Conflict of Interest
CONFLICT OF INTEREST POLICY FOR DIRECTORS, OFFICERS, COMMITTEE MEMBERS AND OTHER “COVERED PERSONS” OF NATIONAL SENIOR CAMPUSES, INC. AND SUPPORTED ORGANIZATIONS
National Senior Campuses, Inc. is dedicated to promotion of the health of the elderly by supporting its affiliated organizations which are the sponsors and operators of continuing care retirement communities and related facilities. National Senior Campuses, Inc. and each of its Supported Organizations, as applicable, are hereinafter referred to individually as the “Corporation”. As a non-profit corporation, the Corporation believes that it is essential for the Corporation and individuals associated with the Corporation to act in a way that avoids conflicts of interest.
This conflict of interest policy sets forth the procedures to be followed in connection with conflicts which arise between the interests of the Corporation and the personal or business interests of individuals associated with the Corporation, as well as certain related issues. This policy is intended to supplement, but not to replace, Section 7.08 of the Corporation’s Bylaws and any laws governing conflicts of interest which are applicable to nonstock corporations. Further, it is intended that this policy will be interpreted and implemented to assure compliance with the requirements under Section 501(c)(3) of the Internal Revenue Code regarding the avoidance of private inurement and impermissible private benefit, and the avoidance of “excess benefit transactions” under Section 4958 of the Internal Revenue Code.
This conflict of interest policy applies to the following persons associated with the Corporation:
(c) key employees;
(d) employees in a position to exercise substantial influence over the Corporation’s affairs;
(e) committee members;
(f) volunteers in a position to exercise substantial influence over the Corporation’s affairs; and
(g) prospective directors (as set forth in Section 5(b)).
The persons described in (c) and (d) above are referenced herein as “Covered Employees.” All of the persons to whom this policy applies, including any family member of a person covered by (a) through (e) above (a “family member” shall be deemed to include any spouse, parents, siblings, children and/or any others living in the same household as the covered person) are referred to herein as “Covered Persons.” It is acknowledged that requirements for identifying and handling conflict of interest issues involving Erickson Retirement Communities, LLC (or any other entity which has been retained by the Corporation to provide management services for the Corporation or otherwise in a position to influence the affairs of the Corporation), or its employees, shall be addressed in the management or services agreement with such service provider; provided, however, that any management company employee who serves as an officer of the Corporation or is considered to be a “key employee” (as defined in the Instructions to IRS Form 990) with respect to the Corporation shall be subject to all of the provisions of this Policy.
4. CONFLICTS OF INTEREST
A Covered Person has an existing or potential conflict of interest if he or she has a direct or indirect interest in a transaction or other arrangement which involves the Corporation and which (i) impairs or might impair his or her independent judgment with respect to the Corporation or (ii) results or may result in the receipt of a material benefit from knowledge of information which is confidential to the Corporation. Conflicts of interest are not necessarily financial in nature. A conflict of interest exists if, based on the circumstances, a reasonable person would question whether the motivations of the Covered Person are aligned with the Corporation’s best interests.
Conflicts of interest include, but are not limited to, all of the following:
(a) An actual or potential (i) compensation arrangement with (other than compensation for services rendered in the individual’s role as a director or committee member of the Corporation), or (ii) other transaction or arrangement with, the Corporation;
(b) An actual or potential (i) ownership or investment interest in, (ii) compensation arrangement with, or (iii) position as a director, trustee, officer, agent, partner, associate, trustee, personal representative, receiver, guardian, custodian, conservator or other legal representative of, an entity with which the Corporation has a transaction or arrangement or is negotiating a transaction or arrangement; (c) Any other significant financial or influential interest in an entity or individual with which the Corporation has a transaction or arrangement or is negotiating a transaction or arrangement including service on the governing body of a contributor to the Corporation;
(c) A relationship between a Covered Person and another board member, volunteer or employee (including an employee of the management company) by blood, marriage, domestic partnership or business relationship;
(d) Holding office, serving on the board, participating in management, or being otherwise employed by any competing organization or otherwise having a financial interest in any competing organization;
(e) The use of confidential information obtained from the Corporation for the benefit of the Covered Person (not necessarily a financial benefit) or for the benefit of another Covered Person or organization;
(f) Usurping an opportunity or assisting another person or organization to take advantage of an opportunity that the Covered Person has reason to believe would be of interest to the Corporation;
(g) Using the Corporation’s time, personnel, equipment, supplies, facilities, or good will for other than activities, programs or purposes approved by the Corporation; and
(h) Receiving personal gifts or loans from third parties dealing with the Corporation other than nonmonetary gifts of nominal value that could not be refused without courtesy.
Conflicts of interest will not be deemed to arise from ownership or investment interests of less than five percent (5%) of any class of the publicly traded securities in a corporation or other entity. Compensation arrangements include direct and indirect remuneration, credit arrangements and gifts or favors that are substantial in nature. It is acknowledged that the process and procedure for determining compensation for the Corporation’s directors for their service to the Corporation shall be set forth in a separate policy adopted by the Corporation’s board of directors.
All conflicts of interest are not necessarily impermissible conflicts of interest. The chairman of the board of the Corporation (the “Chairman”) or the board of directors of the Corporation (the “Board of Directors”) (or a designated committee thereof) shall determine how a conflict of interest should be resolved according to the procedures described below.
5. DISCLOSURE PROCEDURES
(a) Each Covered Person shall make a prompt, full and frank disclosure, on the form of disclosure statement attached hereto as Exhibit A, of actual or potential conflicts of interest. The disclosure should include any relevant and material facts known to the person about the actual or potential conflict of interest which might reasonably be construed to be adverse to the Corporation’s interest.
(b) Disclosure statements will be sent to all Covered Persons for completion on an annual basis or for completion as part of the screening process for prospective directors. Each Covered Person should complete an annual disclosure statement, even if he or she has no actual or potential conflicts of interest to disclose. In addition to completing the annual disclosure statement, each Covered Person shall complete an interim disclosure statement relating to any actual or potential conflicts which arise between annual disclosure statements. A Covered Person should disclose actual or potential conflicts of interest as soon as the Covered Person becomes aware of the conflict. If a Covered Person is uncertain as to whether an interest or activity constitutes an actual or potential conflict of interest, he or she should disclose the interest or activity so that the Chairman or the Board of Directors (or a designated committee thereof) may determine if a conflict exists.
(c) Covered Employees should return disclosure statements to the Chairman. All Covered Persons other than Covered Employees should return disclosure statements to the Board of Directors (or a designated committee thereof).
(d) No director shall vote on any matter in which he or she has a material and direct financial interest that will be affected by the outcome of the vote. In the event of such an abstention, the abstaining director shall state the reason for the abstention, which shall be noted in the minutes of the Board of Directors.
(e) For purposes of this section, officers of the Corporation need not disclose compensation and other benefits paid to the officer by the Corporation pursuant to Board resolution.
6. PROCEDURES FOR IDENTIFYING AND ADDRESSING CONFLICTS
(a) Conflicts Involving Covered Employees
When an actual or potential conflict of interest is disclosed by a Covered Employee, the Chairman shall determine whether an actual or potential conflict of interest exists or can be reasonably construed to exist and how the conflict of interest should be resolved. In determining how a conflict should be resolved, the Chairman may, in his discretion, (i) take steps (or require the Covered Person to take steps) to avoid the effect of the conflict on the Corporation; (ii) decide that the Corporation should not be involved in the transaction or arrangement; (iii) submit the matter for consideration by the Board of Directors; or (iv) take any other action that he determines to be warranted under the circumstances.
(b) Conflicts Involving Covered Persons other than Covered Employees
When a conflict of interest is disclosed by a Covered Person other than a Covered Employee, the Board of Directors or a designated committee thereof shall determine, by majority vote of the disinterested directors (even if the disinterested directors constitute less than a quorum), whether an actual or potential conflict of interest exists or can be reasonably construed to exist and provide proposals to the full Board of Directors as to how the conflict of interest should be resolved. If a committee of the Board of Directors determines that no conflict of interest exists, it need not notify the entire Board of Directors, but the Secretary of the Corporation shall record such decision in the minutes of the committee which shall be available to all members of the Board of Directors on request. If the Covered Person is a director, the Covered Person may be counted in determining the existence of a quorum at any meeting where the conflict of interest or related transaction or arrangement is under discussion or is being voted upon, but such Covered Person shall recuse herself/himself from the meeting and shall not participate in the vote (such recusal to be noted by the Secretary of the Corporation in the minutes of the Board of Directors).
(c) Conflicts Involving Potential Employment by the Corporation
A board member or committee member who is formally considering employment with the Corporation must take a temporary leave of absence until the position is filled. Such a leave will be taken within the board member’s elected term which will not be extended because of the leave. A board member or committee member who is formally considering employment with the Corporation must submit a written request for a temporary leave of absence to the Secretary indicating the timer period of the leave. The Secretary will inform the Chairman of such a request. The Chairman will bring the request to the Board of Directors for action. The request and any action taken shall be reflected in the official minutes of the Corporation.
(d) Role of the Covered Person
The Covered Person shall not participate in any discussion or debate of the Board of Directors, or any committee or subcommittee thereof in which the subject of discussion is a contract, transaction, compensation arrangement, or situation in which there may be a perceived or actual conflict of interest. However, the Covered Person may be present to provide clarifying information in such a discussion or debate or to answer questions unless objected to by any board or committee member. The Covered Person shall not attempt to exert his or her personal influence with respect to the matter, either at or outside the meeting.
(e) Resolution of the Conflict
In determining how a conflict of interest should be resolved, the disinterested members of the Board of Directors or a designated committee thereof may, in their discretion and following consultation with the Covered Person and other persons which such members deem advisable, (i) take steps (or require the Covered Person to take steps) to avoid the effect of the conflict on the Corporation; (ii) decide that the Corporation should not be involved in the transaction or arrangement; or (iii) take any other action that it determines to be warranted under the circumstances.
After exercising due diligence, the Board of Directors or a designated committee thereof shall determine whether the Corporation can obtain a more advantageous transaction, contract or arrangement with reasonable effort from a person or entity that would not give rise to a conflict of interest. If a more advantageous transaction, contract, or other arrangement is not reasonably attainable under circumstances that would not give rise to a conflict of interest, the Board of Directors or a designated committee thereof shall determine by a majority vote of the disinterested directors whether the transaction, contract, or arrangement is in the Corporation’s best interest and for its own benefit and whether it is fair and reasonable to the Corporation, and shall make its decision as to whether to enter into the transaction, contract, or arrangement in conformity with such determination.
7. RECORD KEEPING
The Board of Directors, or a designated committee thereof, considering a conflict of interest matter shall prepare and maintain minutes of those proceedings. Such minutes shall contain:
(a) the names of the Covered Persons who disclosed or otherwise were found to have a financial interest in connection with an actual or possible conflict of interest, the nature of the financial interest, any action taken to determine whether a conflict of interest was present, and the decision as to whether a conflict of interest in fact existed; and
(b) the names of the persons who were present for discussions and votes relating to the transaction or arrangement, the content of the discussion, including any alternatives to the proposed transaction or arrangement, and a record of any votes or actions taken in connection with the proceedings.
8. VIOLATIONS OF THE CONFLICT OF INTEREST POLICY
If the Board of Directors, or a designated committee thereof, has reasonable cause to believe a Covered Person has failed to disclose actual or possible conflicts of interest, it shall inform the Covered Person of the basis for such belief and afford the Covered Person an opportunity to explain the alleged failure to disclose. If, after hearing the Covered Person’s response and after making further investigation as warranted by the circumstances, the Board of Directors, or a designated committee thereof, determines the Covered Person has failed to disclose an actual or possible conflict of interest, it shall take such disciplinary and corrective action as it deems appropriate including the removal of a Director or Officer or the termination of any contractual relationship the Corporation may have with a Covered Person or other party.
Each Covered Person shall exercise care not to disclose confidential information acquired in connection with such Covered Person’s position with the Corporation. Furthermore, a Covered Person shall not disclose or use information relating to the business of the Corporation for the personal profit or advantage of the Covered Person or any other organization or person.
Each Covered Person has, and may in the future, come into the possession of certain confidential information belonging to the Corporation including but not limited to trade secrets, customer lists, supplier lists and prices, pricing schedules, methods, processes, or marketing plans. At no time shall a Covered Person use any such confidential information for his or her own benefit or the benefit of others, or disclose or divulge such confidential information to others.
11. PERIODIC REVIEWS
To ensure that the Corporation operates in a manner consistent with its charitable purposes and that it does not engage in activities that could jeopardize its status as a tax-exempt organization, periodic reviews shall be conducted by the Board of Directors or a committee thereof. At a minimum, the periodic reviews shall include the following subjects:
(a) whether compensation arrangements and benefits are reasonable and are the result of arm’s-length bargaining;
(b) whether acquisitions of provider services, if any, result in inurement or impermissible private benefit;
(c) whether partnership and joint venture arrangements and arrangements with management service organizations and physician hospital organizations, if any, conform to written policies, are properly recorded, reflect reasonable payments for goods and services, further the Corporation’s charitable purposes and do not result in inurement or impermissible private benefit; and
(d) whether agreements to provide health care and agreements with other health care providers, employees and third party payors further the Corporation’s charitable purposes and do not result in inurement or impermissible private benefit.
When conducting the periodic reviews as provided for in this section, the Corporation may, but need not, use outside advisors. If outside experts are used, their use shall not relieve the Board of Directors of its responsibility for ensuring periodic reviews are conducted.
12. POLITICAL ACTIVITIES AND CONTRIBUTIONS
In order to maintain its tax-exempt status, the Corporation prohibited by law from participating in any political campaign or election. For example, this would include: providing financial or other support to a political party, political action committee or candidate for public office; issuing a statement in support of or in opposition to a candidate or political party platform; endorsing a candidate; or otherwise taking action to support or oppose the election of a candidate for public office.
Covered Persons should exercise careful judgment in supporting political parties and candidates. No director, officer, committee member, volunteer or employee of the Corporation is authorized to speak or act on behalf of the Corporation with regard to a political candidate or campaign or imply that he or she has been so authorized. If a Covered Person engages in political activity in his or her personal capacity, the Covered Person may not reference the Covered Person’s title or position with the Corporation.
The Corporation is allowed to engage in certain lobbying and nonpartisan activity under the Internal Revenue Code rules and nothing in this policy is meant to prohibit lobbying and nonpartisan activity approved by the Corporation.
Some state laws require board members of corporations that have contracts with government agencies in that state to report the political contributions that their board members make above a certain threshold. To enable the Corporation to make its required legal disclosures, directors and officers of the Corporation shall notify the Corporation of any contribution (including a gift, donation, payment of money, or purchase of a ticket to a fundraising event) of $500 or more, made under the circumstances described below, to a political candidate, incumbent office holder or political committee for a candidate or a slate of candidates (collectively, a “Candidate”) in any primary or general election.
The Corporation must be notified of the contribution only in the following circumstances:
(a) if the contribution is made by a director of the Corporation who is paid by the Corporation;
(b) if the contribution is made by a director of the Corporation upon the recommendation or at the request of the Corporation;
(c) if the contribution is made by an officer of the Corporation; or
(d) if an officer or director of the Corporation suggested or directed than an employee of the Corporation or a Covered Employee make a contribution and the employee of the Corporation or the Covered Employee in fact made the contribution.
Only contributions which equal or exceed $500 are required to be disclosed. However, if more than one contribution is given to the same Candidate in the circumstances described above and the aggregate amount of the contributions is $500 or more, each of the contributions must be disclosed, even if the individual contributions are less than $500.
Notification of contributions should be made on the form of contribution notification statement. Contribution notification statements should be completed at or prior to the time the contribution is made as the Corporation has an ongoing obligation to report these contributions.