Management Compensation Committee Charter
- February 22, 2008
This Management Compensation Committee Charter was adopted by the Board of Directors (the "Board") of Magellan Health Services, Inc. (the "Company") on February 22, 2008. This Charter is intended to serve as a component of the flexible governance framework within which the Board and its committees directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, and the Company's Certificate of Incorporation and By-Laws, it is not intended to establish any legally-binding obligations.
- I. PURPOSE
The Management Compensation Committee (the "Committee") is responsible for overseeing the Company's management compensation philosophies, policies, programs and practices, including (i) establishing the Company's general compensation philosophy, and oversight of the development and implementation of compensation programs; (ii) review and approval of the means used for applying the Company's corporate goals, and its specific company-wide and business unit performance objectives to be used in determining the compensation of the Company's chief executive officer, other executive officers and other members of senior management; (iii) review, approve, and recommend to the board for ratification by the independent members of the Board the compensation for the Company's chief executive officer and the other executive officers designated as "named executive officers" under the proxy rules promulgated from time to time by the U.S. Securities and Exchange Commission (the "SEC"); (iv) the development of recommendations to the Board with respect to the Company's various plans and programs and overseeing the activities of the individuals and committees responsible for administering those plans; and (v) oversight of regulatory compliance with respect to compensation matters, including the preparation of a report on executive compensation for the inclusion in the Company's annual proxy statement and the review and discussion with management of the Compensation Discussion and Analysis section of such proxy statement.
In discharging its role, the Committee is empowered to inquire into any matter that it considers appropriate to carry out its responsibilities, with access to all books, records, facilities and personnel of the Company. The Committee has the power to retain outside counsel, compensation consultants or other advisors to assist it in carrying out its activities. The Company shall provide adequate resources to support the Committee's activities, including compensation of the Committee's counsel, consultants and other advisors. The Committee shall have the sole authority to retain, compensate, direct, oversee and terminate counsel, compensation consultants, and other advisors hired to assist the Committee, who shall be accountable ultimately to the Committee.
- II. COMMITTEE MEMBERSHIP
The Committee shall consist of three or more members of the Board, each of whom the Board has selected and determined to be "independent" in accordance with applicable rules of the Nasdaq National Market. In addition, no director may serve unless he or she (i) is a "Non¬-employee Director" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and (ii) satisfies the requirements of an "outside director" for purposes of Section 162(m) of the Internal Revenue Code.
Members shall continue to be members until their successors are elected and qualified or until their earlier resignation or removal. Any member may be removed by the Board, with or without cause, at any time. The Chairman of the Committee shall be appointed from among the Committee members by, and serve at the pleasure of, the Board to convene and chair meetings of the Committee, set agendas for meetings, and determine the Committee's information needs. In the absence of the Chairman at a duly convened meeting, the Committee shall select a temporary substitute from among its members.
- III. COMMITTEE MEETINGS
The Committee shall meet on a regularly scheduled basis at least two times per year, or more frequently as circumstances dictate.
The Committee shall establish its own schedule and rules of procedure. Meetings of the Committee may be held telephonically. A majority of the members of the Committee shall constitute a quorum sufficient for the taking of any action by the Committee.
The Committee shall meet at least annually with the CEO and any other corporate officers the Board and Committee deem appropriate to discuss and review the performance criteria and compensation levels of the CEO and his key reports.
It is recognized that compensation modifications or adjustments may need to be made throughout the year depending on circumstances that arise. To the extent possible, these issues will be addressed during the Committee's regularly scheduled meetings. If circumstances require more immediate action, however, the CEO will discuss the proposed modification with the Committee Chairman, who will in turn confer with the other Committee members. Once agreement has been reached, the Committee's decision will be documented through a written resolution that reflects that consent of each Committee member.
- IV. KEY RESPONSIBILITIES
The following responsibilities are set forth as a guide for fulfilling the Committee's purpose, with the understanding that the Committee's activities may diverge as appropriate given the circumstances. The Committee is authorized to carry out these activities and other actions reasonably related to the Committee's purposes or assigned by the Board from time to time. The Committee may form, and delegate any of its responsibilities to, a subcommittee so long as such subcommittee is solely comprised of one or more members of the Committee.
To fulfill its purposes, the Committee shall:
- establish and review the Company's overall management compensation philosophy and policy;
- oversee the development and implementation of management compensation plans and programs;
- review and approve corporate goals and objectives relevant to compensation of the Company's CEO, other executive officers and other members of senior management designated from time to time by the Committee, including annual performance objectives;
- evaluate at least annually the performance of the CEO against corporate goals and objectives, including the annual performance objectives for the CEO and, based on this evaluation, determine and approve the compensation level (including any discretionary incentive awards) for the CEO, reviewing as appropriate, any agreement or understanding relating to the CEO's employment, incentive compensation, or other benefits based on this evaluation;
- review at least annually, approve, and recommend to the Board for ratification by the independent members of the Board the compensation of the CEO's key reports, including the "named executive officers" as that term is defined by the Securities and Exchange Commission and any other officers of the Company as the Committee shall deem appropriate;
- review on a periodic basis the Company's management compensation programs, including any management incentive compensation plans, to determine whether they are appropriate, properly coordinated and achieve their intended purpose(s), and recommend to the Board any appropriate modifications or new plans or programs;
- review and recommend to the Board incentive and equity-based compensation plans of the Company and any modifications of such plans (whether or not final approval rests with the Company's shareholders) and review all grants of awards, including the award of shares or share options, pursuant to such plans;
- administer and monitor compliance by executives with the rules and guidelines of the Company's equity-based plans;
- review and make recommendations to the Board regarding compensation for members of the Board;
- prepare a report on management compensation to be included in the Company's annual proxy statement and review and discuss with management the Compensation Discussion and Analysis section of such proxy statement and determine whether to recommend to the Board the inclusion of such section in the proxy statement, in accordance with applicable rules and regulation of the Nasdaq Stock Market, the SEC and other applicable regulatory bodies;
- conduct an annual self-evaluation of the performance of the Committee, including its effectiveness and compliance with this Charter;
- review and reassess the adequacy of this Charter annually, and recommend to the Board amendments as the Committee deems appropriate; and
- report regularly to the Board on Committee findings and recommendations and any other matters the Committee deems appropriate or the Board requests, and maintain minutes or other records of Committee meetings and activities.