departments to develop standards of
conduct and policies and procedures to promote
compliance with that program;
c. Retain, or approve the recommendation of the
Senior Vice President of Ethics, Compliance and
Corporate Responsibility for the retention of, a
firm or firms to be employed as the Company's
consultants (which shall include the independent
review organization as defined by the Corporate
Integrity Agreement) concerning regulatory or
corporate compliance matters;
d. Review, in conjunction with the relevant Company
departments and the Senior Vice President of
Ethics, Compliance and Corporate Responsibility,
the development of internal systems and controls
to carry out the Company's standards, policies
and procedures as part of its daily operations;
e. Serve as a channel of communication between the
regulatory and/or corporate compliance
consultant and the Board, and between the Senior
Vice President of Ethics, Compliance and
Corporate Responsibility and the Board;
f. Review, as appropriate, information relating to
the performance of the Ethics and Compliance
Program;
g. Review, together with the Audit Committee, any
known significant disputes between management
and the Company's internal or external auditors
concerning matters of regulatory or corporate
compliance, as well as management's responses to
those disputes; and
h. Consider, in consultation with the Company's
external auditor, the Company's and/or the
Board's regulatory and/or corporate compliance
consultant, the Senior Vice President of
Internal Audit, and the Senior Vice President of
Ethics, Compliance and Corporate Responsibility,
the adequacy of the Company's internal
regulatory or corporate compliance controls.
VI. COMPLIANCE WITH LAW
To the extent complying with any provision of this Corporate Governance
Plan violates any governing law, regulation or rule, then such provision
shall be deemed automatically superceded by such law, regulation or
rule.
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VII. GOVERNING LAW AND EXCLUSIVE REMEDY
This Corporate Governance Plan shall be construed in accordance with
Delaware corporate law. Nothing in this Plan shall be deemed to create a
new or independent cause of action. Non-compliance with this Plan may be
remedied by injunctive relief, which shall be the exclusive remedy.
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