Corporate Governance Guidelines

Introductory Note to Corporate Governance Guidelines:

The Corporate Governance Guidelines provide an outline of the principles and practices that the Board of National Senior Campuses, Inc. (“NSC”) and the Boards of its Supported Communities (“Community Boards”) are committed to following in an effort to best serve the interests of the stakeholders, comply with legal and regulatory requirements and engage in “best practices” in governance.

Within the Governance Guidelines certain references are made to “Developing” and “Mature” Communities. Where appropriate, guideline distinctions have been made to reflect differences in bylaws and operation of these two types of community classifications:

  • A “Developing” Community is one that has not yet completed its building development and is supported by NSC. NSC’s support includes the provision of policies and procedures, technical expertise, education and strategic vision that is designed to provide Developing Community Boards with a strong governance foundation and help ensure an adherence to the mission. NSC appoints all of the members of the board of developing communities.
  • A “Mature” Community is one that has fully completed its development, achieved full occupancy and may have exercised an option to purchase its community from the developer. NSC has the ability to appoint one director to the board, so the mature community remains affiliated with NSC. NSC also affirms the state of Directors appointed by the Mature Community Board. The Maturity Community may choose to continue to look to NSC for access to policies, strategies and governance resources. A Mature Community Board may desire to follow the governance policies and procedures contained within these “Governance Guidelines” or it may choose to adopt other governance policies in order to best organize itself to carry out its responsibilities.

Where the Guidelines refer to “Boards”, it is a reference to both NSC and Community Boards.

National Senior Campuses, Inc. (NSC) and its Supported Communities have adopted the following Corporate Governance Guidelines:

Board Mission and Responsibilities

Mission Statement: Sharing Our Gifts To Create Communities That Celebrate Life

The Boards of Directors of National Senior Campuses, Inc. and its Supported Communities are committed to achieving the mission by:

1. Promoting an active quality of life for seniors

  • Creating large scale retirement campuses to promote activity and healthy living
  • Providing a Resident centered service culture
  • Encouraging Resident run activities with professional support

2. Achieving excellence in services and programs

  • Exercising its authority in services, programs, fees, facilities and financing
  • Embracing compliance, ethics, and integrity
  • Overseeing services and programs personally and in meetings with Residents Advisory Council
  • Taking a long-term view of fiduciary responsibility

3. Insuring Affordability to middle income seniors

  • Focusing on the long term viability of the community for current and future residents
  • Using financing strategies to lower the cost of capital
  • Qualifying for exemption from federal and state income tax
  • Obtaining property tax reductions from community governments
  • Accumulating net income to further the mission
  • Maintaining a policy for 90% refundable entrance deposit
  • Offering fee-for-service health care

4. Making a life care commitment

  • To the extent feasible, ensuring that no resident should ever have to leave a community as a result of financial inability to pay for the cost of their care
  • Encouraging fundraising efforts in support of Benevolent Care

5. Fostering Growth

  • Committing to making this lifestyle available to an increasing number of seniors
  • Increasing efforts to achieve affordability

Corporate Authority and Responsibility

All corporate authority resides in the Board of Directors as fiduciaries of the Corporation, subject to the requirements and restrictions set forth in the Corporation’s Charter, Bylaws and applicable law. As fiduciaries, the directors are the stewards of the corporation’s assets and have the responsibility of seeing that the corporate mission is being fulfilled and that the assets of the corporation are being effectively used for that purpose.

While the interests of the various stakeholders (residents, employees, bondholders) are considered by the Board, the duty of loyalty is to the corporation and the corporate mission. The Management Company is responsible for managing the communities. The Board’s responsibility is to provide oversight of the Management Company and to regularly monitor the quality and effectiveness of its performance and decisions including the execution of its strategies in support of the mission.

Board Operations

Selection and Composition of the Boards:

1. Board Recruitment Criteria

On an annual basis, each Board will review the skills and characteristics of the current composition of its Board. This Board Profile will help to identify gaps in skill sets or diversity elements that should be addressed as part of a recruitment effort.

Board candidates are considered based upon various criteria, such as their broad-based business skills and experiences, reputation in their profession, geography, positive attitude and high energy, commitment to the Mission, personal integrity and judgment all in the context of an assessment of the perceived needs of the Board at that point in time. The “Statement of Policy on Criteria for the Selection of Directors” describes the criteria and is used as a guiding document for recruitment initiatives.

In addition, directors must have significant time available to devote to Board activities and to enhance their knowledge of the Continuing Care Retirement Communities (CCRC) industry. Directors are expected to attend meetings of the Board, its Committees on which they serve, and meetings at various community sites consistent with the requirements outlined in the Board’s “Guidelines for Director Participation”.

The Boards support a policy that provides for the recruitment of at least three (3) locally-based directors to serve on each Community Board, one of whom must be a resident.

2. Selection of New Directors

The NSC Board is responsible for appointing all directors. The Annual Meeting of NSC and the Community Boards will be held in the spring, or such other time as designated, at which time directors, officers and committee members will be appointed.

The selection of qualified directors is complex and crucial to the stability and long-term success of the governance structure of the Boards. Prospective director candidates must demonstrate independence, integrity, a strong sense of commitment and the ability to serve in order to be considered for appointment. Each NSC and Community board candidate must complete a Conflict of Interest Disclosure Statement prior to appointment to a Board.

NSC Board:
The NSC Board follows the “Policy for the Recruitment and Retention of Directors” in its effort to select qualified, independent, energized and committed board members. The Chair of the Governance and Internal Affairs Committee provides support and oversight of this recruitment and selection process in coordination with the NSC Board.

Developing Community Boards:
The NSC Board delegates the recruitment and screening process for community directors to the community Boards (in accordance with the total number of directors specified in the Community Board Bylaws). The Governance and Internal Affairs Committee will support and assist as necessary with community director recruitment activities. The NSC Board acts upon recommendations made by each community board for new directors as appropriate. NSC will also appoint one NSC Director (the “NSC Director”) to serve as a member of the Developing Community Board.

Mature Community Boards:
The Mature Community Boards are responsible for the identification and nomination of the directors to serve on the Board. Other than the one “NSC Director” described in the next sentence, NSC appoints the directors nominated by a majority of the directors of the Mature Community Board, including one Resident Director (i.e., a resident of the Corporation’s Continuing Care Retirement Community). NSC will also appoint one NSC Director (the “NSC Director”) to serve as a member of the Mature Community Board.

3. Director Orientation and Continuing Education

The Boards provide for a comprehensive orientation program for new directors to enable them to become familiar with the Corporation’s vision, strategic direction, core values including ethics, financial matters, corporate governance practices and other key policies through a review of background material, meetings with senior management, visits to communities and the assignment of a Board mentor. The role of the mentor is to serve as a resource and facilitator for the new director during the first year of Board membership.

The Boards recognize the importance of continuing education for its directors and is committed to provide such education in order to improve both the Board and Committee performance. It is the responsibility of the Governance and Internal Affairs Committee to advise the directors about continuing education opportunities including leading-edge corporate governance issues. Directors are encouraged to participate in continuing director education programs on an annual basis.

Board Structure and Performance:

1. Size of the Boards

NSC Board:
The number of directors on the NSC Board shall be at least three (3) but no more than fifteen (15). The NSC Board currently has 9 members and the Board may adjust its complement of directors consistent with its desire to achieve targeted levels of efficiency and effectiveness while providing appropriate governance resources for its supported organizations.

Developing Community Boards:
The number of directors serving on each supported Community Board shall be at least six but no more than eleven or twelve in accordance with the provisions of the specific Community Bylaws.

Mature Community Boards:
The number of directors serving on each Mature Community Board shall be at least three but no more than eleven or twelve depending on the specific Community’s Bylaws, unless altered in accordance with provisions of the Bylaws and/or regulatory requirements.

2. Independent Directors

All board members must act independently. Independence requires no current relationship between a director and the Management Company and/or other provider of goods and services to the communities that would compromise a Board member’s independence. If a situation should arise where a Board member may not be independent, the Board member shall comply with the Corporation’s Conflict of Interest Policy.

3. Selection of the Chairman and CEO/President

The positions of the Chairman and CEO/President may be held by the same individual or may be filled by separate persons but the President and the Chairman are required to be directors.

4. Committees

NSC Board Committees:
NSC maintains an Executive Committee, and an Audit Committee as standing committees of the Board. NSC, as a sponsoring organization, provides its Supported Communities direction on global matters such as best practices in governance. It also provides centralized oversight of and recommendations on matters that affect all communities such as budget, finance, investments, risk management and compliance. In order to carry out its advisory and supporting role, NSC has established four Advisory Committees to focus on key areas: the Governance and Internal Affairs Committee, the Budget and Finance Committee, the Treasury and Investment Committee and the Operations and Risk Management Committee. The Chair of each Committee is a director of NSC. Each of the four regions, New England, Pennsylvania/New Jersey, Mid-Atlantic and West, has at least one representative on each committee. This cross-regional membership ensures that NSC is responsive to the needs of its Supported Organizations and fosters strong communication between NSC and the Community Boards.

A Chairs’ Council, comprised of the Chairperson of NSC and the Chairpersons of the Boards of Directors of each community operates to provide a forum for the Boards of Directors of Communities supported by NSC to:

  • perpetuate the mission in all communities;
  • coordinate operating practices and resolve issues;
  • enable efficient access to corporate-wide management strategies and practices;
  • maintain recurring contact with senior Management Company officials
  • undertake an important advisory role in order to serve the Boards of NSC & the Supported Communities

Developing Community Board Committees:
Each Developing Community Board has an Executive Committee, an Audit Committee, and other committees as may be established, composed of one or more directors.

The Executive Committee is comprised of the Chairperson of the Board, President, Treasurer and Secretary; and has the authority to act for the Board of Directors between meetings in accordance with the powers granted by State law and Bylaws provisions.

The Audit Committee is comprised of at least two members of the Board with one member having extensive accounting and financial experience. All members of the Audit Committee must possess financial literacy skills. The purpose of the committee is to assist the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control and the audit process.

In addition, Advisory Committees (of one or more members) may be created to advise the Board(s) on matters concerning specific aspects of the Corporation’s business as designated by the Board(s).

Mature Community Board Committees:
The bylaws of each Mature Community provide for an Executive Committee and Audit Committee. In addition, the Board may choose to create other committees as necessary in order to facilitate Board operations.

5. Board Tenure

  • NSC directors are appointed to serve a three-year term and are eligible to be reappointed to serve one or more consecutive three-year terms.
  • Developing Community Board directors are appointed by NSC for an initial term of one year. After a director has completed this initial one-year term, he or she may be re-appointed by NSC to serve one or more consecutive three-year terms.
  • Mature Community Board directors are appointed by NSC (upon nomination by the majority of directors of the Community Board) for a three-year term and may be reappointed to serve one or more consecutive three-year terms. The NSC Director will always have a term of one year and may be reappointed to serve successive one-year terms.

As part of the re-election process, NSC and the Community Boards, as appropriate, will formally review each director’s performance based upon the criteria established in the “Director Guidelines for Participation”; review the director’s Individual Self-Assessment and conduct interviews to discuss performance and director satisfaction. These interviews offer directors the opportunity to consider past performance and thoughtfully re-affirm their desire to continue as a member of the Board.

This rigorous re-election evaluation enables the Boards to gather the information necessary to make a well-informed determination as to the qualifications and willingness of a board member to continue to serve and fulfill their governance responsibilities for subsequent terms.

There is no retirement age for Board members.

6. Board Compensation

The Boards believe that appropriate compensation is a tool to recruit and retain quality, committed and energetic directors. Each director has a wealth of business and/or professional experience that is extremely valuable to the Boards in enabling it to conduct its business in an informed and diligent manner. The directors are required to spend a substantial amount of time attending meetings and working on Board related duties outside of meetings. Each director is required to maintain a log of the annual time spent on director activities. The Boards believe that the compensation paid to directors is necessary to compensate them for their expertise and time, and greatly facilitates the attraction of highly qualified new directors to join the Boards when the need to recruit additional directors arises. NSC and the Community Boards have adopted a Director Compensation Policy that sets forth the following “Guiding Principles”:

  • Directors should be adequately compensated for their time, effort and expertise
  • Director compensation should be aligned with the long-term interests of the stakeholders
  • Director compensation should be fully disclosed to “stakeholders”
  • Compensation should be considered as a tool to recruit and retain quality, committed and energetic directors

NSC, with the assistance of the Governance and Internal Affairs Committee, will annually review the scope and level of the compensation program and suggest changes as appropriate. In connection with this, NSC and Community Boards will follow the comparability data standards under the rebuttable presumption provisions of the regulations under Section 4958 of the Internal Revenue Code. Each Community Board may adjust compensation levels annually as deemed appropriate by the directors.

7. Assessing the Board’s Performance

Each Board will oversee the following performance evaluations:

  • Board Self-Assessment
  • Committee Evaluations (as appropriate)
  • Individual Self-Assessments

The Board Self-Assessment is an evaluation by the Directors of the Board’s overall effectiveness as a governing body. The results are utilized to increase the level of Board performance by identifying areas for improvement and/or educational needs. Committee Evaluations are completed by each committee member in an effort to evaluate the effectiveness of the committee structure and encourage dialogue within the committees regarding workplans, goals, strengths and areas needing enhancement.

Individual Self-Assessments are completed by each Board member who is being considered for re-election in an effort to focus upon their personal governance performance. It is a tool to encourage critical thinking and identify opportunities for continuing education.

The summary findings of the Board and Committee Evaluations are shared with the Boards.

8. Guidelines and Policies
The Boards shall maintain written corporate governance guidelines and operational policies that will be reviewed annually in consultation with the Chairs of the four NSC Advisory Committees and the Chairs Council as appropriate in an effort to continually strive to operate utilizing “best practices” in corporate governance.

9. Conflicts of Interest
The Boards expect all directors and officers to act ethically and independently. On an annual basis, each director must complete a Conflict of Interest Disclosure Statement. Each Board is charged with the responsibility to oversee the management and implementation of the Conflict of Interest Policy. Each Board Chair will review all completed statements to determine if a conflict may exist and will consult with the Chair of Governance and Internal Affairs Committee as needed. If a conflict exists and cannot be addressed in accordance with the Policy, the individual will be asked to resign from the Board.

10. Independent Advice
The Board (or with the Board’s approval, a committee) may retain independent outside legal, financial or other advisors as appropriate.

11. Communication

A public website, will provide information to the public about NSC and its Supported Organizations.The website will be maintained by NSC staff.

The Community Board will provide consistent and focused communication with the Resident Advisory Council (RAC) and the residents through periodic on-site community meetings, Annual Reports and a Community Reading File.

Meeting Procedures

1. Board Agenda

The Chairperson of the NSC Board and the Chairperson of each Community Board in consultation with senior representatives of the Management Company will set the agenda for each respective Board meeting.

2. Board Materials

Information important to the Board’s understanding of the business will be distributed in writing to each Board member in advance of the meeting, consistent with the agenda topics.

3. Attendance of Non-Directors at Board Meetings

Non-Board members including staff, Board Counsel, Board Advisors and those who are in the most senior management positions of the Management Company are generally invited to attend portions of the Board meetings.

Furthermore, the Board encourages the Management Company to, from time to time, bring managers to Board meetings who: (a) can provide additional insight into the items to be discussed, and/or (b) are managers with future potential that the senior management believes should be given more exposure to the Board.

Board members are free to contact members of senior management within the Management Company. It is assumed that Board members will use judgment to be sure that this contact is not distracting to the business operations of the Management Company.

4. Executive Sessions

An Executive Session of the Directors may be held at a Board meeting and the Chairperson leads these sessions. The Executive Session allows the directors to meet with Counsel or other advisors but without others normally present at Board meetings (e.g., management) typically to consider sensitive or confidential matters.

5. Community Board Meeting Sites

Community Board meetings may be held at a selected community each quarter (on a rotating basis) in an effort to secure first-hand operational knowledge of the communities supported by NSC.

6. Directors’ Forum

Annually, NSC will host a meeting of directors of all Communities to engage in a multi-day strategic planning and Board Development forum with senior management executives of the Management Company and other consultants as appropriate. The agenda for the forum will be developed by NSC in coordination with input from the Governance and Internal Affairs Committee and the Chairs’ Council.