Cleveland Clinic Health System Obligated Group - FMSbonds.com

C. GOVERNANCE OF THE CLEVELAND CLINICThe Cleveland Clinic is the sole member or sole regular member of each Affiliate within the Health System,or of an Affiliate’s direct or indirect parent. The various corporate entities that comprise the Health System each hasits own board of trustees and officers. The Cleveland Clinic governs the Health System through directrepresentation on such boards of trustees, reserved powers and other governance controls. The Cleveland Clinic isgoverned by its Members, a Board of Trustees, a Board of Governors and its principal operating officers.Members. The members of the Cleveland Clinic (“Members”) are elected by existing voting Members,either for fixed or determinable periods of time, or for life. The classes of Members are (1) Life, (2) Active Trustee,(3) Professional Staff, and (4) Distinguished Fellows. Members of each such class must possess specificqualifications that are delineated in the Code of Regulations. Only Life and Active Trustee members have votingrights. The Members meet at least annually to elect new Trustees to the Board of Trustees, to consider and adoptamendments to the governing documents and to act upon such other matters as may be appropriate. Currently, thereare 77 voting Members and approximately 124 other Members.Board of Trustees. The Board of Trustees is required to have not fewer than 26 nor more than 65members. Trustees are selected on the basis of their expertise and experience in a variety of areas beneficial to theCleveland Clinic and the Health System and are not compensated for their services. A majority of the Trustees isrequired to be comprised of persons who meet each of the following criteria: (1) a citizen of Ohio; (2) a Member ofthe Cleveland Clinic; and (3) not a member of the Professional Staff. A Trustee is retired from active service as aTrustee, and the office deemed vacant, and his or her status is changed to Emeritus Trustee, at the annual meetingnext following the Trustee’s 72 nd birthday. Emeritus Trustees may hold the office for life and serve on Boardcommittees, but have no voting rights. At present, there are 58 voting members of the Board of Trustees and 28Emeritus Trustees. The composition of the Board of Trustees is established in the Code of Regulations as follows:eight seats must be held by members of the Professional Staff, five must be members of the Board of Trustees ofCCHS-Western Region, one must be the Chairman of the Board of Trustees of Lakewood, and one must be theChairman of the Board of Trustees of Children’s Hospital. Each member of the Board of Trustees is elected for afive-year term, with the exception of Professional Staff members and Trustees from CCHS-Western Region,Lakewood and Children’s Hospital, all of whom are elected for one-year terms. Trustees may be re-elected at theexpiration of their respective terms of office.The Board of Trustees generally meets four times per year, including an annual meeting during which theCleveland Clinic’s officers are elected and standing committees are appointed. The Trustees are responsible for allof the Cleveland Clinic’s operations and affairs and the control of its property, except as provided by law orotherwise delegated to the Board of Governors by the Code of Regulations. The Board of Trustees annuallyappoints certain committees to perform duties that it delegates to them from time to time. In addition, the Trusteesannually appoint an Executive Committee that subject to the control and direction of the Trustees, generallyoversees the operations and financial affairs of the Cleveland Clinic and the Health System during intervals betweenmeetings of the Board of Trustees. The Executive Committee is required to have at least eight members. At present,it has 21 members.The other committees of the Board of Trustees are: Audit, Buildings and Grounds, Compensation, Conflictof Interest, Development, Emerging Businesses, Finance, Governance, Government Relations, Investment,Marketing, and Research and Education.The Audit Committee of the Board of Trustees, pursuant to the Audit Committee Charter, reviews andapproves the external and internal audit plans and results, approves audit and non-audit accounting services, internalcontrols and regulatory and financial compliance. Although the Audit Committee is only required to meet quarterly,it typically meets more frequently and is scheduled at present to meet seven times in 2008. Currently, the AuditCommittee has eight members, none of whom are employees of the Health System. The Audit Committee regularlyreports to the Board of Trustees.The Conflict of Interest Committee of the Board of Trustees is responsible for reviewing and resolving anypotential conflicts of interest in accordance with applicable legal requirements and the Cleveland Clinic’s conflict ofinterest policies. Trustees must disclose to the Conflict of Interest Committee any potential conflicts of interestA-5