DEF 14A 1 d62175ddef14a.htm DEF 14A DEF 14A
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

PREMIER, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)  Title of each class of securities to which transaction applies:

 
 

 

                

 

 

(2)  Aggregate number of securities to which transaction applies:

 
 

 

 

 

(3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 
 

 

 

 

(4)  Proposed maximum aggregate value of transaction:

 
 

 

 

 

(5)  Total fee paid:

 
 

 

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)  Amount Previously Paid:

 
 

 

                

 

 

(2)  Form, Schedule or Registration Statement No.:

 
 

 

 

 

(3)  Filing Party:

 
 

 

 

 

(4)  Date Filed:

 
 

 


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LOGO

 

LOGO   

October 21, 2020

 

Dear Premier Stockholders:

 

I am pleased to invite you to attend the Premier, Inc. 2020 Annual Meeting of
Stockholders (the “Annual Meeting”). The meeting will be held virtually via the
Internet on Friday, December 4, 2020 at 10:00 a.m., Eastern Standard Time. In
light of ongoing developments related to the global outbreak of coronavirus
(COVID-19) and after careful consideration, the Board of Directors has determined
that holding a virtual annual meeting will best facilitate stockholder attendance
and participation. We are committed to ensuring that stockholders will be
afforded the same rights and opportunities to participate as they would at an
in-person meeting. You will be able to virtually attend the meeting on the Internet,
vote your shares electronically and submit questions.

 

At the Annual Meeting, we will consider the items of business described in the
Notice of 2020 Annual Meeting of Stockholders and in the proxy statement
accompanying this letter. The proxy statement contains important information
about the matters to be voted on and the process for voting, along with
information about Premier and its management and directors.

 

Every stockholder’s vote is important to us. Even if you plan to virtually attend the
Annual Meeting, please promptly vote by submitting your proxy by phone, by
Internet or by mail. The “Frequently Asked Questions” section of the proxy
statement and the enclosed proxy card contain detailed instructions for
submitting your proxy. Our Annual Meeting can be accessed virtually via the
Internet at: www.virtualshareholdermeeting.com/PINC2020. To participate, you
will need the 16-digit control number provided on your Notice of Internet
Availability of Proxy Materials or proxy card.

 

On behalf of the directors, management and employees of Premier, thank you for
your continued support of and ownership in our company.

 

Sincerely,

 

LOGO

 

Terry D. Shaw

Chair of the Board of Directors


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NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS

 

DATE & TIME:      ACCESS:
Friday, December 4, 2020      www.virtualshareholdermeeting.com/PINC2020
10:00 a.m. EST     

 

In light of the global outbreak of COVID-19, for the safety of all of our people, including our stockholders, and taking into account recent federal, state and local guidance that has been issued, our Board of Directors has determined that the Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. At the virtual Annual Meeting, stockholders will be able to attend, vote and submit questions from any location via the Internet.

At the Annual Meeting, we will consider:

 

Item 1.

The election of four Class I Directors to the Board of Directors to serve until our 2023 annual meeting of stockholders.

 

Item 2.

The ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for our fiscal year 2021.

 

Item 3.

The approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission.

 

Item 4.

The transaction of such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

Record Date:

Holders of our common stock at the close of business on our record date of October 7, 2020 are entitled to notice of and to vote at the Annual Meeting and any postponement or adjournment of the meeting.

 

  Your vote is important. Holders of common stock should vote in one of these ways:

 

  

 

 

LOGO  

 

 

INTERNET

Go to www.proxyvote.com and follow the instructions. You will need to enter the control number printed on your proxy card

 

 

   LOGO  

 

 

TELEPHONE

Call toll-free 1-800-690-6903 and follow the instructions. You will need to enter the control number printed on your proxy card

 

 

   LOGO  

 

 

MAIL

Complete, sign, date and promptly return your proxy card in the enclosed envelope

In addition, holders of common stock may vote online at the virtual Annual Meeting.

For a period of at least 10 days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder for any purpose germane to the meeting during regular business hours at our corporate headquarters located at 13034 Ballantyne Corporate Place, Charlotte, North Carolina. To access the list of stockholders during the Annual Meeting, please visit www.virtualshareholdermeeting.com/PINC2020 and enter the control number provided on your proxy card.

 

Our Annual Meeting can be accessed virtually via the Internet at: www.virtualshareholdermeeting.com/PINC2020. To participate, you will need the 16-digit control number provided on your Notice of Internet Availability of Proxy Materials or proxy card. Instructions on how to access the virtual Annual Meeting are set forth in the accompanying proxy statement under

“How can I virtually attend the Annual Meeting?”

Important Notice Regarding the Availability of Proxy Materials

For the Annual Meeting of Stockholders to be Held on December 4, 2020

Premier, Inc.’s proxy statement on Schedule 14A, form of proxy card and 2020 Annual Report on Form 10-K are available at www.proxyvote.com after entering the control number printed on your proxy card.

By order of the Board of Directors,

 

 

LOGO

Belinda A. McCord

Corporate Secretary

October 21, 2020


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PROXY SUMMARY

This summary highlights information about our company and the 2020 Annual Meeting of Stockholders that is included elsewhere in the proxy statement. It does not contain all of the information you should consider before voting your shares. We encourage you to read the entire proxy statement before casting your vote.

2020 Annual Meeting of Stockholders

 

    

 

DATE & TIME:

 

 

LOGO

                

 

ACCESS:

 

 

LOGO

                

 

RECORD DATE:

 

 

LOGO

 

    
   

Friday, December 4, 2020 10:00 a.m. Eastern

Standard Time

           

www.virtualshareholdermee

ting.com/PINC2020

See “Questions and Answers About the Annual Meeting—How can I virtually attend the Annual Meeting?” on page 5 for details on how to access the Annual Meeting.

 

           

Holders of common stock at the close of business on our record date of October 7, 2020 are entitled to notice of and to vote at the Annual Meeting.

 

   

Voting Recommendations of the Board

 

         
  Item     Item Summary   FOR   AGAINST     Page  
   
1   The election of four Class I Directors to the Board of Directors to serve until our 2023 annual meeting of stockholders.       9
   
2   The ratification of the appointment of Ernst & Young LLP to serve as our independent registered public accounting firm for our fiscal year 2021.       18
   
3  

The approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission.

 

        20

2020 Performance Highlights*

 

       NET REVENUE  

                

 

NON-GAAP

ADJUSTED EBITDA

 

                

 

NON-GAAP

ADJUSTED EPS

 

    

  LOGO    

LOGO

    LOGO  
 

7%

1-YEAR REVENUE GROWTH

 

   

1%

1-YEAR ADJUSTED EBITDA GROWTH

 

   

2%

1-YEAR ADJUSTED EPS GROWTH

 

 

 

*

Highlights are based on continuing operations as reported in our 2020 Form 10-K

Stockholder Say-on-Pay Vote

 

 

    94.2%   

 

 

 

say-on-pay votes cast were votes “FOR” our executive compensation program in 2019, showing strong support for our compensation principles, programs and governance practices

 

 

 

    LOGO    


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Introduction     1  
Frequently Asked Questions     1  
Company Information and Mailing Address     8  
Items of Business Requiring Your Vote     9  
Item 1 – Election of Directors     9  

Director Qualifications and Biographies

    9  

Directors Standing for Election

    10  

Other Directors Not Standing for Election at this Meeting

    12  
Item 2 – Ratification of Appointment of Independent Registered Public Accounting Firm     18  

Appointment of Ernst & Young LLP

    18  

Audit and Compliance Committee Pre-Approval of Accounting Services

    18  

Principal Accounting Fees and Services

    19  
Item 3 – Advisory Vote on Executive Compensation     20  
Corporate Governance and Board Structure     22  
Compensation of Directors     39  
Environmental, Social and Governance Matters     43  
 


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2020 PROXY STATEMENT

INTRODUCTION

The 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Premier, Inc., a Delaware corporation (“Premier,” “we,” “us,” “our” or the “Company”), will be held virtually via the Internet on Friday, December 4, 2020, beginning at 10:00 a.m., Eastern Standard Time. We encourage all of our stockholders to vote at or before the Annual Meeting, and we hope the information contained in this document will help you decide how you wish to vote.

FREQUENTLY ASKED QUESTIONS

What is the purpose of this proxy statement?

Our Board of Directors (the “Board of Directors” or “Board”) is soliciting a proxy from each holder of our common stock to vote on the items to be considered at the Annual Meeting, which will be held on December 4, 2020.

At the Annual Meeting, we will consider and act upon the following proposals:

 

  1.

to elect four Class I Directors to the Board of Directors to serve until our 2023 annual meeting of stockholders;

 

  2.

to ratify the appointment of Ernst & Young LLP (“EY”) to serve as our independent registered public accounting firm for our fiscal year 2021;

 

  3.

to approve, on an advisory basis, of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC; and

 

  4.

to transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

This proxy statement and related materials are first being provided to our stockholders on or about October 21, 2020.

Why did I receive a notice regarding the availability of proxy materials on the Internet?

Pursuant to the rules adopted by the Securities and Exchange Commission (“SEC”), we are furnishing proxy materials to our stockholders primarily via the Internet rather than mailing paper copies of these materials to each stockholder. We believe that this process expedites stockholders’ receipt of the proxy materials, lowers the costs of the Annual Meeting and helps conserve natural resources. On or about October 21, 2020, we will mail to each stockholder (other than those stockholders who had previously requested electronic or paper delivery of the proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials, including our proxy statement and annual report, on the Internet and how to access a proxy card to vote on the Internet or by telephone. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copy of the proxy materials. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a paper copy of the proxy materials unless you request one. If you would like to receive a paper copy of the proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. We may, at our discretion, voluntarily choose to mail or deliver a paper copy of the proxy materials, including our proxy statement and annual report, to one or more stockholders.

Who is entitled to vote at the Annual Meeting?

Holders of our common stock as of the record date of October 7, 2020 (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting and any postponement or adjournment of the meeting.

 

 

 

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      FREQUENTLY ASKED QUESTIONS

 

How does the Board of Directors recommend stockholders vote on the business of the Annual Meeting?

The Board of Directors recommends that stockholders vote their shares:

 

  1.

FOR” the election of each of the four Class I Director nominees identified in this proxy statement.

 

  2.

FOR” the ratification of the appointment of EY to serve as our independent registered public accounting firm for our fiscal year 2021.

 

  3.

FOR” the approval, on an advisory basis, of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.

With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote in accordance with their judgment on such matter.

How many shares can be voted at the Annual Meeting?

At the close of business on October 7, 2020, 122,085,712 shares of our common stock were outstanding. Each share of common stock is entitled to one vote.

How many shares must be present or represented at the Annual Meeting to constitute a quorum to conduct business?

Under our Amended and Restated Bylaws (the “Bylaws”), the holders of a majority of the voting power of our stock issued and outstanding and entitled to vote at the Annual Meeting, present in person or represented by proxy at the Annual Meeting, constitute a quorum to conduct business at the Annual Meeting. Virtual attendance at our Annual Meeting constitutes presence in person for purposes of the vote required under our Bylaws. Our common stock is our only class of outstanding voting securities. Abstentions will be treated as present for purposes of determining a quorum.

What vote is required to approve each of the items of business?

Item 1—Election of directors. Directors will be elected by the holders of a plurality of the votes cast by the holders of common stock entitled to vote at the Annual Meeting, whether present in person or represented by proxy at the Annual Meeting.

Item 2—Ratification of independent registered public accounting firm. The affirmative vote of the holders of a majority of the votes cast by the holders of common stock entitled to vote at the Annual Meeting, whether present in person or represented by proxy at the Annual Meeting, is required to ratify EY as our independent registered public accounting firm.

Item 3—Approval, on an advisory basis, of the compensation of our named executive officers (“say-on-pay”). Please note that the “say-on-pay” vote is only advisory in nature and has no binding effect on us or our Board of Directors. Our Board of Directors will consider Item 3 approved if the votes cast in favor of such proposal exceed the votes cast against such proposal.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Most of our common stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholder of record. If your shares are registered directly in your name with our transfer agent, EQ Shareowner Services, you are considered, with respect to those shares, the stockholder of record, and we have made these proxy materials available to you over the Internet or have delivered paper copies of these materials to you by mail, in connection with the solicitation of proxies for the Annual Meeting. As the stockholder of record, you have the right to grant your voting proxy directly to us or to virtually vote at the meeting. We have enclosed a proxy card for you to use.

 

 

 

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FREQUENTLY ASKED QUESTIONS      

 

Beneficial owner. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank or nominee which is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the meeting. If you wish to participate in the meeting and your shares are held in street name, you must obtain, from the broker, bank or nominee that holds your shares, the information required, including a 16-digit control number, in order for you to be able to participate in, and vote at, the Annual Meeting. Your broker, bank or nominee has enclosed or provided a voting instruction card for you to use in directing the broker, bank or nominee how to vote your shares. If you do not provide the stockholder of record with voting instructions, your shares may constitute broker non-votes. The effect of broker non-votes is more specifically described in “What effect do abstentions and broker non-votes have on the items of business?” below.

How can I have my shares represented at the Annual Meeting?

Voting by Proxy Card

Holders of common stock may submit a proxy by:

 

   

following the instructions on your proxy card to vote by telephone or the Internet. These instructions can also be found at www.proxyvote.com. Your telephone or Internet proxy must be received no later than 11:59 p.m., Eastern Standard Time, on December 3, 2020; or

 

   

completing, signing, dating and returning the proxy card so that it is received prior to the Annual Meeting.

Michael J. Alkire and David L. Klatsky (the “proxy holders”) have been designated by our Board of Directors to vote the shares represented by proxy at the Annual Meeting. Mr. Alkire is our President, and Mr. Klatsky is our General Counsel.

 

   

The proxy holders will vote the shares represented by your valid and timely received proxy in accordance with your instructions.

 

   

If you do not specify instructions on your proxy when you submit it, the proxy holders will vote the shares represented by the proxy in accordance with the recommendations of the Board of Directors on each item of business listed above.

 

   

If any other matter properly comes before the Annual Meeting, the proxy holders will vote the shares represented by proxy on that matter in their discretion.

Virtually Attending the Meeting

While we encourage voting in advance by proxy, holders of common stock also have the option of voting their shares virtually at the Annual Meeting. Shares of common stock held directly in your name as the stockholder of record may be voted virtually at the Annual Meeting. Submitting your proxy by telephone, by Internet or by mail will in no way limit your right to vote at the Annual Meeting if you later decide to attend virtually.

If your shares of common stock are held in street name, you must obtain, from the broker, bank or nominee that holds your shares of common stock, the information required, including a 16-digit control number, in order for you to be able to participate in, and vote at, the Annual Meeting. Owners of shares of common stock held in street name that expect to virtually attend and vote at the meeting should contact their broker, bank or nominee as soon as possible to obtain the necessary information.

Please see “How can I virtually attend the Annual Meeting?” below if you plan to virtually attend the Annual Meeting.

Even if you currently plan to virtually attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.

 

 

 

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      FREQUENTLY ASKED QUESTIONS

 

Can I change my vote, or revoke my proxy, after I return my proxy card?

You may change your vote or revoke your proxy before your proxy is voted at the Annual Meeting by:

 

   

sending written notice to Belinda A. McCord, Corporate Secretary, Premier, Inc., 13034 Ballantyne Corporate Place, Charlotte, North Carolina, 28277, so long as your revocation is received by 11:59 p.m., Eastern Standard Time, on December 3, 2020;

 

   

submitting a proxy bearing a later date than the proxy being revoked to Vote Processing c/o Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717, so long as your later dated proxy is received by 11:59 p.m., Eastern Standard Time, on December 3, 2020;

 

   

voting again by telephone or the Internet by 11:59 p.m., Eastern Standard Time, on December 3, 2020; or

 

   

attending the Annual Meeting and voting virtually.

What effect do abstentions and broker non-votes have on the items of business?

A “broker non-vote” occurs when a bank, broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. If you are a beneficial owner of common stock, your bank, broker or other nominee holder of record is permitted to vote your shares on the ratification of the independent registered public accounting firm even if the record holder does not receive voting instructions from you. Absent instructions from you, the record holder may not vote on any “nondiscretionary” matter, including a director election, a matter relating to executive compensation or any stockholder proposal. In that case, without your voting instructions, a broker non-vote will occur. For all other matters, including the ratification of our independent registered public accounting firm, the record holder may vote at its discretion. You should consult your bank, broker or other nominee holder if you have questions about this. As indicated above, our Board of Directors will consider Item 3 (“say-on-pay”) approved if the votes cast in favor of such proposal exceed the votes cast against such proposal. Accordingly, broker non-votes will not be counted as votes cast for or against Item 3 (“say-on-pay”).

An “abstention” will occur at the Annual Meeting if your shares of common stock are deemed to be present at the Annual Meeting, either because you virtually attend the Annual Meeting or because you have properly completed and returned a proxy, but you do not vote on any proposal or other matter which is required to be voted on by our stockholders at the Annual Meeting. An abstention on any of the items listed above will have the effect of a vote against that item, except for the election of directors and Item 3 (“say-on-pay”), in each case for which abstentions will not be counted.

The affirmative vote of at least a majority of our issued and outstanding shares present, in person or by proxy, and entitled to vote at the Annual Meeting will be required to approve any stockholder proposal validly presented at a meeting of stockholders. Under applicable Delaware law, in determining whether any stockholder proposal has received the requisite number of affirmative votes, abstentions will be counted and will have the same effect as a vote against any stockholder proposal, except for the election of any director nominee. Abstentions will have no effect on a vote to elect a director nominee, and broker non-votes will be ignored for all votes. There are no dissenters’ rights of appraisal in connection with any stockholder vote to be taken at the Annual Meeting.

What does it mean if I receive more than one proxy card?

Most likely, it means your shares of common stock are registered differently or are in more than one account. Please provide voting instructions for all proxy cards you receive.

Why hold a virtual meeting?

As part of our effort to maintain a safe and healthy environment for our stockholders, directors, members of management and others attending the Annual Meeting in light of the current COVID-19 pandemic, we have determined to conduct this year’s Annual Meeting virtually. We are excited to make use of available technology to provide our stockholders with the same rights and opportunities to participate as they would have at an in-person meeting.

 

 

 

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FREQUENTLY ASKED QUESTIONS      

 

How can I virtually attend the Annual Meeting?

The live audio webcast of the Annual Meeting will be available for listening by the general public, but participation in the Annual Meeting, including voting shares and submitting questions, will be limited to stockholders. To ensure they can participate, stockholders and proxyholders should visit www.virtualshareholdermeeting.com/PINC2020 and enter the 16-digit control number included on their Notice of Internet Availability of Proxy Materials or proxy card. If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be able to vote, ask questions or access the list of stockholders as of the as of the close of business on the Record Date.

The meeting webcast will begin promptly at 10:00 a.m., Eastern Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m., Eastern Time, and you should allow ample time for the check-in procedures. Attendees will be required to comply with meeting guidelines and procedures available at www.virtualshareholdermeeting.com/PINC2020.

Can I ask questions at the Annual Meeting?

You may submit questions via the Internet during the Annual Meeting by participating in the webcast at www.virtualshareholdermeeting.com/PINC2020. We will answer any timely submitted questions on a matter to be voted on at the Annual Meeting before voting is closed on the matter. Following adjournment of the formal business of the Annual Meeting, we will address appropriate general questions from stockholders regarding Premier in the order in which the questions are received. Questions received during the Annual Meeting will be presented as submitted, uncensored and unedited, except that we may omit certain personal details for data privacy protection issues and we may edit profanity or other inappropriate language. If we receive substantially similar questions, we will group those questions together and provide a single response to avoid repetition. Additional information regarding the submission of questions during the Annual Meeting can be found in our 2020 Rules of Conduct and Procedure, available at www.virtualshareholdermeeting.com/PINC2020.

If you lose your 16-digit control number, you may join the Annual Meeting as a “Guest” but you will not be able to vote, ask questions or access the list of stockholders as of the as of the close of business on the Record Date.

What should I do if, during check-in or the meeting, I have technical difficulties or trouble accessing the virtual meeting website?

Online check-in to the Annual Meeting webcast will begin at 9:45 a.m., Eastern daylight time. You should allow ample time to log in to the meeting webcast and test your computer audio system. During online check-in and continuing through the duration of the Annual Meeting, we will have technicians standing by to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing the Annual Meeting during check-in or the meeting time, please call the technical support number that will be posted on the Annual Meeting login page.

Who pays the cost of soliciting votes for the Annual Meeting?

We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. If you choose to access the proxy materials or vote over the Internet, however, you are responsible for Internet access charges you may incur. In addition to the mailing of these proxy materials, if requested, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We will request banks, brokers, nominees, custodians and other fiduciaries who hold shares of our stock in street name to forward these proxy solicitation materials to the beneficial owners of those shares, and we will reimburse the reasonable out-of-pocket expenses they incur in doing so. At our discretion, we may engage a proxy solicitation firm to assist us with the solicitation process, for which we will bear the costs of any such engagement.

Who will count the votes?

We have retained Broadridge Financial Solutions to tabulate the votes and serve as the independent inspector of election for the Annual Meeting.

 

 

 

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      FREQUENTLY ASKED QUESTIONS

 

Where can I find the voting results of the Annual Meeting?

We will publish the final results of the voting in a Current Report on Form 8-K filed with the SEC within four business days of the Annual Meeting.

Can I access the proxy statement and annual report on the Internet?

Yes. As noted above, we are furnishing our proxy materials to our stockholders via the Internet, except for those stockholders who have elected to receive paper copies. We highly recommend that you receive electronic delivery of Premier, Inc. proxy statements, annual reports and other stockholder communications. This helps reduce the use of paper and reduces our printing, postage and other costs. If you have previously requested paper copies of such materials, you can elect to receive electronic copies when you vote on the Internet.

This proxy statement, the form of proxy card and our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “2020 Form 10-K”) are available at www.proxyvote.com. If you are a stockholder of record who has requested to receive paper copies of the proxy materials and would like to access future Company proxy statements and annual reports electronically instead of receiving paper copies in the mail, there are several ways to do this. You can mark the appropriate box on your proxy card or follow the instructions if you vote by telephone or the Internet. If you choose to access future proxy statements and annual reports on the Internet, you will receive a proxy card in the mail next year with instructions containing the Internet address for those materials. Your choice will remain in effect until you advise us otherwise. If you have Internet access, we hope you make this choice.

What is “householding” and how does it affect me?

Pursuant to SEC rules, we are permitted to deliver one copy of our Notice of Internet Availability of Proxy Materials, and our proxy materials for those who have elected paper copies, in a single envelope addressed to all stockholders who share a single address unless they have notified us they wish to “opt out” of the program known as “householding.” Under this procedure, stockholders of record who have the same address and last name receive only one copy of the Notice of Internet Availability of Proxy Materials or proxy materials. Householding is intended to reduce our printing and postage costs and material waste. WE WILL DELIVER A SEPARATE COPY OF THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, AND PROXY MATERIALS IF APPLICABLE, PROMPTLY UPON WRITTEN OR ORAL REQUEST. You may request a separate copy by contacting our Corporate Secretary at 13034 Ballantyne Corporate Place, Charlotte, North Carolina, 28277, or by calling 1-704-357-0022.

If you are a beneficial stockholder and you choose not to have the aforementioned disclosure documents sent to a single household address as described above, you must “opt-out” by writing to: Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717, or by calling 1-866-540-7095, and we will cease householding all such disclosure documents within 30 days. If we do not receive instructions to remove your account(s) from this service, your account(s) will continue to be householded until we notify you otherwise. If you are a beneficial stockholder and other stockholders with whom you share an address currently receive multiple copies of the aforementioned disclosure documents, or if you hold stock in more than one account and, in either case, you wish to receive only a single copy of the disclosure documents, please contact Broadridge Financial Solutions at the address or phone number above. If you own shares in nominee name (such as through a broker), information regarding householding of disclosure documents should have been forwarded to you by your broker.

Who should I contact if I have questions?

If you are a holder of our common stock through a brokerage account and you have any questions or need assistance in voting your shares, you should contact the broker or bank where you hold the account.

If you are a registered holder of our common stock and you have any questions or need assistance in voting your shares, please call our Investor Relations department at 1-704-357-0022.

As an additional resource, the SEC website has a variety of information about the proxy voting process at www.sec.gov/spotlight/proxymatters.shtml.

 

 

 

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FREQUENTLY ASKED QUESTIONS      

 

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. UNDER NO CIRCUMSTANCES DOES THE DELIVERY OF THIS PROXY STATEMENT CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT.

 

 

 

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COMPANY INFORMATION AND MAILING ADDRESS

We were organized as a Delaware corporation in 2013. Our mailing address is Premier, Inc., 13034 Ballantyne Corporate Place, Charlotte, North Carolina, 28277, and our telephone number is 704-357-0022. Our website address is www.premierinc.com. References in this proxy statement to “Premier,” the “Company,” “we,” “us” and “our” refer to Premier, Inc. and our consolidated subsidiaries, unless the context requires otherwise. References to “PHSI” refer to Premier Healthcare Solutions, Inc., and references to “Premier Plans” refer to Premier Plans, LLC, an affiliate of Premier that was merged into PHSI in 2013 in connection with our reorganization and IPO. Information on our website is not intended to be and shall not be deemed to be incorporated into this proxy statement.

 

 

 

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ITEMS OF BUSINESS REQUIRING YOUR VOTE

ITEM 1 – ELECTION OF DIRECTORS

The current term of office for our Class I Directors expires at the Annual Meeting, while the term for our Class II Directors expires at the 2021 annual meeting and the term for our Class III Directors expires at the 2022 annual meeting. Upon unanimous recommendation by the Nominating and Governance Committee of the Board of Directors, the Board proposes that the following nominees be elected for new terms of three years and until their successors are duly elected and qualified as Class I Directors: John T. Bigalke, Helen M. Boudreau, Stephen R. D’Arcy and Marc D. Miller. Each nominee has consented to serve if elected, and each nominee is currently a member of our Board of Directors. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxy holders will vote for the substitute nominee designated by the Board.

Director Qualifications and Biographies

The Nominating and Governance Committee, consistent with the desires of the full Board, seeks to achieve a Board that represents a diverse mix of skills, perspectives, talents, backgrounds and education that will enhance our decision-making process, oversee management’s execution of strategic objectives and represent the interests of all of our stockholders. Key factors considered in connection with the selection of director nominees are independence, critical thinking skills, practical wisdom and mature judgment in the decision-making process. Our Board composition reflects our commitment to include individuals from diverse backgrounds and with diverse experience, and the members of our Nominating and Governance Committee are mindful of that objective when they nominate directors for election. Our Board composition also reflects the Nominating and Governance Committee’s determination as to the appropriate size of the Board to facilitate effective communication and cooperation.

Important information about our corporate governance practices, the responsibilities and functioning of the Board and its committees, director compensation and related party transactions is found elsewhere in this proxy statement. We encourage you to review this information in connection with your decisions on the election of the director nominees.

The information set forth below includes, with respect to each nominee and each continuing director, his or her age as of the Record Date, principal occupation and employment during the past five years, the year in which he or she first became one of our directors, and other public company directorships held by such person during the last five years. Further, the independence status of each nominee and each continuing director, as determined by the Board of Directors in accordance with the standards set forth in our Corporate Governance Guidelines and the listing standards of NASDAQ, is provided below. A director or director nominee designated below as a “member-director” is a director employed by a hospital or health system or by a group affiliate or other non-provider organization affiliated with one or more Premier member facilities participating in our group purchasing organization (“GPO”) that is or has been during the last three fiscal years a stockholder of Premier, which we refer to as our “member owners.” Although member-directors may meet the quantifiable criteria set forth in the director independence definition contained in the listing standards of NASDAQ, because of each member-director’s and/or their employer’s relationship to us, we have deemed member-directors as not independent. Each of our directors also serves on the management committee of Premier Services, LLC, a wholly-owned subsidiary of Premier and the general partner of Premier LP.

In addition to the experience, qualifications, attributes and skills of each nominee and continuing director outlined below, which have led the Board to conclude that such person should serve as a member of the Board, our Board believes that each nominee and each continuing director has demonstrated broad-based business knowledge, outstanding achievement in his or her professional career, commitment to ethical and moral values, personal and professional integrity, sound business judgment and a commitment to corporate citizenship.

 

 

 

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      ITEM 1 – ELECTION OF DIRECTORS

 

Directors Standing for Election

Nominees to Serve as Class I Directors until the 2023 Annual Meeting

 

LOGO

 

Age: 66

 

Director Since: 2019

 

Committee Memberships:  

Audit and Compliance, and Compensation

 

Independent Director

 

  

 

John T. Bigalke

 

Experience:

 

  Chief Executive Officer of Second Half Health Advisors, a healthcare strategy firm, since 2016

  Previously with Deloitte USA LLP from 1998 to 2016, including serving as Vice Chairman and National Industry Leader for the Health Care and Life Science Practice from 2002 until 2012 and Vice Chairman and Senior Partner, Global Health Care Practice from 2012 to 2016

  Director, Audit Committee Chair and member of the Nominating/Corporate and Governance Committee and Chair of the Special Committee of Progenity, Inc., a NASDAQ-listed biotechnology company, and director and non-voting member of the Audit Committee, Finance and Strategy Committee and Risk and Corporate Responsibility Committee of AdventHealth

  Serves on the Advisory Board of Concord Healthcare Management Services, LLC and Vaxcare, Inc. (Chair)

  Obtained a bachelor’s degree from Clemson University and completed the Leadership Development Program at Columbia University Graduate School of Business and the Executive Leadership Program at the Wharton School of the University of Pennsylvania

  Licensed as a Certified Public Accountant

 

 

Skills/Qualifications:

 

We believe Mr. Bigalke’s qualifications to serve on our Board of Directors include his strong financial, corporate accounting, business development and leadership experience and his service on the boards and audit committees at several privately-held and publicly-traded companies and enterprises.

 

 

LOGO

 

Age: 54

 

Director Since: 2020

 

Committee Membership:  

Nominating and Governance

 

Independent Director

 

  

 

Helen M. Boudreau

 

Experience:

 

  Retired

  Chief Operating Officer of the Bill & Melinda Gates Medical Research Institute, a nonprofit medical research organization, from June 2018 to June 2019

  Previously served as the Chief Financial Officer at each of Proteostasis Therapeutics, Inc., a NASDAQ-listed biopharmaceutical company, from July 2017 to June 2018, and FORMA Therapeutics, Inc., a privately-held biotechnology company, from October 2014 to June 2017

  Prior experience includes executive positions with Novartis Corporation and Pfizer, Inc. and leadership roles with Pepsico/Yum! Brands, Inc., McKinsey & Company, Inc. and Bank of America Corporation

  Served on the board of directors and as Chair of the Audit Committee and member of the Compensation Committee for Proteostasis Therapeutics, Inc. from 2016 to 2017

  Serves on the boards of directors of four private healthcare-related companies

  Obtained a bachelor’s degree from the University of Maryland and a Master of Business Administration from the University of Virginia Darden Graduate School of Business

 

 

Skills/Qualifications:

 

We believe Ms. Boudreau’s qualifications to serve on our Board of Directors include her strong financial background and broad understanding of the healthcare ecosystem through her work across multiple different healthcare and biopharmaceutical companies.

 

 

 

 

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ITEM 1 – ELECTION OF DIRECTORS      

 

 

LOGO

 

Age: 65

 

Director Since: 2013

 

Committee Memberships:  

Audit and Compliance, Conflict Advisory, Compensation, and Nominating and Governance

 

Independent Director

 

  

 

Stephen R. D’Arcy

 

Experience:

 

  Partner of Quantum Group LLC, an investment and consulting firm, since 2010

  Previous experience includes 34 years at PricewaterhouseCoopers LLP, a multinational professional services firm, including serving as Global Automotive Leader

  Director and audit committee member (committee Chair since 2017) of the board of Navistar International Corporation, a NYSE-listed company, since 2016, and member of the boards of directors of Penske Corporation and the Hudson-Webber Foundation

  Previously served on the board of directors of Vanguard Health Systems Inc., a company previously listed on the NYSE, and served as Non-Executive Chair of the board of trustees of The Detroit Medical Center

  Obtained a bachelor’s degree in Business Administration from the University of Michigan

 

 

Skills/Qualifications:

 

We believe Mr. D’Arcy’s qualifications to serve on our Board of Directors include his strong financial, corporate accounting, business development and leadership experience, his current and past service on the audit committees of publicly-traded companies and his service on the boards at several privately-held companies and enterprises.

 

 

 

LOGO

 

Age: 50

 

Director Since: 2015

 

Committee Membership:  

Finance

 

Member-Director

 

  

 

Marc D. Miller

 

Experience:

 

  President of Universal Health Services, Inc., a NYSE-listed company headquartered in King of Prussia, Pennsylvania, since 2009

  Prior service in various executive roles and key positions with Universal Health Services, Central Montgomery Medical Center, Wellington Regional Medical Center, The George Washington University Hospital and Mayo Clinic

  Member of the board of directors of Universal Health Services, Inc. since 2006 and of the board of trustees of its affiliated entity Universal Health Realty Income Trust, a NYSE-listed company, since 2008

  Obtained a bachelor’s degree from the University of Vermont and a Master of Business Administration with a concentration in healthcare management and finance from The Wharton School at the University of Pennsylvania

 

 

Skills/Qualifications:

 

We believe that Mr. Miller’s qualifications to serve on our Board of Directors include his approximately 25 years of experience in the healthcare industry, his strong background in healthcare and healthcare management, his leadership experience serving in executive positions at large healthcare systems and his public company experience.

 

 

 

LOGO

 

 

 

  

 

Board Recommendation

 

                  
  

The Board of Directors unanimously recommends a vote “FOR” the election of each of the director nominees named above.

 

  

 

  

In accordance with the Board’s recommendation, the proxy holders will vote the shares of common stock covered by valid and timely received proxies “FOR” the election of each of the Class I director nominees set forth above, unless instructed otherwise.

 

 

 

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      ITEM 1 – ELECTION OF DIRECTORS

 

Other Directors Not Standing for Election at this Meeting

Directors who will continue to serve after the 2020 Annual Meeting are:

Class II Directors with Terms Expiring at the 2021 Annual Meeting

 

LOGO

 

Age: 67

 

Director Since: 2015

 

Committee Membership:

Finance

 

Member-Director

 

  

 

Barclay Berdan

 

Experience:

 

  Chief Executive Officer of Texas Health Resources since 2014

  Served in various executive roles with Texas Health Resources since 1986, including Chief Operating Officer, Senior Executive Vice President, President of Texas Health Harris Methodist Fort Worth and Vice President of Harris Methodist Southwest Hospital Fort Worth

  Previous leadership and administrative positions with American Medical International, Inc., Northwestern Memorial Hospital and Jackson Park Hospital

  Serves on the Healthcare Leadership Council and as Chair of the American Excess Insurance Exchange Risk Retention Group

  Serves on the boards of Texas Health Aetna (Chair), Southwestern Health Resources (Co-Chair), North Texas Healthy Communities (Chair), Dallas Regional Chamber, Dallas Medical Resources and Fairview Health Services

  Fellow of the American College of Healthcare Executives

  Obtained a bachelor’s degree from Texas Christian University and a Master of Business Administration with a specialization in hospital administration from the University of Chicago

 

 

Skills/Qualifications:

 

We believe that Mr. Berdan’s qualifications to serve on our Board of Directors include his approximately 44 years of experience in the healthcare industry, his strong background in healthcare and healthcare management and his leadership experience serving in executive positions at large healthcare systems.

 

 

 

LOGO

 

Age: 80

 

Director Since: 2013

 

Committee Memberships:

Compensation (Chair),

Finance, and Member

Agreement Review (Chair)

 

Lead Independent Director

 

  

 

William E. Mayer

 

Experience:

 

  Partner and founder of Park Avenue Equity Partners in New York since 1999

  Lead Independent Director of the Premier Board of Directors since 2019

  Member of the board of directors of PHSI and the board of managers of Premier Plans from 1997 to 2013

  Member of the boards of directors of BlackRock Capital Investment Corporation, a NASDAQ-listed company, Lee Enterprises, Incorporated, a NYSE-listed company, and Rosehill Resources, Inc., a NASDAQ-listed company, and previous member of the boards of directors of numerous other publicly-traded and privately held companies

  Member of the board of trustees of The Aspen Institute, and Chair from 2000 to 2008

  Serves on the boards of Lirio, Inc. and Friends of Florence, on the board of governors at the Pardee RAND Graduate School, as a member of the Council on Foreign Relations and as the Vice Chair of the Middle East Investment Initiative

  Named to the 2013 National Association of Corporate Directors

  Obtained a bachelor’s degree and Master of Business Administration from the University of Maryland

 

Skills/Qualifications:

 

We believe Mr. Mayer’s qualifications to serve on our Board of Directors include his approximately 35 years of experience in financial and senior executive positions at various companies and his experience serving on the boards of several publicly-traded companies.

 

 

 

 

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ITEM 1 – ELECTION OF DIRECTORS      

 

 

LOGO

 

Age: 56

 

Director Since: 2015

 

Committee Membership:

Finance

 

Member-Director

 

  

 

Scott Reiner

 

Experience:

 

  Chief Executive Officer of Adventist Health System/West, a hospital system serving more than 75 communities in California, Oregon, Washington and Hawaii, since 2014

  Previously served in various executive roles with Adventist Health, including Executive Vice President, Chief Operating Officer and Senior Vice President

  Prior executive positions with Glendale Adventist Medical Center, General Health System, Tennessee Christian Medical Center and Affiliated Physicians Medical Group

  Member of the boards of directors of Adventist Health, California Hospital Association, Loma Linda University Health and Loma Linda University Medical Center and past member of the board of directors of American Hospital Association Region Nine

  Obtained a bachelor’s degree from Pacific Union College, a Master of Science in Health Administration from California State University, Northridge and a Certificate in Managed Care Administration from the University of Missouri, and licensed as a registered nurse

 

Skills/Qualifications:

 

We believe that Mr. Reiner’s qualifications to serve on our Board of Directors include his approximately 32 years of experience in the healthcare industry, his strong background in healthcare and healthcare management and his leadership experience serving in executive positions at large healthcare systems.

 

 

 

LOGO

 

Age: 58

 

Director Since: 2013

 

Committee Membership:

None

 

Member-Director

 

  

 

Terry D. Shaw

 

Experience:

 

  Chief Executive Officer of AdventHealth (f/k/a Adventist Health System), a nine-state health system headquartered in Florida, since 2017

  Previously served with AdventHealth since 2000, including as the Executive Vice President, Chief Financial Officer and Chief Operations Officer from 2010 to 2017

  Chair of the Board of Directors of Premier since August 2019, Vice Chair of the Board of Directors of Premier from July 2015 to August 2019, and member of the board of directors of PHSI and the board of managers of Premier Plans from 2012 to 2013

  Member of the American College of Healthcare Executives and the Healthcare Leadership Council

  Member of the board of directors of AdventHealth

  Obtained a bachelor’s degree from Southern Adventist University and a Master of Business Administration from the University of Central Florida

 

Skills/Qualifications:

 

We believe Mr. Shaw’s qualifications to serve on our Board of Directors include his approximately 36 years of experience in the healthcare industry, his strong background in finance, healthcare and healthcare management and his leadership experience serving in executive positions at a large healthcare system.

 

 

 

 

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      ITEM 1 – ELECTION OF DIRECTORS

 

LOGO

 

Age: 63

 

Director Since: 2013

 

Committee Memberships:  

Compensation, and Nominating and Governance Committee (Chair)

 

Independent Director

 

  

 

Richard J. Statuto

 

Experience:

 

  Retired

  Advisor to Bon Secours Mercy Health, primarily focused on strategic growth and innovation, from September 2018 through August 2019

  President and Chief Executive Officer of Bon Secours Health System from 2005 to September 2018

  Chair of the Board of Directors of Premier from 2013 to August 2019, member of the board of directors of PHSI and the board of managers of Premier Plans from 2011 to 2013

  Previously served as President and Chief Executive Officer of St. Joseph Health System

  Member of the boards of directors of the Catholic Medical Mission Board and the Innovation Institute

  Previous service as Chair of the board of directors of Catholic Health Association and as Vice Chair of the board of directors of Christus Health System

  Obtained a bachelor’s degree in chemical engineering from Vanderbilt University and a Master of Business Administration from Xavier University

 

Skills/Qualifications:

 

We believe Mr. Statuto’s qualifications to serve on our Board of Directors include his approximately 35 years of experience in the healthcare industry, his strong background in healthcare and healthcare management and his leadership experience serving in executive positions at large healthcare systems.

 

 

LOGO

 

Age: 66

 

Director Since: 2013

 

Committee Memberships:

Audit and Compliance (Chair), Conflict Advisory, Nominating and
Governance, and Member Agreement Review

 

Independent Director

 

  

 

Ellen C. Wolf

 

Experience:

 

  Retired

  Previously served as Chief Financial Officer of American Water Works Company, Inc., the largest investor-owned U.S. water and wastewater company, as Senior Vice President and Chief Financial Officer of USEC, Inc. and as Vice President and Chief Financial Officer of American Water Works

  Former director of Connecticut Water, a NASDAQ-listed company, from 2015 until its sale in 2019, and former director and Chair of the audit committee of InfraREIT, L.L.C., a NYSE-listed company, from 2014 until its sale in 2019

  Former director of Airgas, Inc., a NYSE-listed company

  Serves on the board of the Philadelphia Zoo

  Obtained a bachelor’s degree from Duke University and a Master of Business Administration from the Wharton School of the University of Pennsylvania

 

Skills/Qualifications:

 

We believe that Ms. Wolf’s qualifications to serve on our Board of Directors include her strong financial, corporate accounting, business development and leadership experience through her service in corporate senior executive positions, her prior service on the audit committee of another publicly-traded company and her prior service on the audit and compensation committees of a privately-held company.

 

 

 

 

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ITEM 1 – ELECTION OF DIRECTORS      

 

Class III Directors with Terms Expiring at the 2022 Annual Meeting

 

LOGO

 

Age: 61

 

Director Since: 2013

 

Committee Membership:  

Member Agreement Review

 

Employee-Director

  

 

Susan D. DeVore

 

Experience:

 

  Chief Executive Officer of Premier since May 2013

  President of Premier from 2013 to April 2019, and Chief Executive Officer of PHSI and the general partner of Premier LP since 2009

  Member of the board of directors of PHSI since 2009 and the board of managers of Premier Plans from 2009 to 2013

  Chief Operating Officer of PHSI from 2006 to 2009 and of a number of other Premier entities from 2007 to 2009

  Previous executive experience includes over 20 years at Ernst & Young LLP, including as a Senior Healthcare Industry Management Practice Leader

  Member of the board of directors and the audit committee and risk and finance committee of Unum Group, a NYSE-listed company that provides financial protection benefits in the United States and the United Kingdom

  Member of the board of directors or member of the following non-profit and state-based organizations: Healthcare Leadership Council, Coalition to Protect America’s Healthcare and the National Academy of Medicine Roundtable on Value and Science Driven Healthcare

  Vice Chair of the UNC Charlotte Board of Trustees

  Member of the board of directors and the quality committee and finance committee of AdventHealth

  Obtained a bachelor’s degree from the University of North Carolina at Charlotte and a Master of Management from McGill University

 

 

Skills/Qualifications:

 

We believe Ms. DeVore’s qualifications to serve on our Board of Directors include her approximately 35 years of experience in senior positions involving hospital strategy, large-scale operations transformation, quality improvement and financial management.

 

 

LOGO

 

Age: 64

 

Director Since: 2015

 

Committee Memberships:  

Audit and Compliance, Conflict Advisory, Compensation, and Member Agreement Review

 

Independent Director

 

  

 

Jody R. Davids

 

Experience:

 

  Retired

  Senior Vice President and Global Chief Information Officer of PepsiCo, Inc., a NYSE-listed company that has a global portfolio of food and beverage brands, from April 2016 to October 2019

  Chief Information Officer of Agrium, Inc., a NYSE-listed company and Toronto Stock Exchange-listed company that is a global producer and marketer of nutrients for agricultural and industrial markets, from April 2014 to April 2016

  Various executive and consulting roles with Agrium, Best Buy, Inc., a NYSE-listed company, and Cardinal Health, Inc., a NYSE-listed company, during the period from 2000 to 2014

  Obtained a bachelor’s degree and a Master of Business Administration from San Jose State University

 

 

Skills/Qualifications:

 

We believe that Ms. Davids’ qualifications to serve on our Board of Directors include her strong background in information technology, cybersecurity risk management, supply chain, logistics and distribution and her leadership experience serving in corporate senior executive positions of other publicly-traded companies.

 

 

 

 

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      ITEM 1 – ELECTION OF DIRECTORS

 

LOGO

 

Age: 68

 

Director Since: 2013

 

Committee Membership:  

Finance (Chair)

 

Member-Director

 

  

 

Peter S. Fine

 

Experience:

 

  President and Chief Executive Officer of Banner Health since 2000

  Member of the board of directors of Banner Health

  Member of the board of directors of PHSI from 2003 through 2009

  Previously served on the boards of directors of Accuray Incorporated and the Translational Genomics Research Institute and as member of the Heard Museum board of trustees

  Obtained a bachelor’s degree from Ohio University and Master of Arts in Healthcare Administration from George Washington University

 

Skills/Qualifications:

 

We believe Mr. Fine’s qualifications to serve on our Board of Directors include his approximately 43 years of experience in the healthcare industry, his strong background in healthcare and healthcare management and his leadership experience serving in executive positions at a large healthcare system.

 

 

LOGO

 

Age: 66

 

Director Since: 2016

 

Committee Memberships:  

Audit and Compliance,
Conflict Advisory,
Nominating and
Governance, and Member
Agreement Review

 

Independent Director

 

  

 

David H. Langstaff

 

Experience:

 

  President of Argotyche, Inc., a consulting and advisory services company, since 2003

  Executive Vice President at The Aspen Institute since 2018, as well as various other leadership roles with The Aspen Institute since 1998

  Member of the board of directors of Boston Dynamics, an American engineering and robotics design company and a subsidiary of SoftBank Group, since 2017

  Member of the board of directors and Chair of the Special Security Agreement Board of Idemia National Security Solutions LLC, a subsidiary of Idemia, the France-based global leader in Augmented Identity, since 2017

  Member of the board of directors of the Wolf Trap Foundation since 2016

  Previous board of directors and/or executive officer positions with TASC, Inc., Veridian Corporation (listed on NYSE), The Olive Group, SRA International (listed on NYSE), QinetiQ Group PLC (listed on the London Stock Exchange) and Higher Ground LLC between 1995 and 2013

  Served on the Defense Business Board, which provides independent advice to the Secretary and Deputy Secretary of Defense

  Obtained a bachelor’s degree, cum laude, and a Master of Business Administration from Harvard University

 

 

Skills/Qualifications:

 

We believe that Mr. Langstaff’s qualifications to serve on the Company’s Board include his strong background serving as senior executive of a variety of technology companies and his prior board and committee service with other publicly-traded companies.

 

 

 

 

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ITEM 1 – ELECTION OF DIRECTORS      

 

LOGO

 

Age: 68

 

Director Since: 2015

 

Committee Membership:  

Finance

 

Member-Director

 

  

 

Marvin R. O’Quinn

 

Experience:

 

  President and Chief Operating Officer of CommonSpirit Health since February 2019

  Senior Executive Vice President and Chief Operating Officer of Dignity Health in San Francisco, California since 2009

  Previous executive roles with Jackson Health System, Atlantic Health System, New York Presbyterian Health System, Providence Medical Center and Providence Milwaukee Hospital

  Additional key positions with other hospitals and medical centers in Portland, Fresno and Seattle

  Held board appointments with Charles Drew University of Medicine and Science (Chair), PriMed/Hill Physicians, Francisco Partners and Ministry Leadership Center

  Obtained a bachelor’s degree and a Master of Health Administration from the University of Washington

 

 

Skills/Qualifications:

 

We believe that Mr. O’Quinn’s qualifications to serve on our Board of Directors include his approximately 41 years of experience in the healthcare industry, his strong background in healthcare and healthcare management and his leadership experience serving in executive positions at large healthcare systems.

 

There are no family relationships between any of our executive officers, directors and director nominees. The business address of each of our directors and director nominees is 13034 Ballantyne Corporate Place, Charlotte, NC 28277.

 

 

 

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ITEM 2 – RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Appointment of Ernst & Young LLP

In accordance with its charter, the Audit and Compliance Committee selected the firm of Ernst & Young LLP (“EY”) to be our independent registered public accounting firm for the fiscal year 2021 audit period and, with the endorsement of the Board of Directors, recommends to our stockholders that they ratify that appointment. The Audit and Compliance Committee will reconsider the appointment of EY for the next audit period if such appointment is not ratified. Representatives of EY are expected to virtually attend the Annual Meeting, will have the opportunity to make a statement if they desire and are expected to be available to respond to appropriate questions.

The Audit and Compliance Committee recognizes the importance of maintaining the independence of our independent registered public accounting firm, both in fact and appearance. Consistent with its charter, the Audit and Compliance Committee has evaluated EY’s qualifications, performance and independence, including that of the lead audit partner. The Audit and Compliance Committee reviews and approves, in advance, the audit scope, the types of non-audit services, if any, and the estimated fees for each category for the coming year. For each category of proposed service, EY is required to confirm that the provision of such services does not impair its independence.

Before selecting EY, the Audit and Compliance Committee carefully considered that firm’s qualifications and prior performance. This included a review of its performance in prior years, and over the course of the most recently completed fiscal year, including the quality and efficiency of the services provided and EY’s communication and interactions with our management and the Audit and Compliance Committee. The Audit and Compliance Committee also considered EY’s independence, objectivity, reputation for integrity and competence in the fields of accounting and auditing, technical expertise, knowledge of our industry and business operations and fee structure. The Audit and Compliance Committee has expressed its satisfaction with EY in all of these respects. The Audit and Compliance Committee’s review included inquiry concerning any litigation involving EY and any investigations or proceedings by the SEC or Public Company Accounting Oversight Board (‘‘PCAOB’’) against the firm, if any. In this respect, the Audit and Compliance Committee has concluded that the ability of EY to perform services for Premier is in no way adversely affected by any such investigation or litigation.

EY has served as our auditor since 1991. We believe there are significant benefits to retaining a longer-tenured independent registered public accounting firm. EY has gained institutional knowledge and expertise regarding our business operations, accounting policies and practices, and internal control over financial reporting. We believe EY’s audit and other fees are also competitive with peer companies because of EY’s familiarity with us and operations. Notwithstanding EY’s tenure, we believe EY’s independence provides significant benefit to stockholders by ensuring an unbiased audit of our consolidated financial statements and our internal control over financial reporting.

Audit and Compliance Committee Pre-Approval of Accounting Services

The Audit and Compliance Committee of our Board of Directors is responsible for the appointment, oversight and evaluation of our independent registered public accounting firm. In accordance with our Audit and Compliance Committee’s charter, our Audit and Compliance Committee must approve, in advance of the service, all audit and permissible non-audit services provided by our independent registered public accounting firm. Our independent registered public accounting firm may not be retained to perform the non-audit services specified in Section 10A(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit and Compliance Committee has concluded that provision of the non-audit services described in that section is not compatible with maintaining the independence of EY.

The Audit and Compliance Committee has established a policy regarding pre-approval of audit and permissible non-audit services provided by our independent registered public accounting firm, as well as all engagement fees and terms for our independent registered public accounting firm. Under the policy, the Audit and Compliance Committee must approve the services to be rendered and fees to be charged by our independent registered public accounting firm. Typically, the Audit and Compliance Committee approves services up to a specific amount of fees.

 

 

 

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ITEM 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      

 

The Audit and Compliance Committee must then approve, in advance, any services or fees exceeding those pre-approved levels, subject to the de minimis exception set forth in Section 10A(i)(1)(B) of the Exchange Act. The Audit and Compliance Committee may delegate general pre-approval authority to a subcommittee of which the Chair of the Audit and Compliance Committee is a member. All requests or applications for services to be provided by our independent registered public accounting firm must be submitted to specified officers who may determine whether such services are included within the list of pre-approved services. All requests for services that have not been pre-approved must be accompanied by a statement that the request is consistent with the independent registered public accounting firm’s independence from Premier.

Principal Accounting Fees and Services

The following table presents the fees billed to us and our subsidiaries for services rendered by EY for the fiscal years ended June 30, 2020 and 2019.

 

   
     FY 2020      FY 2019  
 
      ($) in thousands  

Audit Fees(1)

   $ 3,811      $ 3,994  

Audit-Related Fees(2)

     491        465  

Tax Fees(3)

     83        76  
  

 

 

    

 

 

 

Total(4)

   $ 4,385      $ 4,535  

 

(1)

Represents audit fees billed in each of fiscal years 2020 and 2019. Audit fees in fiscal years 2020 and 2019 include the audit of our consolidated financial statements, the audit of our internal control over financial reporting, consent for the registration of securities with the SEC, and services provided in connection with the review of our quarterly condensed consolidated financial statements included in our SEC filings.

(2)

Represents audit-related fees billed in each of fiscal years 2020 and 2019. Audit-related fees in fiscal years 2020 and 2019 principally related to professional services in connection with internal controls, information technology and cybersecurity assessments and other services that are traditionally performed by our independent registered public accounting firm.

(3)

Represents tax fees billed in each of fiscal years 2020 and 2019. Tax fees in fiscal years 2020 and 2019 principally related to domestic tax compliance and other tax-related consulting services.

(4)

In fiscal years 2020 and 2019, EY did not provide any products or services that would be required to be disclosed under “all other fees” in the table above. In fiscal years 2020 and 2019, the Audit and Compliance Committee did not approve any services or fees pursuant to the de minimis exception set forth in Section 10A(i)(1)(B) of the Exchange Act.

 

 

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Board Recommendation

 

                  
  

The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EY to serve as our independent registered public accounting firm for our fiscal year ending June 30, 2021.

 

  

 

  

In accordance with the Board’s recommendation, the proxy holders will vote the shares of common stock covered by valid and timely received proxies “FOR” the ratification of the appointment of EY to serve as our independent registered public accounting firm for our fiscal year ending June 30, 2021, unless instructed otherwise.

 

 

 

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ITEM 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with the Dodd-Frank Act and related SEC rules, we request stockholders approve, on an advisory basis, our executive compensation program. We ask that you support the compensation of our named executive officers, or NEOs, as disclosed under the heading “Executive Compensation,” including the “Executive Summary” section, beginning on page 53, and the accompanying tables and related narrative disclosure. This proposal, commonly referred to as a “say-on-pay” proposal, gives stockholders the opportunity to express their views on the NEOs’ compensation as required under Section 14A of the Exchange Act. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the NEOs and the philosophy, policies and practices described in this proxy statement.

Our executives – including our NEOs – are critical to our success. That is why we design our executive compensation program to attract, retain and motivate exceptional and diverse executive talent. We structure our executive compensation program to focus on stockholders’ interests by incentivizing superior sustainable long-term performance. We believe our executive compensation program strikes an appropriate balance between using responsible, measured pay practices and effectively incentivizing our NEOs to dedicate themselves fully to value creation for our stockholders.

Under our executive compensation program, we align pay and performance by making a significant portion of our NEOs’ compensation contingent on:

 

   

achieving specific and challenging annual and long-term performance goals; and

 

   

increasing stockholder value.

As further described in our “Compensation Discussion & Analysis” section, we incorporate rigorous compensation-related design and governance practices to protect our stockholders’ interests, including the following:

 

   

we have stock ownership guidelines for our executive officers that promote alignment of their interests with those of our stockholders;

 

   

our long-term incentive plan is 100% equity-based;

 

   

87% of our CEO’s target total compensation is at-risk, incentive-based pay (67% of which is based on our long-term performance);

 

   

on average, 79% of our other NEOs’ target total compensation is at-risk, incentive-based pay (57% of which is based on long-term performance);

 

   

we do not pay tax gross-ups associated with benefits payable in connection with a change in control;

 

   

we mitigate risk by limiting incentive payments using multiple performance measures in our incentive plans and imposing a strong incentive compensation recoupment (clawback) policy; and

 

   

we prohibit hedging, pledging and short sales of our common stock.

We encourage you to read the “Compensation Discussion and Analysis” section beginning on page 53 of this proxy statement, which includes a recap of what we do and what we don’t do on page 55, and the “Executive Compensation Tables” beginning on page 74 of this proxy statement to better understand the details of our NEOs’ compensation for fiscal year 2020 and their opportunities to realize compensation in the future.

Our Compensation Committee and our Board believe that our executive compensation program for our NEOs serves our stockholders’ interests. This vote is advisory and not binding on us, the Board or the Compensation Committee, which is responsible for developing and administering our executive compensation philosophy and program; however, the Compensation Committee will consider the results as part of its ongoing review of our executive compensation program.

 

 

 

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ITEM 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION      

 

The Board recommends that stockholders indicate their support for our compensation of our NEOs, and we ask you to vote “FOR” the following resolution at our Annual Meeting:

“RESOLVED, that Premier’s stockholders approve, on an advisory basis, the compensation paid to Premier’s named executive officers, as disclosed in this proxy statement for the 2020 Annual Meeting of Stockholders pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis section, Summary Compensation Table for Fiscal Year 2020 and the other related tables and discussion.”

 

 

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Board Recommendation

 

                  
  

The Board of Directors unanimously recommends a vote “FOR” the approval of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.

 

  

 

  

In accordance with the Board of Directors’ recommendation, the proxy holders will vote the shares of common stock covered by valid and timely received proxies “FOR” the approval of the compensation of our named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, unless instructed otherwise.

 

 

 

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CORPORATE GOVERNANCE AND BOARD STRUCTURE

Corporate Governance

Our corporate governance practices are established, monitored and regularly assessed by our Board of Directors with assistance from the Nominating and Governance Committee. The Board of Directors considers current and proposed legal requirements and governance best practices in connection with its oversight of our corporate governance practices.

Corporate Governance Guidelines

To assist the Board of Directors in the exercise of its duties and responsibilities and to serve the best interests of us and our stockholders, the Board of Directors has adopted Corporate Governance Guidelines that set forth, among other things:

 

   

a governance matrix depicting the structure and committees of the Board.

 

   

the Board’s role in overseeing the management and conduct of our business, including:

 

   

the job description and specific functions of the Board and its committees;

 

   

Board membership criteria and core competencies required by members;

 

   

annual review and evaluation of the Chief Executive Officer led by the Chair of the Board in collaboration with the Compensation Committee;

 

   

annual senior management evaluation;

 

   

annual review and update, if appropriate, of the management succession plan;

 

   

risk management and oversight by the Audit and Compliance Committee; and

 

   

annual Board self-assessment to evaluate whether the Board is functioning effectively and meeting objectives and goals.

 

   

director qualifications and responsibilities, including:

 

   

individual director qualification standards and personal traits;

 

   

director nomination, selection and assessment;

 

   

director responsibilities to exercise common sense business judgment, exercise their fiduciary duties to all stockholders and exercise personal accountability through regular attendance and participation and investment of time and energy in our business;

 

   

commitment to support the needs of the Board and fully serve out the established Board term;

 

   

limits on other board service;

 

   

director orientation and continuing education;

 

   

director mentorship program;

 

   

notice of changes in principal employment or changes in independence; and

 

   

director compensation and independent/outside director stock ownership.

 

   

Board independence, including:

 

   

director independence standards and required reviews of each director’s independence;

 

   

Board leadership and the annual election of a Board Chair and Lead Independent Director (if the Board Chair is not independent) that are not officers;

 

   

the annual election of Company officers, including a president, chief executive officer and secretary;

 

   

Board job descriptions, including the Chair and the Lead Independent Director; and

 

   

independence and other qualifications for Board committee members.

 

 

 

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Board accountability, ethics and integrity, including:

 

   

adherence to the Board’s Conflict of Interest and Confidentiality Policy;

 

   

adherence to our Code of Conduct and the Board Code of Ethics;

 

   

regularly held executive sessions outside the presence of management; and

 

   

Board access to and retention of independent advisors.

 

   

Board structure, including:

 

   

Board size and review of the same;

 

   

Board class structure and term of each class;

 

   

term limits; and

 

   

resignation and failure to be re-elected.

 

   

Board committees, including:

 

   

standing committees and committee structure;

 

   

assignment and rotation of committee members and committee Chairs;

 

   

committee Chair job description; and

 

   

committee meeting frequency, length and agenda.

 

   

Board meetings, agenda and information, including:

 

   

regular meeting schedules and attendance expectations;

 

   

Board agenda process;

 

   

Board information flow, materials and presentations;

 

   

director access to senior management;

 

   

right to call a special meeting of the Board and related procedures; and

 

   

annual stockholder meeting and attendance.

 

   

Board interaction/communications with stockholders, analysts, institutional investors, member owners and the media where appropriate.

 

   

Board responsiveness to stockholder proposals that receive substantial support.

Under its charter, the Nominating and Governance Committee, in consultation with the Chair of the Board and the Chief Executive Officer, periodically reviews, revises, interprets and confirms compliance with the Corporate Governance Guidelines.

Code of Ethics

We have adopted a Corporate Code of Conduct, as well as a Board Code of Ethics and a Board Conflict of Interest Policy and Disclosure Statement, together our “code of ethics,” that apply, as applicable, to all employees, directors and officers, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. The purpose of the code of ethics is to deter wrongdoing and promote:

 

   

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

   

full, fair, accurate, timely and understandable disclosure in reports required to be filed with or submitted by us to the SEC and in other public communications;

 

 

 

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compliance with all applicable rules and regulations that apply to us and our officers and directors;

 

   

the prompt internal reporting of violations of the code of ethics to an appropriate person or persons identified in the code of ethics; and

 

   

accountability for adherence to the code of ethics.

We will disclose any future amendments to, or waivers from, certain provisions of these ethical policies and standards for officers and directors on the “Investors” section of our website at http://investors.premierinc.com promptly following the date of such amendment or waiver. Upon written request to our Corporate Secretary, we will also provide a copy of the code of ethics free of charge.

Corporate Website

We maintain a “Corporate Governance” area within the “Investors” section of our website and an “Ethics and Compliance” area within the “About Premier” section of our website where you can find copies of our principal governance documents and ethics policies. You may also request copies of these documents by contacting our Corporate Secretary at 13034 Ballantyne Corporate Place, Charlotte, North Carolina, 28277, or by calling 1-704-357-0022. Our “Corporate Governance” and “Compliance and Ethics” areas of our website are located at http://investors.premierinc.com/corporate-governance/ and https://www.premierinc.com/compliance-and-ethics, respectively, and include the following documents, among others:

 

   

Certificate of Incorporation;

 

   

Bylaws;

 

   

Corporate Governance Guidelines;

 

   

Lead Independent Director Policy;

 

   

Whistleblower Policy;

 

   

Insider Trading Policy;

 

   

Code of Conduct;

 

   

Group Purchasing Code of Conduct;

 

   

Board Code of Ethics;

 

   

Board Conflict of Interest Policy and Disclosure Statement;

 

   

Audit and Compliance Committee Charter;

 

   

Nominating and Governance Committee Charter;

 

   

Finance Committee Charter;

 

   

Compensation Committee Charter;

 

   

Conflict Advisory Committee Charter; and

 

   

Member Agreement Review Committee Charter.

We encourage our stockholders to read our governance documents, as we believe they illustrate our commitment to good governance practices and ethical business conduct.

Role of the Board in the Oversight of Risk

Our Board of Directors plays an active role in overseeing management of our risks. We have identified five primary areas of enterprise risk across our operations that are monitored and managed by our Board of Directors, management and internal auditors. These areas include risks associated with strategic, operational, financial, legal and information technology and systems, including cybersecurity. In conjunction with its management of these specific risk areas, our Board of Directors manages reputational risks across all of our operations. Our Board of Directors is primarily responsible for oversight of the strategic, operational and information technology and systems

 

 

 

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risks that we may encounter. The committees of our Board of Directors assist our full Board in risk oversight by addressing specific matters within the purview of each committee. Our Audit and Compliance Committee focuses on oversight of financial, legal and regulatory compliance, as well as ethical risks. The Audit and Compliance Committee oversees the cyber risk management program, which was developed by our President of Performance Services, and is designed to monitor, mitigate and respond to cyber risks, threats and incidents and reviews periodic reports from our President of Performance Services, including developments in cyber threat environment and cyber risk mitigation efforts. Our Finance Committee oversees financial risks related to capital allocation and financial forecasting. Our Compensation Committee, as discussed in more detail below, focuses on risks relating to executive compensation plans and arrangements, and our Nominating and Governance Committee focuses on reputational and corporate governance risks relating to our company including the independence of our Board of Directors.

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our full Board of Directors remains regularly informed regarding such risks through committee reports and otherwise. In addition, our Board and its committees receive regular reports from our Chief Executive Officer, President, Chief Administrative and Financial Officer, General Counsel, Chief Ethics and Compliance Officer and other members of senior management regarding areas of significant risk to us, including strategic, operational, financial, legal and regulatory, information technology and systems, cyber and reputational risks. We believe the leadership structure of our Board of Directors supports and promotes effective risk management and oversight.

The Compensation Committee reviews and considers our compensation policies and programs in light of the Board of Directors’ risk assessment and management responsibilities on an annual basis. Our human resources department in consultation with Mercer (US) Inc. (“Mercer”) prepared and presented to the Compensation Committee a risk assessment report that addressed the incentive compensation structure, plans and processes at all levels of our Company. The assessment included, among other things, a review of pay mix (fixed versus variable, cash versus equity and short- versus long-term), performance metrics, target setting, performance measurement practices, pay determination, mitigation practices such as our compensation recoupment policy, and overall governance and administration of pay programs. After reviewing this report and making inquiries of management, the Compensation Committee determined we have no compensation policies and programs that give rise to risks reasonably likely to have a material adverse effect on our Company.

Communications to Directors

Stockholders and other parties interested in communicating directly to the Board of Directors, any committee or any non-employee director may do so by writing to the address listed below:

PREMIER, INC.

BOARD OF DIRECTORS

13034 BALLANTYNE CORPORATE PLACE

CHARLOTTE, NORTH CAROLINA 28277

ATTENTION: [Addressee*]

C/O BELINDA A. MCCORD, CORPORATE SECRETARY

* Including the name of the specific addressee(s) will allow

us to direct the communication to the intended recipient.

All communications received as set forth in this paragraph will be reviewed by the office of our General Counsel for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board of Directors or any group or committee of directors, the General Counsel’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.

 

 

 

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Board Structure and Director Nominations

Board Structure and Meetings

The Board’s overarching responsibility is to advise and oversee the management and conduct of our business by our Chief Executive Officer and other members of management charged with the health and overall success of Premier’s business. To that end, our business, property and affairs are managed under the direction of our Board of Directors. Our Board size may not exceed 18 directors, and it must consist of a majority of independent directors that satisfy the NASDAQ listing standards discussed below. Our Board is currently comprised of 15 members, eight of whom are independent, six of whom are member-directors as discussed below and one of whom is our Chief Executive Officer, Ms. DeVore. The Board is divided into three classes (Class I, Class II and Class III) with staggered terms of three years each. The term of one class expires at each annual meeting of stockholders; thus, directors typically stand for election after three years, unless they are filling an unexpired term. Under our Corporate Governance Guidelines, no director may serve for more than two full three-year consecutive terms except for (i) the Chief Executive Officer; (ii) each director who is not a director, officer, employee or agent of, or otherwise affiliated with, any stockholder of ours; and (iii) a Director serving as Chair of the Board, whose term may be extended at the discretion of the Board.

Our Bylaws and Corporate Governance Guidelines provide that the Chair of the Board shall not be one of our officers. We believe that having a non-executive Chair of our Board creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board of Directors to monitor whether management’s actions are in the best interests of us and our stockholders. Our Chief Executive Officer and Board Chair work together to set the Board agenda. Board members are invited to make agenda suggestions, and the Board approves the annual schedule of Board and committee items. The Board Chair presides over Board meetings, coordinates the work of the committees of our Board of Directors and performs other duties delegated to the Chair by our Board of Directors. Committee assignments and designation of the committee Chair are made by the Board based upon recommendations of the Board Chair and Nominating and Governance Committee.

In the event that the Board Chair is not an independent director, the independent directors of the Board shall elect annually a Lead Independent Director upon the recommendation of the Nominating and Governance Committee. The Lead Independent Director serves as a liaison between the Board Chair and the independent directors and performs other responsibilities as assigned by the Board. Executive sessions of independent directors, held outside the presence of employee Board members and member-directors, are scheduled at each in-person Board meeting and may be called at any other Board or committee meeting. The Lead Independent Director presides over these independent-only executive sessions.

The Board of Directors adopted the foregoing structure to promote decision-making and governance independent of that of our management and to better perform the Board’s monitoring and evaluation functions. The role of Lead Independent Director was created to enhance our comprehensive plan of corporate governance and to support the role of the Chair as set forth in the Company’s bylaws and Corporate Governance Guidelines. Members of our Board of Directors are kept informed of our business through discussions with our Chief Executive Officer and other officers, by reviewing materials provided to them, by visiting our offices and by participating in meetings of the Board of Directors and its committees.

Under our Corporate Governance Guidelines, Board members are expected to prepare for and attend at least 75% of all Board and applicable committee meetings. The Board of Directors met 13 times during fiscal year 2020. In addition, the independent directors met in executive session seven times during fiscal year 2020. Each incumbent member of the Board of Directors attended 75% or more of the meetings of the Board of Directors and of the committees on which he or she served that were held during the period for which he or she was a director or committee member, respectively. In addition, under our Corporate Governance Guidelines, directors are encouraged to attend each annual meeting of stockholders. Except for Messrs. Fine (prior commitment), Reiner (prior commitment) and Shaw (health related conflict), all current directors who were serving as directors at the time of our 2019 Annual Meeting of Stockholders held on December 6, 2019 attended such annual meeting. We expect all of our directors to virtually attend the Annual Meeting.

 

 

 

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Criteria for Board Members

Our Corporate Governance Guidelines provide criteria applicable to both the composition of the Board as a whole and individual directors. The Board as a whole has been designed to possess all of the following core competencies, with each director contributing knowledge, experience and skills in at least one of the following domains:

 

   

senior executive level leadership experience;

 

   

group purchasing, value-based purchasing, pharmacy management and supply chain operations;

 

   

healthcare transformation, healthcare continuum of care and population management;

 

   

performance improvement, clinical quality improvement, patient safety, outcomes management, risk management and healthcare measurement;

 

   

information technology, cybersecurity and knowledge management;

 

   

outsourcing services;

 

   

finance, audit and major transactions/M&A/private equity/public equity;

 

   

national perspective on healthcare policy and advocacy;

 

   

healthcare insurance and payment systems; or

 

   

academic medical experience.

The Board has adopted a Board Competency and Succession Plan Policy as the guideline for the Nominating and Governance Committee in evaluating and nominating Board candidates. The Board recognizes that criteria change as the membership of the Board changes and considers the current make-up and requirements of the Board in its nomination process. To be considered for Board membership, individual directors should possess the following personal traits:

 

   

a strong strategic planning orientation, including the ability to view our goals and plans strategically;

 

   

ability to effectively oversee risk and innovation, thus safeguarding our mission and stockholder interests;

 

   

knowledge of effective governance policies and practices;

 

   

proven leadership skills as an executive in a successful organization;

 

   

ability to listen, engage, reflect and generally work effectively with other directors and management;

 

   

willingness to ask management and each other tough questions and challenge traditional thinking;

 

   

adeptness at managing change, ambiguity and complexity;

 

   

integrity backed by a record of ethical conduct;

 

   

understanding of the importance and implications of compliance with regulatory requirements;

 

   

interest and ability to serve in a Board leadership position (e.g., Board Chair, Lead Independent Director, committee Chair) in the future; and

 

   

ability to make a priority commitment to support the needs of the Board and to fully serve out the established Board term.

With respect to member-directors, the Board Competency and Succession Plan Policy requires consideration of the following characteristics:

 

   

type of stockholder (e.g., member owner, group affiliate);

 

   

type of organization (e.g., health system, hospital, other);

 

   

organization’s size and scope of services;

 

   

organization’s primary markets (e.g., urban, suburban, rural, safety net);

 

 

 

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geography;

 

   

level of engagement with us; and

 

   

candidate’s gender, ethnic background and age.

Board Diversity

Our Board Competency and Succession Plan Policy states that a Board Composition that is diverse in gender, ethnicity and age is an explicit goal of the candidate recruitment and nomination process. Both the Board of Directors and the Nominating and Governance Committee believe that diversity of skills, perspectives and experiences as represented on the Board as a whole, in addition to the primary factors, attributes or qualities discussed above, promote improved monitoring and evaluation of management on behalf of the stockholders and produce more creative thinking and solutions. The Nominating and Governance Committee considers, but does not base its choices solely on, the distinctive skills, perspectives and experiences that candidates diverse in gender, ethnic background, geographic origin and professional experience offer. Our Corporate Governance Guidelines do not explicitly provide limitations on Board service due to age.

Resignation Policy; Vacancies

Under our Corporate Governance Guidelines, our non-management directors must submit a letter of resignation upon resignation or retirement from, or termination of, the director’s principal current employment, or other similarly material changes in professional occupation or association. The Board is free to accept or reject the letter of resignation based on the best interests of the Board and stockholders and shall promptly notify such director of its decision.

A director appointed by the Board to fill a vacancy, including a vacancy created by a resignation, will serve until the next election of the class for which such director has been appointed and until his or her successor is elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.

Service on Multiple Boards or Audit Committees

As outlined in our Corporate Governance Guidelines, the Board recommends that directors serve on no more than four other public company boards. Directors are required to notify the Board Chair and the Nominating and Governance Committee Chair in advance of accepting an invitation to serve on another public company board or an appointment to serve on the audit or compensation committee of another public company board. The Board shall determine each director’s ability to serve effectively on our Board while simultaneously serving on other public company boards.

In accordance with the requirements of the SEC, if an Audit and Compliance Committee member simultaneously serves on the audit committee of more than three public companies, the Board must determine that such simultaneous service will not impair the ability of the director to effectively serve on our Audit and Compliance Committee. The determination will then be disclosed in our proxy statement for the annual meeting of stockholders or as otherwise required by applicable listing standards, rules and regulations.

Director Nomination Process

The Nominating and Governance Committee, in consultation with the Chair of the Board and the Chief Executive Officer, is responsible for identifying, considering, recommending, recruiting and selecting, or recommending that the Board select, candidates to fill open positions on the Board consistent with Board-approved criteria and qualifications for membership. It is the Board’s expectation that all Board members participate in Board recruitment efforts.

Internal Process for Identifying Candidates

The Board Competency and Succession Plan Policy is the guideline for the Nominating and Governance Committee in evaluating and nominating Board candidates. The Nominating and Governance Committee has two primary methods for identifying director nominees (other than those proposed by stockholders, as discussed below). First, on a periodic basis, the Committee solicits ideas for possible candidates from members of the Board of Directors, senior level executives and other individuals personally known to the members of the Board. Second, the Committee

 

 

 

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may from time to time use its authority under its charter to retain, at our expense, one or more search firms to identify candidates (and to approve such firms’ fees and other retention terms).

Ad Hoc Special Committee for Board Transition to a Majority Independent Board

In anticipation of our ceasing to qualify as a “controlled company” under NASDAQ rules and the corresponding requirement to have a Board comprised of a majority of independent directors within one year thereafter, the Board, based on the recommendation of the Nominating and Governance Committee, established a special committee (the “Special Committee”) in January 2019 to assist with the Board’s transition from its then-current composition to a majority of independent directors. The Special Committee included Messrs. Fine, Mayer, Statuto (Chair) and Shaw and Mss. DeVore and Wolf. The purpose of the Special Committee was to (1) develop recommendations for determining the process for identifying three member-directors to resign from the Board within the one-year period following the loss of our “controlled company” status under NASDAQ rules; and (2) interview and provide feedback to the Nominating and Governance Committee regarding prospective independent director candidates.

On July 31, 2019, we no longer qualified for the “controlled company” exemption under NASDAQ rules. As a result, we were required to fully comply with all general NASDAQ rules regarding board and committee composition by July 31, 2020. Based upon the recommendations of the Special Committee, during fiscal year 2020, the Board appointed two new independent directors and accepted the resignations of three member-directors. The Special Committee completed its work in April 2020. We are now in compliance with all NASDAQ rules regarding board and committee composition.

Proposals for Director Nominees by Stockholders

The Nominating and Governance Committee will consider written proposals from stockholders for director nominees that are timely and properly noticed. In considering candidates submitted by stockholders, the Nominating and Governance Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. In accordance with Article I, Section 12 of our Bylaws, to be timely, stockholder notice must be delivered to or mailed and received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 20 days, or delayed by more than 70 days, from such anniversary, proposed nominee(s) and related notice, in order to be timely, must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. The Nominating and Governance Committee received no nominee recommendations from stockholders for the Annual Meeting. Stockholder nominations for our 2021 annual meeting of stockholders must be received at our principal executive offices on or after August 6, 2021 and not later than September 5, 2021. A stockholder’s notice must be in the form set forth in Article I, Section 12 of our Bylaws and must be addressed to Premier, Inc., 13034 Ballantyne Corporate Place, Charlotte, North Carolina 28277, Attention: Corporate Secretary.

Article I, Section 12 of our Bylaws requires, among other things, that the notice must set forth:

(1) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected;

(2) the name and record address of the stockholder giving notice and the beneficial owner, if any, on whose behalf the nomination is being made;

(3) the class and number of shares of our stock which are owned beneficially and of record by such stockholder and such beneficial owner;

(4) a representation that the stockholder intends to appear in person or by proxy at the meeting to propose such nomination;

(5) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends to (i) deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to elect the nominee and/or (ii) solicit proxies from stockholders in support of such nominee;

 

 

 

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(6) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder;

(7) a description of any agreement, arrangement or understanding with respect to the nomination and/or the voting of shares of any class or series of our stock between or among the stockholder giving the notice, the beneficial owner, if any, on whose behalf the nomination is made, any of their respective affiliates or associates and/or any others acting in concert with any of the foregoing (collectively, “proponent persons”); and

(8) a description of any agreement, arrangement or understanding (including without limitation any contract to purchase or sell, acquisition or grant of any option, right or warrant to purchase or sell, swap or other instrument) the intent or effect of which may be (i) to transfer to or from any proponent person, in whole or in part, any of the economic consequences of ownership of any security of ours; (ii) to increase or decrease the voting power of any proponent person with respect to shares of any class or series of our stock and/or (iii) to provide any proponent person, directly or indirectly, with the opportunity to profit or share in any profit derived from, or to otherwise benefit economically from, any increase or decrease in the value of any security of ours.

A stockholder proposing a nominee for the annual meeting must update and supplement the notice required by Article I, Section 12 of our Bylaws so that the information in the notice is true and correct as of the record date for the annual meeting and as of the date that is 15 days prior to the annual meeting or any adjournment or postponement thereof; such update and supplement shall be delivered in writing to the Corporate Secretary at our principal executive offices not later than five days after the record date for the meeting (in the case of any update and supplement required to be made as of the record date), and not later than 10 days prior to the date for the meeting or any adjournment or postponement thereof (in the case of any update and supplement required to be made as of 15 days prior to the meeting or any adjournment or postponement thereof). We may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as a director. Any stockholder that intends to submit a nominee should read the entirety of the requirements in our Bylaws, particularly Article I, Section 12, which can be found under the “Corporate Governance” area within the “Investors” section of our website at http://investors.premierinc.com/corporate-governance/.

Evaluation of Candidates

The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each of them, including incumbents, based on the same criteria. The selection process involves rigorous vetting of both independent and non-independent director candidates by the Nominating and Governance Committee, the Chair of the Board and senior management to ensure the best qualified individuals are appointed to the Board. Ultimately, background and reference checks will be conducted, and the Committee will meet to finalize its list of recommended candidates for the Board’s consideration. The candidates recommended for the Board’s consideration will be those individuals who will create a Board of Directors that is strong in its collective knowledge of, and diverse in skills and experience with respect to, accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, information technology and cybersecurity, industry knowledge, corporate governance and global markets.

Director Independence

Transition to a Majority Independent Board

On July 31, 2019, we ceased to qualify as a “controlled company” under NASDAQ rules. Accordingly, we were required by NASDAQ rules to have (i) a Board comprised of a majority of independent directors on or prior to July 31, 2020, (ii) each of our Compensation and Nominating and Governance Committees comprised of a majority of independent directors by October 31, 2019 and (iii) fully independent Compensation and Nominating and Governance Committees on or prior to July 31, 2020. We historically maintained an Audit and Compliance Committee comprised entirely of independent directors in accordance with SEC and NASDAQ rules. As discussed above, we established a Special Committee in January 2019 to assist the Board in its compliance with all NASDAQ rules in a timely manner. Effective as of July 31, 2020, we are in compliance with all general NASDAQ rules regarding board and committee composition, including having a majority of independent directors on the Board.

 

 

 

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Review of Director Independence and Standards for Independence

On August 5, 2020, the Board of Directors undertook its review of the independence of its directors and director nominees as independent directors based on our Corporate Governance Guidelines. Independent directors must meet the standards of independence established by NASDAQ. The Board reviews annually the independence of each director, taking into consideration the recommendations of the Nominating and Governance Committee. Directors have an affirmative obligation to inform the Board of any material changes in their circumstances or relationships that may impact their designation by the Board as independent.

The Board of Directors assessed whether any director had a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of such director. In addition, the Board assessed whether any of the following relationships existed between us and the director or the director’s family members (i.e., spouse, parents, children and siblings or anyone residing in the director’s home) that would prohibit a finding of independence under NASDAQ rules:

 

   

at any time during the past three years was the director employed by us;

 

   

has the director or a family member of the director accepted any compensation from us in excess of $120,000 during any period of 12 consecutive months within the three years preceding the determination of independence, other than the following: (i) compensation for Board or Board committee service; (ii) compensation paid to a family member who is our employee (other than an executive officer) or (iii) benefits under a tax-qualified retirement plan, or non-discretionary compensation;

 

   

does the director have a family member who is, or at any time during the past three years was, employed by us as an executive officer;

 

   

is the director or his family member a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in our securities or (ii) payments under non-discretionary charitable contribution matching programs;

 

   

is the director or his family member employed as an executive officer of another entity where at any time during the past three years any of our executive officers served on the compensation committee of such other entity; or

 

   

is the director or his family member a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

In connection with this determination, on an annual basis, each director and executive officer is required to complete a questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. There were no such transactions indicated for fiscal year 2020.

Determination of Director Independence

Based on its review at the August 5, 2020 meeting, the Board of Directors affirmatively determined that each of John T. Bigalke, Helen M. Boudreau, Stephen R. D’Arcy, Jody R. Davids, David H. Langstaff, William E. Mayer, Richard J. Statuto and Ellen C. Wolf is an independent director in accordance with NASDAQ rules and our Corporate Governance Guidelines. Each of Barclay Berdan, Peter S. Fine, Marc D. Miller, Marvin R. O’Quinn, Scott Reiner and Terry D. Shaw is a member-director. Ms. DeVore, who is our Chief Executive Officer, was not deemed to be independent. Although member-directors may satisfy the quantifiable criteria set forth in the director independence definition contained in the NASDAQ rules, because of the member-directors’ and/or their employers’ relationship to us, we have deemed member-directors as not independent.

Each of our independent directors satisfies the definition of “independent director” contained in Rule 5605 of the NASDAQ listing standards. As a result of the review and determination above, the Board determined that:

 

   

each member of the Audit and Compliance Committee was an independent director under our Corporate Governance Guidelines and otherwise meets the qualifications for membership on such committee imposed by NASDAQ and other applicable laws and regulations; and

 

 

 

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each member of the Audit and Compliance Committee had accounting or related financial management expertise and was financially literate, and otherwise meets the audit committee membership requirements imposed by NASDAQ, our Corporate Governance Guidelines and other applicable laws and regulations; and that Ms. Wolf qualifies as an “audit committee financial expert” within the meaning of SEC regulations.

In addition, there are no arrangements or understandings known to us between any of the directors nominated for election to the Board of Directors and any other person pursuant to which a director was or is to be elected as a director or nominee, other than any arrangements or understandings with our directors or officers acting solely in their capacities as such. None of our directors, nominees or executive officers is a party to any material proceedings adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

Committees of the Board of Directors

Committee Memberships and Meetings

The Board reviews and determines the membership of our Board committees at least annually, with input from the Nominating and Governance Committee. Our Board of Directors has the following five standing committees, each of which is governed by a charter and reports its actions and recommendations to the Board of Directors: Audit and Compliance Committee, Compensation Committee, Nominating and Governance Committee, Finance Committee and Member Agreement Review Committee.

The following table shows the number of meetings held in fiscal year 2020 and the current membership of each of the five Board committees, and the Conflict Advisory Committee, which is overseen by the Audit and Compliance Committee.

 

           

Directors:

 

Audit and
Compliance

Committee(1)

  Compensation
Committee
  Nominating and
Governance
Committee
  Finance
Committee
  Member
Agreement
Review
Committee
 

Conflict

Advisory
Committee
(2)

                         

Barclay Berdan

                     

John T. Bigalke

 

 

               

Helen M. Boudreau

                     

Stephen R. D’Arcy

     

         

Jody R. Davids

               

Susan D. DeVore

                     

Peter S. Fine

              C        

David H. Langstaff        

 

             

William E. Mayer

      C         C    

Marc D. Miller

                     

Marvin R. O’Quinn

                     

Scott Reiner

                     

Terry D. Shaw

                       

Richard J. Statuto

        C            

Ellen C. Wolf

  C              

Number of Meetings

 

9

 

6

 

5

 

5

 

5

 

5

C Chair         Member

 

(1)

The Audit and Compliance Committee also oversees a Disclosure Committee that includes, among others, our General Counsel, Corporate Controller and Chief Ethics and Compliance Officer.

(2)

The Conflict Advisory Committee is chaired by our Chief Ethics and Compliance Officer and includes the directors identified above, as well as our General Counsel.

 

 

 

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Special Committees

The Board established the Special Committee in January 2019 to assist with the Board’s transition from its then-current composition to a majority of independent directors in accordance with NASDAQ rules. The Special Committee included Messrs. Fine, Mayer, Statuto (Chair) and Shaw and Mss. DeVore and Wolf. In addition to interviewing director candidates, the Special Committee met once alone and once with the Nominating and Governance Committee in fiscal 2020 and completed its work in April 2020.

The Board also established a second Special Committee in January 2020 to review and evaluate the restructuring that we announced in August 2020. The Special Committee was comprised solely of independent directors and met once in fiscal 2020, twice in fiscal 2021 and completed its work in August 2020.

Board Committee Charters

As discussed in more detail in the descriptions of each of our Board committees below, each of our Board committees operates under a written charter adopted by the Board. The charters set forth the purpose, objectives and responsibilities of the respective committee and discuss matters such as committee membership requirements, number of meetings and the setting of meeting agendas. The charters are assessed periodically by the Nominating and Governance Committee and the respective committee and are updated by the Board as needed. The Board committee charters are available under the “Corporate Governance” area within the “Investors” section of our website at http://investors.premierinc.com/corporate-governance/. You may also request copies by contacting our Corporate Secretary at 13034 Ballantyne Corporate Place, Charlotte, North Carolina, 28277, or by calling

1-704-357-0022.

Audit and Compliance Committee

Our Audit and Compliance Committee is intended to meet the requirements of a separately designated standing audit committee as defined under Section 3(a)(58)(A) of the Exchange Act. The Audit and Compliance Committee must consist of at least three members of the Board, with each member satisfying the independence requirements for directors and audit committee members under NASDAQ rules and Rule 10A-3 of the Exchange Act. Each member of the Audit and Compliance Committee must be financially literate, and at least one member of the Audit and Compliance Committee must have past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background demonstrating financial management experience, as each such qualification is interpreted by the Board in its business judgment. In addition, to the extent practicable, at least one member of the Audit and Compliance Committee shall be an “audit committee financial expert” as such term is defined by the SEC.

The specific responsibilities of the Audit and Compliance Committee set forth under its charter are, among others, to:

 

   

review and discuss with management and the independent auditors the annual audited and quarterly financial statements and other related disclosure prior to filing our annual report on Form 10-K and quarterly reports on Form 10-Q, including our disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations;

 

   

review any significant issues regarding, or proposed changes to, our auditing and accounting principles and practices identified by the independent auditors, the internal auditors or management;

 

   

review financial and business risk exposures and the steps management has undertaken to monitor and control such exposures, including our procedures and any related policies with respect to risk assessment and risk management;

 

   

have responsibility for the appointment, compensation, retention, termination (when appropriate) and oversight of the work of the independent auditors and the internal auditors;

 

   

pre-approve all audit and permitted non-audit related services (including the fees and terms thereof) to be performed for us by our independent auditors, subject to the de minimis exception set forth in Section 10A(i)(1)(B) of the Exchange Act;

 

 

 

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at least annually, review a report by our independent auditors regarding their internal quality control procedures, material issues raised by certain reviews, inquiries or investigations relating to independent audits within the last five years and relationships between the independent auditors and us;

 

   

consider at least annually the independence of the independent auditors, discussing with the independent auditors, if necessary, relationships identified in the auditors’ report, review the experience and qualifications of the lead partner each year and determine that all partner rotation requirements are executed;

 

   

discuss with management and the independent auditors, as appropriate, our earnings press releases and corporate policies with respect to the type and presentation of information to be included in earnings releases (paying particular attention to any use of “pro forma” or “adjusted” non-GAAP (as defined below) financial information) and our financial information and earnings guidance provided to investors, analysts and rating agencies;

 

   

receive reports from the independent auditors and management regarding, and review the adequacy and effectiveness of, our internal controls, including any significant deficiencies or material weaknesses in internal controls and significant changes in such controls reported to the committee by the independent auditors, the internal auditor or management, and any special audit steps adopted in light of material deficiencies; receive reports from management regarding, and review the adequacy and effectiveness of, our disclosure controls and procedures, including our policies and procedures to assess, monitor and manage business risk and other legal and ethical compliance programs;

 

   

receive and review reports from the independent auditors on: (i) our critical accounting policies and practices; (ii) material alternative treatments of financial information within generally accepted accounting principles (“GAAP”) that have been discussed with our management, including the ramifications of the use of such alternative treatments and the disclosures or treatments preferred by the independent auditors, and (iii) other material written communications between the independent auditors and management;

 

   

establish procedures for the receipt, retention and treatment of complaints received by our directors, officers and employees regarding illicit or illegal business practices and conduct and establish a process for investigation and proper resolution of any issues so raised;

 

   

review and approve, in accordance with our Code of Conduct, all “related party transactions” requiring disclosure under SEC Regulation S-K, Item 404 (primarily through the oversight of and collaboration with the Conflict Advisory Committee discussed below);

 

   

review with our General Counsel and independent auditors (i) legal matters that may have a material impact on our financial statements; (ii) any fraud involving our management or other employees who have a significant role in our internal controls; (iii) compliance policies and (iv) material reports or inquiries received from regulators or governmental agencies that raise material issues regarding our financial statements and accounting or compliance policies; and

 

   

advise the Board with respect to our policies and procedures for compliance with applicable laws and regulations, as well as general oversight of our corporate ethics and compliance policies.

As noted above, the Audit and Compliance Committee also oversees our cyber risk management program that is designed to monitor, mitigate and respond to cyber risks, threats and incidents and reviews periodic reports from our President of Performance Services and our independent auditors, including developments in cyber threat environment and cyber risk mitigation efforts.

The Audit and Compliance Committee has established a whistleblower policy to (i) facilitate reporting in good faith any complaint of inappropriate conduct and participation in the investigation of such complaint, (ii) encourage proper individual conduct, (iii) alert the Audit and Compliance Committee of potential issues before such inappropriate conduct has serious adverse consequences and (iv) instill protections for bringing such inappropriate conduct to our Company’s attention.

For additional information on the Audit and Compliance Committee’s role and its oversight of the independent auditors during fiscal year 2020, see “Report of the Audit and Compliance Committee.”

In connection with its duties, the Audit and Compliance Committee reviews and evaluates, at least annually, the performance of the committee and its members, may obtain the advice and assistance of outside advisors, including consultants and legal and accounting advisors, and performs all acts reasonably necessary to fulfill its responsibilities and achieve its objectives.

 

 

 

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Compensation Committee

We have a separately standing Compensation Committee which has a charter requiring no fewer than three members, each of whom satisfies the independence requirement for directors under NASDAQ rules and qualifies as a “nonemployee director” within the meaning of SEC Rule 16b-3 under the Exchange Act.

The Compensation Committee’s purpose and objectives are to discharge the Board’s responsibilities related to the compensation of our and our subsidiaries’ executive officers. The committee has overall responsibility for approving and evaluating all of our and our subsidiaries’ compensation plans, policies and programs as applicable to the executive officers.

The specific responsibilities of the Compensation Committee are, among others, to:

 

   

at least annually, review and approve the annual base salaries and annual incentive opportunities of the executive officers; and periodically and as and when appropriate, review and approve the following items as they affect the executive officers: (i) all other incentive awards and opportunities, including both cash-based and equity-based awards and opportunities; (ii) any employment agreements and severance arrangements; (iii) any change in control agreements and change in control provisions affecting any elements of compensation and benefits; and (iv) any special or supplemental compensation and benefits for the executive officers and individuals who formerly served as executive officers, including supplemental retirement benefits and perquisites provided to them during and after employment;

 

   

make recommendations to the Board with respect to the structure of overall incentive and equity-based plans and adopt, amend or terminate plans consistent with the approved structure;

 

   

take all permitted actions to administer and interpret our equity compensation plans and other long-term compensation plans and programs covering executive officers;

 

   

review, approve and oversee all equity award granting practices, and the stock ownership guidelines for senior management and directors and monitor compliance with such guidelines;

 

   

review and recommend to the Board the compensation of the non-management directors no less frequently than every three years;

 

   

review and discuss with management the Compensation Discussion and Analysis and related disclosures as may be required by the rules and regulations of the SEC;

 

   

determine annually whether any conflicts of interest exist on the part of any executive compensation consultants retained by the Committee, and if so, ensure disclosure of such conflicts, including the nature of the conflict and how it was addressed, in our proxy statement;

 

   

evaluate the outcome of the advisory vote of the stockholders regarding “say-on-pay” and make recommendations or take appropriate actions in response to such advisory vote;

 

   

in conjunction with the Board, oversee the management development and succession planning process (including succession planning for emergencies) for the Chief Executive Officer and the Chief Executive Officer’s direct reports;

 

   

monitor our compliance with the requirements under the Sarbanes-Oxley Act of 2002 relating to loans to directors and officers, and with all other applicable laws affecting employee compensation and benefits; and

 

   

delegate authority to one or more subcommittees as it deems appropriate to carry out its responsibilities.

In connection with its duties, the Compensation Committee reviews and evaluates, at least annually, the performance of the Committee and its members, may obtain the advice and assistance of outside advisors, including consultants and legal and accounting advisors, and performs all acts reasonably necessary to fulfill its responsibilities and achieve its objectives. The Compensation Committee has the sole authority to set the compensation for, and to terminate the services of, its advisors. As discussed in further detail below under “Compensation Committee Report—Executive Compensation—Role of the Compensation Consultant,” the Compensation Committee directly engaged Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), to provide advice and recommendations to the Compensation Committee on the amount and form of executive officer and Board of Director compensation. The Compensation Committee has reviewed the services that Mercer provides to the

 

 

 

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Compensation Committee and otherwise to us and our management, as well as the services that each individual employee of Mercer provides to us. Based on this review, the Compensation Committee has determined Mercer has no conflict of interest in providing advisory services to us.

Nominating and Governance Committee

We have a separately standing Nominating and Governance Committee. The Nominating and Governance Committee must be comprised of three or more directors as determined by the Board, in accordance with all applicable rules, regulations and stock exchange requirements. Each member of the Nominating and Governance Committee must satisfy the independence requirements for directors under the NASDAQ rules.

The purpose of the Nominating and Governance Committee is to (i) assist the Board by identifying and nominating individuals qualified to become directors, consistent with criteria approved by the Board; (ii) take a leadership role in shaping the corporate governance of the Company; (iii) oversee the evaluation of the Board and management and (iv) recommend to the Board director nominees for each of the Board’s committees. The Nominating and Governance Committee has authority to retain and terminate search firms used to identify director candidates and to approve any such search firm’s fees and other retention terms.

The specific responsibilities of the Nominating and Governance Committee are, among others, to:

 

   

recommend the criteria and qualifications for membership on the Board;

 

   

identify, consider, recommend, recruit and select, or recommend that the Board select, candidates to fill open positions on the Board, including nominees recommended by stockholders;

 

   

develop and periodically evaluate policies with regard to the consideration of director candidates recommended by stockholders;

 

   

establish a process for identifying and evaluating nominees for director;

 

   

conduct appropriate inquiries into the backgrounds and qualifications of possible candidates;

 

   

recommend director nominees for approval by the stockholders;

 

   

recommend director nominees for each of the Board’s committees;

 

   

review and recommend proposed changes to our Certificate of Incorporation and Bylaws;

 

   

oversee the Board committee charters and policies;

 

   

periodically review, revise, interpret and confirm compliance with the Corporate Governance Guidelines;

 

   

establish and maintain an ongoing succession planning process for directors, Board leaders and Board committee members;

 

   

recommend ways to enhance services to, and improve communications and relations with, stockholders;

 

   

oversee periodic self-evaluations by the Board of its performance;

 

   

evaluate the size, needs and effectiveness of the Board;

 

   

recommend improvements to our corporate governance;

 

   

oversee the Board orientation process for new directors and the development by the Chief Executive Officer of programs for continuing education for all directors;

 

   

monitor the functions of the various committees of the Board and conduct periodic reviews of their contributions;

 

   

conduct director self- and peer-assessments on a regular basis/interval and regularly review each independent director’s continuation on the Board through this process;

 

   

establish criteria for an annual performance evaluation of the Committee by the Board; and

 

   

participate in evaluating the performance of the Chief Executive Officer.

 

 

 

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In connection with its duties, the Nominating and Governance Committee reviews and evaluates, at least annually, the performance of the Committee and its members, may obtain the advice and assistance of outside advisors, including consultants and legal and accounting advisors, and performs all acts reasonably necessary to fulfill its responsibilities and achieve its objectives.

Finance Committee

We have a separately standing Finance Committee. The Finance Committee must be comprised of at least three directors. The Finance Committee is composed solely of independent directors and member-directors. There are no employee-directors on the Finance Committee. The purpose of the Finance Committee is to assist the Board in its oversight of our financial condition, strategies and capital structure.

The specific responsibilities of the Finance Committee are, among others, to:

 

   

provide oversight of our financial affairs, including: (i) reviewing the financial condition of us and our subsidiaries and (ii) reviewing, advising and making recommendations to the Board regarding proposed operating budgets for us and our subsidiaries;

 

   

review our financial policies as they relate to the Committee’s responsibilities;

 

   

review and recommend annual limits for expenditures and borrowings;

 

   

review, recommend and monitor significant mergers, acquisitions, divestitures, joint ventures, minority investments and other debt and equity investments;

 

   

review and recommend to the Board management’s recommendations to the Committee for significant capital expenditures, including for real estate, facilities and information technology;

 

   

review management’s plans and objectives for our capitalization, including (i) the structure and amount of equity and debt desired to meet our financing needs; (ii) anticipated sources and uses of cash and (iii) our target credit rating;

 

   

review and make recommendations to the Board regarding management’s recommendations to the Committee with respect to (i) new offerings of equity and debt securities, stock splits, credit agreements, including material changes thereto, and our investment policies; (ii) dividends declared by us and distributions by Premier LP; (iii) any authorization for repurchases of our stock and (iv) our Corporate Cash Investment Policy;

 

   

review with management our strategies for managing significant financial risks and contingent liabilities including the use of hedges, derivative instruments, insurance coverage and related costs and other similar risk management techniques; and

 

   

carry out such other activities within the scope of its primary purpose or as the Board may from time to time delegate to it.

The Finance Committee also reviews and evaluates, at least annually, the performance of the Committee and its members. In connection with its duties, the Finance Committee may obtain the advice and assistance of outside advisors, including consultants and legal and accounting advisors, and perform all acts reasonably necessary to fulfill its responsibilities and achieve its objectives.

Member Agreement Review Committee

We have a separately standing Member Agreement Review Committee. The Member Agreement Review Committee must be comprised of at least three directors and the Chief Executive Officer. The Member Agreement Review Committee is currently composed of four independent directors and the Chief Executive Officer. The purpose of the Member Agreement Review Committee is to review and provide feedback to our management with respect to non-ordinary course transactions between us or our subsidiaries and our members, particularly entering into member agreements that provide for “savings guarantees” or “fees at risk.” “Savings guarantee” means an arrangement in which we or our subsidiary contractually provides to identify and/or implement a specific amount of savings for a customer and will pay cash for any shortfall. “Fees at risk” means a consulting arrangement in which we contractually provide to identify and/or implement a certain amount of savings and will have our consulting fees reduced on a proportionate basis or will continue to provide consulting resources at no charge to the customer in the event that such savings are not achieved (until such savings are achieved).

 

 

 

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      CORPORATE GOVERNANCE AND BOARD STRUCTURE

 

The specific responsibilities of the Member Agreement Review Committee are, among others, to:

 

   

assess risks in connection with agreements entered into with members;

 

   

review the status of risk-based agreements on a periodic basis;

 

   

review and address the outcome of significant risk-based proposals; and

 

   

together with the full Board, approve any increase to the aggregate permitted level of risk for management to enter into an agreement that would cause the then-current permitted level of risk to be exceeded.

The Member Agreement Review Committee also reviews and evaluates, at least annually, the performance of the Committee and its members. In connection with its duties, the Member Agreement Review Committee may obtain the advice and assistance of outside advisors, including consultants and legal and accounting advisors, and perform all acts reasonably necessary to fulfill its responsibilities and achieve its objectives.

Conflict Advisory Committee

The Audit and Compliance Committee of the Board of Directors maintains a Conflict Advisory Committee. The Conflict Advisory Committee must be comprised of our General Counsel, our Chief Ethics and Compliance Officer and at least three independent directors. The Conflict Advisory Committee is currently comprised of four independent directors, our General Counsel and our Chief Ethics and Compliance Officer, who chairs the Committee. The purpose of the Conflict Advisory Committee is to provide advice and recommendations to the Audit and Compliance Committee such that each of our directors and officers can exercise the powers and duties thereof in the best interests of us and our stockholders and not to further the interests of such director or officer or the interests of another person (including a family member) or entity, or any member organization. The Conflict Advisory Committee is an advisory committee, and its members serve in a non-fiduciary capacity and have no independent authority to act on our behalf.

The specific responsibilities of the Conflict Advisory Committee are, among others, to:

 

   

investigate, review and evaluate any potential “conflict of interest” (as defined below);

 

   

determine the facts and circumstances regarding any such conflict of interest or potential conflict of interest referred to it by the Audit and Compliance Committee and recommend to the Audit and Compliance Committee what action, if any, should be taken with respect to the matter;

 

   

regularly review and assess the effectiveness of the Board Conflict of Interest Policy and recommend any changes to the Audit and Compliance Committee for approval;

 

   

carry out any other duties delegated by the Audit and Compliance Committee that relate to potential conflicts of interest; and

 

   

perform any other activities consistent with its charter and applicable law as the Conflict Advisory Committee deems necessary or appropriate.

As used in the Conflict Advisory Committee charter, the term “conflicts of interest” refers to (i) any matter that the Board believes may involve a conflict of interest between us or any of our affiliates, on the one hand, and any of our officers or directors or their affiliates, on the other hand, and (ii) any material Related Party transaction (as such term is defined in the Board Conflict of Interest Policy), including transactions between us or any of our affiliates, on the one hand, and any of our officers or directors or their affiliates, on the other hand.

The Conflict Advisory Committee conducts an annual performance evaluation of itself, including an evaluation of compliance with its charter, pursuant to the Board self-assessment process. The Conflict Advisory Committee annually reviews and reassesses the adequacy of its charter and recommends any proposed changes to the Audit and Compliance Committee for approval. The Conflict Advisory Committee may request any of our officers or employees or our outside counsel to attend its meetings or to meet with any members of, or consultants to, the Conflict Advisory Committee.

 

 

 

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COMPENSATION OF DIRECTORS

Fiscal 2020 Directors’ Compensation Policy

Our Board has approved and we maintain a Directors’ Compensation Policy to provide an incentive to attract and retain the services of qualified persons to serve as directors. The policy applies to each director who is not an employee of, or compensated consultant to, us or any of our affiliates (“non-employee director”). The policy is designed to achieve the following key objectives:

 

   

align the interests of the non-employee directors and stockholders;

 

   

support overall organizational objectives and encourage the creation of stockholder value;

 

   

attract and retain high quality talent;

 

   

reflect the broad spectrum of talent and diverse sources of market data;

 

   

target median competitive pay levels, as evaluated no less frequently than every three years; and

 

   

be simple to understand and administer.

The Compensation Committee and the Board review the policy from time to time to assess whether any adjustments to the type and amount of director compensation should be made in order to fulfill the objectives of the policy. The Board, based on the recommendation of the Compensation Committee, approved the Directors’ Compensation Policy in June 2019. The Compensation Committee’s recommendation was based upon market analysis of director compensation levels and practices generally and within the Company’s peer group conducted by and discussed with the Compensation Committee’s independent compensation consultant. The Directors’ Compensation Policy was amended in January 2020 to provide compensation to the Board’s then newly established Lead Independent Director.

Under our 2013 Equity Incentive Plan, annual cash fees (including cash retainers and meeting fees) and equity compensation that may be earned during a calendar year cannot exceed $500,000.

For Fiscal 2020, the following table sets forth the compensation elements and levels for non-employee directors and reflects the compensation for the enhanced responsibilities and time commitment associated with the positions.

 

   
     

Compensation Element

  

Compensation Amount

 

Annual

Retainer

  

Cash Retainer

  

 

$80,000

 

  

Equity Retainer (or Cash Award, if applicable)(1)(2)

  

 

$155,000/$125,000

 

Additional

Retainer Fees

  

Board Chair

  

 

$60,000

 

  

Lead Independent Director

  

 

$30,000

 

  

Committees

  

Chair

    

Member

 
  

Audit and Compliance Committee

  

$

30,000

 

  

$

15,000

 

  

Compensation Committee

  

$

30,000

 

  

$

15,000

 

  

Nominating and Governance Committee

  

$

15,000

 

  

$

7,500

 

  

Member Agreement Review Committee

  

$

15,000

 

  

$

7,500

 

  

Finance Committee

  

$

15,000

 

  

$

7,500

 

  

Conflict Advisory Committee

  

$

15,000

 

  

$

7,500

 

  

Short-term Ad Hoc Committee

  

$

10,000

 

  

$

5,000

 

Other

  

Charitable Contribution

  

 

$1,000

 

 

(1)

Each non-employee director will receive an annual equity award of restricted stock units valued at $155,000, with the exception of any director whose employer prohibits the receipt by such individual of equity-based awards from Premier. Non-employee directors prohibited from receiving equity-based compensation will receive an annual cash award of $125,000 in lieu of the annual equity award.

 

 

 

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(2)

The grant date of the annual equity award, and the annual cash award for directors who are prohibited from receiving equity, is the earlier of the first business day following the annual stockholders meeting or December 15. The annual equity award, and any annual cash award granted in lieu of the annual equity award, will vest in full one year after the grant date and immediately upon a change in control.

Directors who are also our employees do not receive cash or equity compensation for service on the Board in addition to compensation payable for their service as employees of the Company.

Fiscal 2020 Components of Director Compensation

Cash Retainer and FeesThe amounts in the “Fees Earned or Paid in Cash” column under the Fiscal Year 2020 Director Compensation Table below are cash retainers earned for serving on our Board, as its Chair or Lead Independent Director, and on its committees and as committee Chairs during fiscal year 2020. All annual retainers are paid quarterly. Each outside director receives his or her cash compensation after first being elected or appointed to the Board on a pro-rated basis for the number of days during which he or she provides service. If an outside director dies, resigns or is removed during any quarter, he or she shall be entitled to a cash payment on a pro-rated basis through his or her last day of service.

Equity or Cash Awards—On December 9, 2019, each non-employee director then serving on the Board received an award of restricted stock units (RSUs) with a grant date fair value, computed in accordance with FASB Accounting Standards Codification, Compensation—Stock Compensation (Topic 718), of $155,019, with the exception of any non-employee director whose employer prohibited the receipt by such individual of equity-based awards from Premier. If a director provides a written certification stating that he or she is prohibited by his or her employer from receiving equity-based compensation from Premier, then such director will receive an annual cash award of $125,000 in lieu of the annual equity award. With respect to equity grants, grant date fair value assumptions are consistent with those disclosed in Note 14—Stock-Based Compensation to our Consolidated Financial Statements in our 2020 Form 10-K. In fiscal year 2020, each non-employee director, except Barclay Berdan and Terry D. Shaw, was awarded 4,038 RSUs, with a grant date fair market value of $38.39 per share based on the closing price of our common stock on the award date, December 9, 2019. Each of Barclay Berdan and Terry D. Shaw received a cash award of $125,000. Each annual equity award, and each annual cash award granted in lieu of the annual equity award, will vest one full year after the grant date. Directors who begin their service mid-year will receive a pro-rated equity or cash award, as applicable.

Expense ReimbursementEach non-employee director will be reimbursed for his or her reasonable out-of-pocket business expenses incurred in connection with attending meetings of the Board and its committees or in connection with other business related to the Board. Each non-employee director will also be reimbursed for his or her reasonable out-of-pocket business expenses authorized by the Board or one of its committees that are incurred in connection with attendance at meetings with our management.

Additional ServicesOn occasion, short-term ad hoc committees may be formed to address a particular oversight need. In the event that an ad-hoc committee is formed, the committee Chair shall be paid an annual retainer of $10,000 and committee members shall be paid a member retainer of $5,000. The Board has the authority to provide additional compensation to directors for ad hoc requests that require a substantial amount of time and/or work.

All Other CompensationEach director is entitled annually to direct an amount of $1,000 to his or her selected not-for-profit organization during the holiday season in lieu of receipt of a holiday gift. No compensation or benefits other than those described above are payable to any directors for Board service.

Director Education Policy

We believe that we and our stockholders are best served by a Board of Directors comprised of individuals who are well versed in modern principles and “best practices” of corporate governance and other subject matters relevant to board service, including matters related to the healthcare industry, and who thoroughly comprehend the role and responsibilities of board membership. Under our Director Education Policy, we provide both internal and external educational opportunities and association memberships for our directors. To encourage continuing director education, we reimburse directors up to $7,500 annually for attending U.S.-based director education programs under this policy. Amounts reimbursed include all reasonable costs associated with attending each program, including travel, lodging and meals. Directors serving on multiple boards are encouraged to obtain pro rata reimbursement of their director education expenses from each company that they serve, but we will nonetheless reimburse 100% of the costs if this is not practicable.

 

 

 

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COMPENSATION OF DIRECTORS      

 

Director Stock Ownership Guidelines

Our stock ownership guidelines require our non-employee directors to hold our common stock equal in value to at least three times the annual cash retainer. The non-employee directors are expected to meet the stock ownership guideline level within five years after receipt of their first equity-based award for service to the Board and to continuously own sufficient shares to satisfy the guideline level once attained for as long they remain a member of the Board. If a director provides us with a written certification stating that he or she is prohibited by his or her employer from receiving equity-based compensation from Premier, then such director will not receive equity-based awards from us and, accordingly, will not be subject to the stock ownership guidelines. As of June 30, 2020, each director who is subject to the stock ownership guidelines was in compliance with his or her stock ownership requirements.

Fiscal Year 2020 Director Compensation Table

Compensation in the table below reflects amounts earned in fiscal year 2020 by our non-employee directors serving on our Board for all or a portion of fiscal year 2020. Ms. DeVore, the only director who is also an employee, receives no additional compensation for serving on the Board.

 

         

Name

 

  

Fees
Earned
or Paid
in Cash

($)

(1)

 

    

Stock
Awards

($)

(2)

 

    

Cash Awards

Under Directors’
Compensation
Policy

($)

(3)

 

    

All other
Compensation

($)

(4)

 

    

Total

 

 

Barclay Berdan

  

 

$87,500

 

  

 

$0

 

  

 

$125,000

 

  

 

$1,000

 

  

 

$213,500

 

Eric J. Bieber, MD(5)

  

 

$87,500

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$243,519

 

John T. Bigalke(5)

  

 

$77,501

 

  

 

$174,559

 

  

 

$0

 

  

 

$1,000

 

  

 

$253,060

 

Helen M. Boudreau(5)

  

 

$7,001

 

  

 

$0

 

  

 

$0

 

  

 

$0

 

  

 

$7,001

 

Stephen R. D’Arcy

  

 

$124,810

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$280,829

 

Jody R. Davids

  

 

$120,082

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$276,101

 

William B. Downey(5)

  

 

$87,500

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$243,519

 

Peter S. Fine

  

 

$99,080

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$255,099

 

Philip A. Incarnati(5)

  

 

$87,500

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$243,519

 

David H. Langstaff

  

 

$117,310

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$273,329

 

William E. Mayer

  

 

$159,297

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$315,316

 

Marc D. Miller

  

 

$89,864

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$245,883

 

Marvin R. O’Quinn

  

 

$87,500

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$243,519

 

Scott Reiner

  

 

$87,500

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$243,519

 

Terry D. Shaw

  

 

$144,813

 

  

 

$0

 

  

 

$125,000

 

  

 

$1,000

 

  

 

$270,813

 

Richard J. Statuto

  

 

$124,328

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$280,347

 

Ellen C. Wolf

  

 

$138,754

 

  

 

$155,019

 

  

 

$0

 

  

 

$1,000

 

  

 

$294,773

 

 

(1)

The amounts reflected in this column are cash retainers earned for service as a director for fiscal year 2020, regardless of when such fees are paid.

(2)

Unless otherwise noted or as stated in note 3 below, each non-employee director received an annual award of 4,038 restricted stock units (RSUs) with a grant date fair value, computed in accordance with FASB Accounting Standards Codification, Compensation—Stock Compensation (Topic 718), of $155,019. The grant date fair value is based on the closing price for our common stock on the award date, December 9, 2019, of $38.39. Mr. Bigalke received an award of 4,547 RSUs with a grant date fair value, computed in accordance with FASB Accounting Standards Codification, Compensation—Stock Compensation (Topic 718), of $174,559. Mr. Bigalke’s award includes an additional prorated amount for his service from October 24, 2019 to December 9, 2019. Ms. Boudreau did not receive an annual award of RSUs in Fiscal 2020. Grant date fair value assumptions are consistent with those disclosed in Note 14—Stock-Based Compensation to our Consolidated Financial Statements in our 2020 Form 10-K. RSU grants fully vest on the first anniversary of the grant date. A total of 57,041 unvested RSUs granted to non-employee directors were outstanding as of June 30, 2020.

(3)

Cash awards are made pursuant to the Directors’ Compensation Policy and are not made under 2013 Equity Incentive Plan. Each of Messrs. Berdan and Shaw provided a written certification stating that he was prohibited by his employer from receiving equity-based compensation from Premier and accordingly, each received an annual cash award of $125,000 in lieu of the annual equity award. See note 2 above.

 

 

 

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(4)

The Directors’ Compensation Policy provides for a $1,000 contribution to be made to the charity of choice for each member of the Board of Directors. Contributions are generally made annually in December.

(5)

Each of Dr. Bieber and Messrs. Downey and Incarnati resigned from the Board of Directors, effective July 31, 2020. Mr. Bigalke and Ms. Boudreau were appointed to the Board of Directors October 24, 2019 and June 1, 2020, respectively.

Indemnification and Exculpation

We indemnify our directors and officers to the fullest extent permitted by Delaware law. Our Certificate of Incorporation also includes provisions that eliminate the personal liability of our directors for monetary damages for breach of fiduciary duty as a director, except for liability:

 

   

for any breach of the director’s duty of loyalty to us or our stockholders;

 

   

for acts or omissions not in good faith or that involved intentional misconduct or a knowing violation of law;

 

   

under Section 174 of the Delaware General Corporation Law (regarding unlawful payment of dividends); or

 

   

for any transaction from which the director derives an improper personal benefit.

We have entered and expect to continue to enter into agreements to indemnify our officers and directors. With certain exceptions, these agreements provide for indemnification of expenses and liabilities incurred by the indemnified individual in connection with a proceeding related to his or her service to us as an officer or director (including, among other things, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and settlement amounts).

We believe these provisions and agreements are necessary to attract and retain qualified people who will be free from undue concern about personal liability in connection with their service to us.

 

 

 

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS

We are committed to being a good corporate citizen and doing the right thing. We are known as a company that is governed responsibly and behaves ethically, that is open and transparent in its business dealings, that makes a positive social impact and protects the environment, and that provides a work environment where our employees are treated well and are given the opportunity to be all they can be. We were named one of the world’s most ethical companies for the 13th consecutive year in 2020 by Ethisphere® Institute for ethical leadership. As detailed below, we are committed to managing the risks and opportunities that arise from environmental, social and governance (ESG) issues. By growing our Company responsibly, we earn the trust on which our business is based, and we build the relationships on which our future depends.

Diversity and Inclusion

Improving the health of our communities is more than an ambitious goal; it’s our mission. Solving the complex challenges we face requires a greater diversity of thought, cross-cultural representation and engagement. We know that a diversity of perspectives, experiences and backgrounds is a powerful way to unlock new ideas and better understand the needs of others.

Our Diversity, Inclusion and Belonging strategy is based on foundational pillars designed to accelerate how we provide health and wellness solutions to an increasingly diverse world. We have hired a new Vice President of Diversity and Inclusion to oversee this strategy. Our employee-based Council on Diversity, Inclusion and Belonging acts as our governing committee to define, drive and support our strategic objectives. In addition, our nine Employee Resource Groups (ERGs) and other company programs provide opportunities to listen, learn, mentor and grow. Creating an atmosphere of trust and openness supports engagement, development and retention of our employees.

We have put forth the following pledge as our objectives:

 

   

Demonstrate commitment and accountability for modeling behavior that drives diversity, inclusion and belonging.

 

   

Cultivate and support a values-driven culture that promotes inclusiveness, innovation, openness, listening, learning and compassion.

 

   

Build and maintain a diverse workforce at all levels of our organization. Identify, attract and retain a pipeline of diverse and qualified candidates through targeted outreach, recruitment, employee development and selection.

 

   

Create a work environment that ensures equal access to opportunities for professional growth and advancement.

We are committed to a workforce representing different generations, ethnicities, genders, races, orientations, cultures and life experiences. Our values, specifically Integrity and Focus on People, speak to our commitment to treat others fairly, equitably and consistently while affirming that respect for our differences creates our strength. Building a diverse and inclusive culture where our workforce can thrive, where all voices matter and everyone has a chance to succeed is an extension of these values.

Income Equality

We strive to comply with all equal opportunity and pay equity laws and continuously review compensation levels to identify any potential disparate impact of protected groups, and to ensure internal equity and external competitiveness. Our total rewards philosophy and programs are designed to attract and retain exceptional talent at all levels of our organization. We believe we use best-in-class rewards evaluation methods and tools (including external market surveys and geographic cost of living and cost of labor assessors) and engage external experts to ensure our rewards programs provide employees with living wages, short- and long-term bonus opportunities, and comprehensive health and welfare and retirement benefits.

We use an internally developed career level framework and talent and succession planning processes to provide employees with growth and advancement opportunities which, in turn, drive the economic mobility of our workforce. We are a healthcare performance improvement company with solutions and services that may be used by healthcare

 

 

 

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      ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS

 

providers to better manage the cost of healthcare while also improving the quality and outcomes of care provided. We believe these solutions ultimately have the potential to provide the downstream benefit of lower costs for healthcare and better outcomes for all classes of earners, including lower wage earners.

Supplier Diversity

As an organization built on the foundation of transforming healthcare within communities across the country, we also recognize that supplier diversity is an important component of our members’ success. Diverse suppliers help our hospitals create jobs and improve life in the communities they serve. As much as we are proud of our past record of success due in large part to our members’ commitment to inclusiveness, we are equally focused on ensuring that our future continues that heritage. For example, we enhanced our current Supplier Diversity program with Sourcing Education and Enrichment for Diverse and Small Suppliers (SEEDS), a program aimed at increasing the number of small, diverse and regional enterprises doing business with members of the Premier healthcare alliance. The SEEDS program lends support to diverse and small business enterprises, enabling them to grow at a pace that is commensurate with their existing business infrastructure, i.e., local, regional to national sales capabilities. Moreover, the program provides contracted suppliers with experienced resources and educational tools. These tools are intended to assist our suppliers in gaining contract sales with our members and building long-term relationships across the Premier healthcare alliance. To further support and expand our supplier diversity program, we are a member of the following advocacy organizations:

 

   

National Minority Supplier Development Council (Corporate Member), with additional participation in the regional chapters outlined below:

 

   

Michigan Minority Business Development Council

 

   

Carolinas Minority Business Development Council

 

   

Women Business Enterprises National Council (Corporate Member)

 

   

Healthcare Supplier Diversity Alliance (Board Member)

 

   

Healthcare Group Purchasing Industry Initiative (Board Member)

Sustainability and Climate Change

Our corporate mission is to improve the health of our nation’s communities through the transformation to high-quality, cost-effective health care. We pursue our mission as prudent stewards of the environment in numerous ways. For example:

 

   

We have been recognized numerous times by a leading healthcare organization driving environmental stewardship and sustainable practices as a leader in environmental excellence for our commitment to collaborate with member health systems on environmentally preferable purchasing and energy efficiency initiatives. We employ company-wide efforts to make informed decisions about sustainable products, services and business practices.

 

   

Through our ongoing partnership with a leading supply chain sustainability solutions company, we work to integrate critical environmental impact data for medical and non-medical products into the purchasing process for hospitals, health systems and other provider organizations.

 

   

Our GPO also incorporates Environmentally Preferred Purchasing (EPP) into our product selection process, as demonstrated by the following:

 

   

We are committed to supplying our member health systems with products that support the health of their patients, staff and the populations they serve. As part of this commitment, our sourcing committees include third-party validated environmental impact data in their contracting decisions. Included in our sourcing process are questions about the existence of chemicals of concern, recyclable or recycled packaging and responsible resources in the products we contract on behalf of our member health systems. Contracted products with environmental attributes are highlighted in our product catalog for use by our member health systems. We work closely with a representative group of our members’ sustainability professionals through our EPP Advisory Council. This Council serves as a forum for the exchange of best practices and continuous improvement.

 

 

 

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In addition, we work with member health systems in their varying organizational EPP initiatives. These initiatives include efforts to eliminate certain chemicals from their health systems, reduce their environmental footprint through reprocessing, utilize products with recyclable packaging and content to eliminate waste and greenhouse gas emissions, and reduce energy usage through the purchase of energy efficient electronics. Through support of these efforts, we are working to address healthcare’s role in climate change.

Political Contributions and Lobbying Activities

All political contributions are made only through a voluntary, eligible-employee-funded Premier Employee Political Action Committee (the “PAC”). The PAC is non-partisan, and it enables us to support federal lawmakers who share our vision, values and commitment to improving healthcare quality and safety and reducing costs. The PAC is overseen by a Premier Employee PAC Advisory Committee comprised of contributors to the PAC. We share information on all contributions made from the PAC with the PAC contributors biannually. The PAC only contributes funds to federal lawmakers. It does not make any contributions to state policy-makers or to organizations that are recognized under Section 527 of the U.S. federal tax code and are registered with the Federal Election Commission.

Data Privacy

We collect and process various data files primarily from healthcare providers to support their healthcare operations. Currently, our healthcare customers are primarily located in the United States, and nearly all of the data that we receive is generated in the United States. With respect to our websites and solution portals, we collect user data with respect to customer interactions with our solutions and systems. This data is typically only used for internal purposes, is only disclosed to third parties in furtherance of the services offered by us or for internal marketing practices, and is collected, stored and maintained in accordance with applicable privacy laws and regulations. All our websites include a current Privacy Policy addressing the requirements of both the California Consumer Privacy Act and General Data Protection Regulation. The Privacy Policy describes the categories of data we collect from a consumer, what we do with that data and who we share it with and the related purpose. Our Privacy Policy is located at https://www.premierinc.com/privacy-notice.

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth information, as of the Record Date, regarding the beneficial ownership of shares of our common stock by (i) each person known to us to beneficially own more than 5% of the outstanding shares of our common stock, (ii) each of our directors, director nominees and Named Executive Officers listed in the Summary Compensation Table for Fiscal Year 2020 and (iii) all of our directors, director nominees and executive officers as a group. Unless otherwise indicated in a footnote, the business address of each person listed below is the address of our principal executive office, Premier, Inc., 13034 Ballantyne Corporate Place, Charlotte, NC 28277. We know of no arrangements, the operation of which may at a subsequent date result in the change of control of Premier, Inc.

In preparing the following table, we relied upon statements filed with the SEC by the beneficial owners of more than 5% of our outstanding shares of common stock pursuant to Sections 13 or 16 of the Exchange Act. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned.

 

 

 

  

Common Stock

Beneficially Owned(1)

 
   Name

 

  

# Shares

 

   

% of Class(2)

 

 

Greater Than 5% Beneficial Owners

                

Vanguard Group Inc.(3)

     6,520,552       5.3

Directors, Director Nominees and Named Executive Officers:

 

                

Barclay Berdan(4)

            

John T. Bigalke

            

Helen M. Boudreau

            

Stephen R. D’Arcy

     10,676       *  

Jody R. Davids

     17,059       *  

Susan D. DeVore

     1,676,143 (5)      1.4

Peter S. Fine(4)

     10,876       *  

David H. Langstaff

     12,146       *  

William E. Mayer

     9,763       *  

Marc D. Miller(4)

     10,876       *  

Marvin R. O’Quinn(4)

     10,876       *  

Scott Reiner(4)

     10,876       *  

Terry D. Shaw(4)

            

Richard J. Statuto

     10,876       *  

Ellen C. Wolf

     20,364       *  

Michael J. Alkire

     868,561 (6)      *  

Craig S. McKasson

     189,113 (7)      *  

Leigh T. Anderson

     22,887 (8)      *  

David A. Hargraves

     17,481 (9)      *  

Directors, Director Nominees and Executive Officers as a group (21 persons)(10)

     2,983,958 (10)      2.4

 

*

Represents less than 1%.

(1)

According to the rules adopted by the SEC, a person is a beneficial owner of securities if the person or entity has or shares the power to vote them or to direct their investment or has the right to acquire beneficial ownership of such securities within 60 days through the exercise of an option, warrant or right, conversion of a security or otherwise. Unless otherwise indicated, each person or entity named in the table has sole voting and investment power, or shares voting and investment power, with respect to all shares of stock listed as owned by that person.

(2)

The percentage of beneficial ownership is based upon 122,085,712 shares of common stock outstanding as of October 7, 2020.

(3)

The information presented is based solely on the Schedule 13F-HR filed with the SEC by Vanguard Group, Inc. (“Vanguard”) on August 14, 2020, with respect to holdings at June 30, 2020. The Schedule 13F-HR indicates sole investment discretion with respect to 6,422,577 shares, defined investment discretion with respect to 97,975 shares, sole voting authority with respect to no shares, shared voting authority with respect to 45,437 shares and no voting authority with respect to 6,475,115 shares. The address of Vanguard is P.O. Box 2600, V26, Valley Forge, PA 19482.

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT      

 

(4)

As an executive officer of a member owner, such person may be deemed to share beneficial ownership of the shares and/or units held by the member owner with which he or she is affiliated, and such person disclaims beneficial ownership of any such shares or units or any other shares or units held by affiliates of the applicable member owner.

(5)

Ms. DeVore is our Chief Executive Officer. Includes 437,397 shares of common stock owned by Ms. DeVore and 1,238,746 shares of common stock that are issuable upon the exercise of currently exercisable options.

(6)

Mr. Alkire is our President. Includes 235,384 shares of common stock owned by Mr. Alkire and 633,177 shares of common stock that are issuable upon the exercise of currently exercisable options.

(7)

Mr. McKasson is our Chief Administrative Officer and Chief Financial Officer. Includes 87,370 shares of common stock owned by Mr. McKasson and 101,743 shares of common stock that are issuable upon the exercise of currently exercisable options.

(8)

Mr. Anderson is our President of Performance Services. Includes 6,784 shares of common stock owned by Mr. Anderson and 16,103 shares of common stock that are issuable upon the exercise of currently exercisable options.

(9)

Mr. Hargraves is our Senior Vice President of Supply Chain. Includes 5,993 shares of common stock owned by Mr. Hargraves and 11,488 shares of common stock that are issuable upon the exercise of currently exercisable options.

(10)

Includes the individuals identified in the table above and those additional individuals serving as executive officers as of the Record Date, as indicated under the heading “Executive Officers” below. Includes 924,311 shares of common stock and 2,059,647 shares of common stock that are issuable upon the exercise of currently exercisable options.

 

 

 

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial owners are required by the Exchange Act to furnish us with copies of all Section 16(a) forms they file. As an administrative matter, we assist our executive officers and directors by monitoring transactions and filing Section 16 reports on their behalf. Based on our records, compliance program and review of written representations and SEC filings, we believe that during fiscal year 2020 our executive officers, directors and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements.

 

 

 

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RELATED PERSON TRANSACTIONS

Policy on Oversight of Related Person Transactions

We have several written policies and codes in place that govern, among other things, related party transactions and potential conflicts of interest. In addition, several of the committees of our Board of Directors have oversight responsibility for related party transactions and potential conflicts of interest. Transactions between us and our directors, executive officers and significant stockholders must be approved by our Audit and Compliance Committee, which is comprised of independent members of our Board of Directors, following consultation with the Conflict Advisory Committee. Pursuant to its charter, the Audit and Compliance Committee is responsible for the review and approval, in accordance with our Code of Conduct, of all related party transactions requiring disclosure under SEC Regulation S-K Item 404 (i.e., those in excess of $120,000). This obligation is executed primarily through oversight of and collaboration with the Conflict Advisory Committee. The Conflict Advisory Committee charter authorizes that Committee to oversee all business or personal transactions between officers or directors or their respective affiliates, on the one hand, and us or our affiliates, on the other hand. Additionally, the Conflict Advisory Committee is maintained in light of the fact that we have member-directors on our Board of Directors and the need to establish governance around our member owners’ health system business development plans as well as our objective to collaborate on potential new business with our member owners. The Conflict Advisory Committee may recommend actions ranging from disclosure to recusal or resignation to the Audit and Compliance Committee for their consideration and action. In addition, the Member Agreement Review Committee is responsible for reviewing and providing feedback to our management with respect to non-ordinary course transactions between us or our subsidiaries and our member owners and also for assessing risks associated with agreements that we enter into with our member owners.

The above committees are permitted to engage outside advisors and other professionals to assist them with their stated duties, including evaluating and approving any transaction between us and any related party, including our member owners.

For more information regarding the evaluation of related party transactions and potential conflicts of interest, see “Corporate Governance and Board Structure—Corporate Governance—Code of Ethics,” “—Committees of the Board of Directors—Audit and Compliance Committee,” “—Member Agreement Review Committee” and “—Conflict Advisory Committee” above.

Related Person Transactions in Fiscal Years 2020 and 2019

FFF Enterprises

On July 26, 2016, through our consolidated subsidiary, Premier Supply Chain Improvement, Inc., we acquired 49% of the issued and outstanding stock of FFF Enterprises, Inc. (“FFF”). Our share of FFF’s net income was $12.3 million and $5.1 million for the fiscal years ended June 30, 2020 and 2019, respectively. We maintain group purchasing agreements with FFF and receive administrative fees for purchases made by our members pursuant to those agreements. Net administrative fees revenue recorded from purchases under those agreements was $7.4 million and $8.0 million for the fiscal years ended June 30, 2020 and 2019, respectively.

AEIX

We conduct all operational activities for American Excess Insurance Exchange Risk Retention Group (“AEIX”), a reciprocal risk retention group that provides excess and umbrella healthcare professional and general liability insurance to certain hospital and healthcare system members. We are reimbursed by AEIX for actual costs, plus an annual incentive management fee not to exceed $0.5 million per calendar year. We received cost reimbursement of $5.4 million and $5.5 million for the fiscal years ended June 30, 2020 and 2019, respectively, and annual incentive management fees of $0.2 million and $0.7 million for the fiscal years ended June 30, 2020 and 2019, respectively. As of June 30, 2020 and 2019, $0.5 million and $0.7 million, respectively, in amounts receivable from AEIX are included in accounts receivable, net in the Consolidated Balance Sheets included in our 2020 Form 10-K.

 

 

 

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      RELATED PERSON TRANSACTIONS

 

Barclay Berdan, one of our directors, is Chair of the AEIX board of directors.

Class B Common Stock Held by Former Limited Partners of Premier LP

Information is provided for the entities listed below because they held 5% or more of our Class B common stock at June 30, 2020. As of August 11, 2020, each such entity held no shares of our Class B common stock and did not, to our knowledge, hold 5% or more of our Class A common stock.

Dignity Health (“Dignity”)As of June 30, 2020, Dignity owned approximately 7% of the outstanding (i) partnership interests in Premier LP and (ii) Class B common stock of Premier, Inc. We had a limited partners’ distribution payable to Dignity and its member organizations at June 30, 2020 and 2019 of $0.5 million and $0.6 million, respectively. During the fiscal year ended June 30, 2020, we made a payment to Dignity of $0.3 million under our tax receivable agreement. Net administrative fees revenue based on purchases by Dignity and its member organizations was $16.2 million and $15.7 million for the fiscal years ended June 30, 2020 and 2019, respectively. Approximately $1.9 million of our revenue share obligations related to revenue share obligations to Dignity and its member organizations at each of June 30, 2020 and 2019. Services and support revenue earned from Dignity and its member organizations was $0.8 million and $0.7 million during the fiscal years ended June 30, 2020 and 2019, respectively. Product revenue earned from, or attributable to services provided to, Dignity and its member organizations was $0.5 million and $0.3 million during the fiscal years ended June 30, 2020 and 2019, respectively. We also had receivables from Dignity and its member organizations of $0.2 million and $0.1 million at June 30, 2020 and 2019, respectively.

Marvin R. O’Quinn, one of our directors, is the President and Chief Operating Officer of CommonSpirit Health and Senior Executive Vice President and Chief Operating Officer of Dignity Health. CommonSpirit was formed through the combination of Catholic Health Initiatives and Dignity Health in 2019.

AdventHealth (f/k/a Adventist Health System Sunbelt Healthcare Corporation)—As of June 30, 2020, AdventHealth owned approximately 7% of the outstanding (i) partnership interests in Premier LP and (ii) Class B common stock of Premier, Inc. We had a limited partners’ distribution payable to AdventHealth at each of June 30, 2020 and 2019 of $0.9 million. During fiscal year ended June 30, 2020, we made a payment to AdventHealth of $0.3 million under our tax receivable agreement. Net administrative fees revenue based on purchases by AdventHealth and its member organizations was $23.1 million and $19.9 million for the fiscal years ended June 30, 2020 and 2019, respectively. Approximately $2.7 million and $2.4 million of our revenue share obligations related to revenue share obligations to AdventHealth and its member organizations at June 30, 2020 and 2019, respectively. Services and support revenue earned from AdventHealth and its member organizations was $6.1 million and $5.2 million during the fiscal years ended June 30, 2020 and 2019, respectively. Product revenue earned from, or attributable to services provided to, AdventHealth and its member organizations was $10.3 million and $12.6 million during the fiscal years ended June 30, 2020 and 2019, respectively. We also had receivables from AdventHealth and its member organizations of $3.6 million and $1.0 million at June 30, 2020 and 2019, respectively.

Susan DeVore, our Chief Executive Officer and one of our directors, and John T. Bigalke, one of our directors, serve on the board of directors of AdventHealth. Terry D. Shaw, one of our directors, is the Chief Executive Officer of AdventHealth.

Adventist Health System/West (“AHW”)As of June 30, 2020, AHW owned approximately 6% of the outstanding (i) partnership interests in Premier LP and (ii) Class B common stock of Premier, Inc. We had a limited partners’ distribution payable to AHW and its member organizations at each of June 30, 2020 and 2019 of $0.5 million. During the fiscal year ended June 30, 2020, we made a payment to AHW of $0.2 million under our tax receivable agreement. Net administrative fees revenue based on purchases by AHW and its member organizations was $13.3 million and $12.1 million for the fiscal years ended June 30, 2020 and 2019, respectively. Approximately $1.4 million of our revenue share obligations related to revenue share obligations to AHW and its member organizations at each of June 30, 2020 and 2019. Services and support revenue earned from AHW and its member organizations was $5.2 million and $10.1 million during the fiscal years ended June 30, 2020 and 2019, respectively. Product revenue earned from, or attributable to services provided to, AHW and its member organizations was $4.7 million and $3.0 million during the fiscal years ended June 30, 2020 and 2019, respectively. We also had receivables from AHW and its member organizations of $0.5 million and $4.5 million at June 30, 2020 and 2019, respectively.

 

 

 

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RELATED PERSON TRANSACTIONS      

 

Scott Reiner, one of our directors, is the Chief Executive Officer of AHW.

Banner HealthAs of June 30, 2020, Banner owned approximately 5% of the outstanding (i) partnership interests in Premier LP and (ii) Class B common stock of Premier, Inc. We had a limited partners’ distribution payable to Banner and its member organizations at June 30, 2020 and 2019 of $0.5 million and $0.6 million, respectively. During the fiscal year ended June 30, 2020, we made a payment to Banner of $0.2 million under our tax receivable agreement. Net administrative fees revenue based on purchases by Banner and its member organizations was $12.2 million and $12.0 million for the fiscal years ended June 30, 2020 and 2019, respectively. Approximately $1.3 million and $1.4 million of our revenue share obligations related to revenue share obligations to Banner and its member organizations at June 30, 2020 and 2019, respectively. Services and support revenue earned from Banner and its member organizations was $3.1 million and $2.9 million during the fiscal years ended June 30, 2020 and 2019, respectively. Product revenue earned from, or attributable to services provided to, Banner and its member organizations was $13.9 million and $12.2 million during the fiscal years ended June 30, 2020 and 2019, respectively. We also had receivables from Banner and its member organizations of $2.7 million and $15.1 million at June 30, 2020 and 2019, respectively.

Peter Fine, one of our directors, is the President and Chief Executive Officer of Banner.

 

 

 

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EXECUTIVE COMPENSATION

Introduction

Our Compensation Discussion and Analysis (“CD&A”) discusses our executive compensation program and explains the Compensation Committee’s decisions affecting NEO compensation for fiscal year 2020. Detailed compensation information is provided in tabular format with related narrative disclosure.

Our NEOs for fiscal year 2020 include the following current officers:

 

 

Name

 

  

 

Title

 

 

Susan D. DeVore

   Chief Executive Officer
 

Michael J. Alkire

   President
 

Craig S. McKasson

   Chief Administrative and Chief Financial Officer
 

Leigh T. Anderson

   President, Performance Services
 

David A. Hargraves

   Senior Vice President Supply Chain

Additional information regarding the NEOs’ biographical and business backgrounds is set forth above under “Item 1—Election of Directors” for Ms. DeVore, and below under “Executive Officers” for the other current NEOs.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

In the Executive Summary section of our CD&A, we discuss:

 

   

The linkage of our executive compensation program to our Mission, Vision and Values

 

   

Our 2019 say-on-pay stockholder advisory vote

 

   

Key changes to our fiscal year 2020 executive compensation program

 

   

Highlights of our fiscal year 2020 performance

In the remainder of our CD&A, we describe:

 

   

How our executive compensation principles and governance practices align with our stockholders’ interests, i.e., what we do and what we don’t do

 

   

The design and rationale of our executive compensation program

 

   

The individual elements of our NEOs’ compensation program

 

   

Compensation paid to our NEOs in fiscal year 2020

 

   

Our recoupment (“clawback”), trading restrictions and anti-hedging, anti-pledging and compensation deductibility policies

EXECUTIVE SUMMARY

Linking Executive Compensation to Our Mission, Vision and Values

We are confident that our executive compensation program provides a sound linkage between our Mission, Vision and Values and our stockholders’ interests, and we encourage a thorough review of our CD&A and other information in this “Executive Compensation” section of this proxy statement to ensure a better understanding of our program and this linkage.

Our Mission is to improve the health of communities.

Our Vision is through the collaborative power of the Premier alliance, we will lead the transformation to high-quality, cost-effective healthcare.

Our Values are integrity, passion for performance, innovation and a focus on people.

From serving our members, to improving healthcare in our communities, to investing in our people, our Mission, Vision and Values are at the heart of everything we do at Premier. Within this context, we design all our compensation programs, including the structure of our executive compensation program, to accomplish the following:

 

   

Hire exceptionally talented people who are passionate about our Mission and Vision and exemplify our Values;

 

   

Drive sustained performance of our people to achieve challenging short- and long-term financial and operational goals that increase stockholder value; and

 

   

Retain the strongest and most diverse talent who are critical to the achievement of our Mission and realization of our Vision.

 

 

 

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      EXECUTIVE SUMMARY

 

Our 2019 Stockholder Say-on-Pay Vote

At our 2019 Annual Meeting of Stockholders, we sought stockholder approval, on an advisory basis, of the compensation of our NEOs as disclosed in our 2019 proxy statement (“say-on-pay” vote). We hold our say-on-pay vote annually. In 2019, approximately 94% of the say-on-pay votes cast were votes “FOR” our executive compensation program. As evidenced by this strong backing, we believe our stockholders generally support our compensation principles, programs and governance practices. Our Compensation Committee and Board of Directors considered the 2019 advisory say-on-pay vote results, as well as comments from our stockholders, and decided not to change the overall structure of our executive compensation program.

Highlights of Our 2020 Performance

Our fiscal year 2020 performance exceeded our fiscal year 2019 performance on key financial metrics used, in part, in determining fiscal year 2020 NEO compensation. Set forth below is a comparison of our total Net Revenue, Non-GAAP Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) and Non-GAAP Adjusted Fully Distributed Earnings per Share (“Adjusted EPS”) for fiscal years 2019 and 2020:

 

       NET REVENUE1                      NON-GAAP ADJUSTED EBITDA2                     

NON-GAAP

ADJUSTED EPS3

 

    

  LOGO     LOGO     LOGO  
 

7%

1-YEAR REVENUE GROWTH

 

   

1%

1-YEAR ADJUSTED EBITDA GROWTH

 

   

2%

1-YEAR ADJUSTED EPS

GROWTH

 

 

 

(1)

Represents Total Net Revenue from continuing operations calculated in accordance with GAAP as reported in our 2020 Form 10-K.

(2)

Non-GAAP Adjusted EBITDA is defined as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items and including equity in net income of unconsolidated affiliates. EBITDA is defined as net income before income or loss from discontinued operations, net of tax, interest and investment income, net, income tax expense, depreciation and amortization, and amortization of purchased intangible assets. Non-recurring items include income or expenses and other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include certain strategic and financial restructuring expenses. Non-operating items include gains or losses on disposal of assets and interest and investment income or expense.

(3)

We define Adjusted Fully Distributed Earnings per Share, or Adjusted EPS, as Non-GAAP Adjusted Fully Distributed Net Income divided by diluted weighted average shares. We define Non-GAAP Adjusted Fully Distributed Net Income as net income attributable us (i) excluding income or loss from discontinued operations, net, (ii) excluding income tax expense, (iii) excluding the impact of adjustment of redeemable limited partners’ capital to redemption amount, (iv) excluding the effect of non-recurring and non-cash items, (v) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination of non-controlling interest in Premier LP and (vi) reflecting an adjustment for income tax expense on fully distributed net income before income taxes at our estimated effective income tax rate. Reflects income tax expense at an estimated effective income tax rate of 26% of Non-GAAP adjusted fully distributed income before income taxes for fiscal years 2020 and 2019.

We use Non-GAAP financial metrics in our executive compensation program to more fairly evaluate our performance on a year-over-year basis by removing certain items outside the control of our management team. We note that Adjusted EBITDA and Adjusted EPS may have limitations as analytical tools, and should not be considered in isolation from, or as an alternative to, any measure of our performance derived in accordance with GAAP. Definitions of Adjusted EBITDA and Adjusted EPS and our rationale for using these performance metrics are further discussed below—see “Annual Incentive Plan and Equity Plan Metric Definitions.” Also see Appendix A to this proxy statement and our 2020 Form 10-K for additional information on our use of Non-GAAP financial metrics as well as a reconciliation to comparable GAAP measures.

 

 

 

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OUR EXECUTIVE COMPENSATION PRINCIPLES AND GOVERNANCE PRACTICES

Our executive compensation principles and governance practices are designed to promote and protect our stockholders’ interests. The table below outlines the foundational principles used in the design of our executive compensation program and the practices that govern the program.

 

    

 

Our Compensation Practices

 

    

 

What We Do

 

       

 

What We Don’t Do

 

    
 
 

 Put pay at-risk based on short- and long-term company performance. Three-fourths of our NEO compensation is at-risk (assuming target-level performance).

 

 Incorporate meaningful and challenging short- and long-term performance goals in our incentive programs.

 

 Analyze compensation levels and types of compensation relative to a representative and relevant group of peer companies (our “peer group”).

 

 Cap annual incentive compensation and performance shares at 150% of the target payout.

 

 Require stock ownership under guidelines that are in line with those of our peer group companies.

 

 Mandate that our NEOs trade equity exclusively via SEC Rule 10b5-1 trading plans which can be established only during open trading windows at least 30 days in advance of the execution of any trades.

 

 Maintain a compensation recoupment (i.e., “clawback”) policy to recapture unearned incentive payments upon financial restatements.

 

 Use restrictive covenants including non-compete protections.

 

    

 Incentivize short-term results at the expense of long-term performance.

 

 Allow margining, derivative or speculative transactions, such as hedges, pledges and short sales by our NEOs.

 

 Provide tax gross-up payments.

 

 Re-price “under water” outstanding stock options.

 

 Provide separate employer paid supplemental pensions for our executives.

 

 Require automatic “single-trigger” equity award vesting and severance.

 

 Incentivize excessively risky business decisions.

 

Our Executive Compensation Key Objectives

In setting and overseeing our executive compensation program, our Compensation Committee focuses on the following key objectives:

 

   

Attract and retain exceptional and diverse executive talent

 

   

Support business objectives

 

   

Encourage the creation of stockholder value by focusing executive pay more on long-term equity compensation than short-term incentives and cash

 

   

Recognize our unique business structure and focus

 

   

Reflect the broad spectrum of talent and diverse sources of market data

 

   

Provide reward opportunities consistent with business performance

 

 

 

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      OUR EXECUTIVE COMPENSATION PRINCIPLES AND GOVERNANCE PRACTICES

 

We design our executive compensation program in light of these key objectives by:

 

 

Using a mix of fixed and variable compensation

 

 

 

We heavily weight our NEOs’ compensation mix toward variable, at-risk compensation so that our program encourages behaviors that achieve desired results.

 

 

Using a mix of cash and equity incentives

 

 

 

The majority of our NEOs’ total pay is variable and tightly linked to our short- and long-term financial and stock performance.

 

 

Requiring NEOs to be significant stockholders

 

 

 

We require our NEOs to own specified levels of Premier stock under our stock ownership guidelines to enhance alignment of executive and stockholder interests.

 

 

Paying based on individual performance and potential

 

 

 

We consider individual performance and potential for advancement in making compensation decisions.

 

 

Regularly reviewing our compensation program versus representative and relevant comparators

 

 

We review our executive compensation program at least annually versus our peer group to evaluate competitive compensation levels and alignment with the external market to attract and retain exceptional leaders with strong, balanced skills. The Compensation Committee annually reviews the composition of our peer group so that it remains a relevant and representative comparator for our executive compensation program.

 

 

Paying competitive compensation

 

 

Each year, we compare and evaluate our compensation program with those of our peer group to assess whether our target compensation levels are consistent with market levels and practices and adjust compensation levels if determined appropriate. We do not tie any element of our compensation program to a specific percentile of our peer group.

 

 

Our Peer Group

We use a peer group of companies to analyze external market compensation practices. We consider this information when implementing competitive and performance-driving compensation packages for our NEOs. With input from management and Mercer, our compensation consultant, the Compensation Committee reviews the peer group annually so that its size and composition remain appropriate. Each year, we compare our compensation programs with those of our peer group and assess whether our executive compensation programs and target compensation levels are consistent with market practice.

In constructing our peer group, the Compensation Committee reviews information for and considers publicly traded companies in the U.S. with the following attributes:

 

   

Similar business orientation and industry classifications (healthcare services, technology, distributors, research and consulting)

 

   

Similar services (group purchasing, supply chain services, technology/data, population health and performance management)

 

   

Revenue that is approximately one-third to three times that of ours

The Compensation Committees also considers other relevant factors, including:

 

   

Market capitalization, total number of employees and revenue less cost of goods sold

 

   

Executive positions similar in breadth, complexity and/or scope of responsibility

 

   

Competitors for customers and executive talent

Based on these considerations as well as input from Mercer and our management, our Compensation Committee reviewed and approved our peer group for fiscal year 2020. The decision was made to remove one company from the peer group for fiscal year 2019—athenahealth, which was acquired by Veritas Capital in February 2019, and to add the following companies: AMN Healthcare Services, Inc., ASGN Incorporated, FTI Consulting, Inc., Hill-Rom

 

 

 

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OUR EXECUTIVE COMPENSATION PRINCIPLES AND GOVERNANCE PRACTICES      

 

Holdings, Inc., and MEDNAX, Inc., based on Mercer’s review methodology summarized above. The Compensation Committee approved the peer group for fiscal year 2020 to be comprised of the following companies:

 

  Allscripts Healthcare Solutions, Inc.

 

  Magellan Health, Inc.

  AMN Healthcare Services, Inc.

 

  MEDNAX, Inc.

  ASGN Incorporated

 

  Navigant Consulting, Inc.

  Cerner Corporation

 

  NextGen Healthcare, Inc.

  FTI Consulting, Inc.

 

  Omnicell Inc.

  Hill-Rom Holdings, Inc.

 

  Owens & Minor, Inc.

  HMS Holdings Corp.

 

  Patterson Companies, Inc.

  Huron Consulting Group, Inc.

 

As we grow and evolve, and as the companies in our peer group change (e.g., due to merger, acquisition, delisting), our Compensation Committee will continue to review and reconfigure our peer group as appropriate.

The table below summarizes and compares our revenue and market capitalization to that of the peer group. Revenue for the peer group is as of each respective company’s most recently completed fiscal year as of June 1, 2019; market capitalization for the peer group is as of June 1, 2019. Excluding Premier, the median revenue of the peer group is $2.146 billion, which is higher than our fiscal year 2019 revenue; the median market capitalization of the peer group is $2.102 billion, which is lower than our market capitalization as of June 1, 2019.

 

     

Peer Group Summary1

 

  

 

Revenue       

($) in billions       

 

  

 

Market Capitalization       

($) in billions       

 

   LOGO   

 

75th Percentile

 

  

 

4.555

 

  

 

2.893

 

  

 

Median

 

  

 

2.146

 

  

 

2.102

 

  

 

25th Percentile

 

  

 

0.807

 

  

 

1.418

 

    

 

Premier

 

  

 

1.2182

 

  

 

4.6473

 

    

 

Premier Percentile Rank

 

  

 

     34%

 

  

 

     84%

 

 

(1)

Source: S&P Global Market Intelligence as of June 2019.

(2)

Premier total net revenue for fiscal year 2019 as reported in our 2019 Form 10-K.

(3)

Premier market capitalization includes all outstanding Class A common stock and Class B common stock, and is based on the May 31, 2019 closing price ($36.75) of our Class A common stock on the NASDAQ Global Select Market.

Our Competitive Positioning

Our Compensation Committee reviews the median peer group data for total direct compensation (at target), including base salary and annual and long-term incentives. Company and individual performance and other factors, including potential succession and, where applicable, compensation levels relative to general survey data, ultimately determine whether target compensation for our NEOs is above or below the peer group median.

In determining appropriate compensation levels for our NEOs, our Compensation Committee reviews compensation levels for executives in similarly situated roles at companies in our peer group. Mercer initially compiles the compensation data for the selected peer group; at the request of the Compensation Committee, management reviews and evaluates Mercer’s compensation data.

Our Pay Mix

Our pay mix is an important aspect of our executive compensation program; our use of at-risk performance-based compensation is designed to drive annual and long-term performance, enhance retention and maintain competitiveness with the external marketplace.

 

 

 

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      OUR EXECUTIVE COMPENSATION PRINCIPLES AND GOVERNANCE PRACTICES

 

The charts below compare our CEO’s and other NEOs’ total direct compensation mix (base salary, target annual incentive and equity incentive) to the average total direct compensation mix of the CEOs and NEOs of our peer group, as compiled by our compensation consultant.

Pay mix for our NEOs was determined using the NEOs’ annual base salary and target annual and equity incentive (assuming target or 100% performance for performance-based equity under our equity plan) for fiscal year 2020. Pay mix for our peer group was determined using the annual base salary, target annual incentive and annual grant date fair value opportunity of long-term incentive awards as reported in peer group companies’ 2019 proxy statements filed with the SEC.

Our CEO’s percentage of total direct compensation attributable to at-risk, annual (target annual bonus) and long-term (equity) compensation approximates that of the CEOs in our peer group. Our NEO compensation also, on average, approximates the at-risk, performance-based pay of our peer group.

 

CEO Pay Mix – Premier   CEO Pay Mix – Peer Group
LOGO   LOGO
All Other NEOs Pay Mix – Premier   All Other NEOs Pay Mix – Peer Group
LOGO   LOGO

 

 

 

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OUR EXECUTIVE COMPENSATION PRINCIPLES AND GOVERNANCE PRACTICES      

 

Overview of Primary Executive Compensation Elements

The table below summarizes the primary elements of our NEOs’ fiscal year 2020 executive compensation program, including a description and purpose of each element. In addition to the elements summarized in the table below, our NEOs are eligible to participate in a voluntary non-qualified deferred compensation plan and a company-wide defined contribution (i.e., 401(k) savings) program. A more detailed description of all of our compensation elements, along with related 2020 actions for each element, if applicable, follows this table.

 

Pay Element

  Base Salary   Annual Incentive Program   Equity Program
  Performance Shares  

Time-based Restricted

Stock Units

(“RSUs”)

Description

 

 

  Ongoing fixed cash compensation

 

 

  Annual cash incentive plan based on target amounts for each NEO

  Actual awards may be higher or lower than target based on business performance

  Awards are 0% of target for below-threshold performance or 50% to 150% of target for above-threshold performance

 

 

 

  Shares of stock are earned based on our performance during a 3-year performance cycle based on meeting pre-determined performance goals

  Awards are 0% of target for below-threshold performance or 50% to 150% of target for above-threshold performance

 

 

  RSUs vest at defined times after the NEO meets certain service-based requirements

Purpose

 

 

  Attract and retain exceptional and diverse talent

  Reflect business expectations, competencies and values

 

 

  Motivate achievement of Premier’s annual financial, member and strategic objectives

  Reflect challenges and share in risk with our performance

  Balance business unit and corporate focus

  Provide an annual balanced focus relative to long-term (equity) incentive plan objectives

 

 

 

  Motivate sustained achievement of long-term earnings growth goals

  Align NEOs’ interests with stockholders’ interests

  Enhance retention

  Provide a long-term balanced focus relative to annual incentive plan objectives

 

 

Who Receives

 

 

 

 

 

All NEOs

 

 

When Granted/Paid

 

 

Reviewed annually,

paid semi-monthly

 

 

 

Paid within 2.5

months after fiscal year end

 

  Generally granted annually in August

 

 

Form of Delivery

 

 

 

 

 

Cash

 

 

 

 

 

Premier Common Stock

 

 

 

 

Type of Performance

 

 

 

 

 

Short-term/Annual

 

 

 

 

 

Long-term

 

 

 

Performance/Vesting 

Period(1)

 

  N/A  

1-Year Performance

Cycle

 

3-Year Performance

Cycle

  Vests in full after 3 years

Performance

Measures

  Competencies, values, individual performance, longer-term potential  

 

Revenue growth, Non-GAAP Adjusted EBITDA growth, Member Performance Indices,

Key Strategic Milestones

 

  3-Year Non-GAAP Adjusted EPS and stock price appreciation   Stock price appreciation

 

(1)

Subject to accelerated or pro rata vesting based on certain events such as a change in control or the employee’s death, disability or other qualifying termination of service.

 

 

 

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DESCRIPTION OF EXECUTIVE COMPENSATION PROGRAM ELEMENTS

Base Salary

Overview

Base salary is the single fixed pay element of our total direct compensation paid to our NEOs. The Compensation Committee reviews the base salaries for NEOs in similarly-situated roles in our peer group and general industry survey data, and determines NEOs’ salaries based on roles, responsibilities, Company and individual performance and potential to assume roles with a higher level of responsibility and experience. Our Compensation Committee reviews each NEO’s base salary annually, or more frequently if there is a change in a NEO’s scope of responsibilities, and considers whether base salary increases are warranted. Base salary changes, if any, are generally effective September 1 for all our employees, including NEOs.

2020 Actions

To maintain their compensation position relative to peer group and general survey data levels and to reflect the importance of retaining them in their positions, the Compensation Committee increased base salary in fiscal year 2020 for Ms. DeVore and Messrs. Alkire, McKasson, Anderson and Hargraves, each effective as of September 1, 2019.

Our NEOs’ fiscal year 2019 and 2020 base salaries are set out in the table below.

 

NEO

 

 

2019 Base Salary

($)

 

 

2020 Base Salary

($)

Change

(%)

 

     

Ms. DeVore

1,025,000 1,125,000   9.8%  
     

Mr. Alkire

   797,500    877,250   10.0%  
     

Mr. McKasson

   577,830    635,613   10.0%  
     

Mr. Anderson

   553,150    608,465   10.0%  
     

Mr. Hargraves

   446,250    455,175   2.0%  

Our Annual Incentive Plan

Overview

Our annual incentive plan is a one-year cash-based incentive designed to drive and reward NEOs for delivering annual financial, member and strategic results relative to pre-established performance thresholds during a fiscal year. Our Compensation Committee determines the annual incentive structure, performance metrics and goals and each NEO’s threshold, target and maximum award opportunity at the beginning of the fiscal year. At the end of the fiscal year, the Compensation Committee then determines the actual payment amount for each NEO based on our fiscal year financial, member and strategic performance.

For Ms. DeVore and Messrs. Alkire and McKasson, the fiscal year 2020 annual incentive plan was based 70% on our financial performance and 30% on certain components of our member and strategic performance, collectively called the “Corporate Score.” Payouts for financial performance were tied equally to Revenue and Non-GAAP Adjusted EBITDA. Payouts for member and strategic performance were tied equally to our Member Quality index, Member Cost index, and certain key strategic milestones. For the key strategic milestones, we do not publicly disclose specific goals or performance targets as we believe that revealing these goals and targets would provide competitors and other third parties with insights into our confidential planning and strategies, thus potentially harming us competitively, as well as our stockholders.

For fiscal year 2020, our Compensation Committee determined that a significant portion of Messrs. Anderson’s and Hargraves’ annual incentive plan should be tied directly to the financial performance of the segments they lead. Thus,

 

 

 

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DESCRIPTION OF EXECUTIVE COMPENSATION PROGRAM ELEMENTS      

 

Mr. Anderson’s fiscal year 2020 annual incentive plan was based 40% on the Corporate Score as described above and 60% on certain financial metrics specific to our Performance Services segment, the “Performance Services Segment Score,” and Mr. Hargraves’ fiscal year 2020 annual incentive plan was based 40% on the Corporate Score as described above and 60% on certain financial metrics specific to our Supply Chain Services segment, the “Supply Chain Services Segment Score.”

Our performance targets are designed to be challenging based on the likelihood of attainment based on historical and potential future achievement analyses.

The Compensation Committee chose these metrics and weightings for the following reasons:

 

   

Revenue and Non-GAAP Adjusted EBITDA drive top- and bottom-line financial growth in the support of our Mission and Vision;

 

   

Revenue and Non-GAAP Adjusted EBITDA are important indicators of the operational strength and performance of the business, including the ability to provide the capital necessary to execute upon our business and growth strategies and to fund capital expenditures;

 

   

An equal weighting of financial goals helps drive a balance of top- and bottom-line performance so that increasing Revenue does not come at the expense of declining margins;

 

   

Equally weighted member performance indices create greater alignment with our member organizations and incentivize our executives to assist our member organizations in becoming top industry performers in quality, safety, supply chain cost and total cost of care;

 

   

Key strategic milestones foster alignment with significant strategies undertaken as part of our business growth strategies; and

 

   

These metrics and weightings incentivize NEOs to collaborate on, and align to a company-wide focus and, for specific leaders, drive performance in their respective segments.

2020 Actions

To maintain compensation position relative to peer group and general survey data levels, increase emphasis on annual financial and operational performance, and reflect the importance of retaining him in his position, the Compensation Committee increased the fiscal year 2020 target annual incentive opportunity for Mr. Hargraves. All other NEOs’ target annual incentive opportunity did not change for 2020.

 

NEO

 

 

2019 Annual Incentive
Plan Target

(% of base salary)

 

 

2020 Annual Incentive
Plan Target

(% of base salary)

 

   

Ms. DeVore

150% 150%
   

Mr. Alkire

125% 125%
   

Mr. McKasson

125% 125%
   

Mr. Anderson

  75%   75%
   

Mr. Hargraves

  55%   65%

 

 

 

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      DESCRIPTION OF EXECUTIVE COMPENSATION PROGRAM ELEMENTS

 

Annual Incentive Plan Calculation

The Compensation Committee used the calculation below to determine fiscal year 2020 annual incentive plan payouts for our NEOs.

 

       
        

Annual Base Salary  
($)  

as of June 30, 2020  

    X         

Target Annual Award     
Opportunity

(% of Annual Base
Salary)

 

    X         

Achievement     
Percentage Earned     

(0% or 50%—150%)     

(Rounded)     

 

    =         

FY2020     

Annual     
Incentive Award     

($)     

 

Ms. DeVore

     $1,125,000      150%      103.3%      1,743,188

Mr. Alkire

     $   877,250      125%      103.3%      1,132,749

Mr. McKasson

     $   635,613      125%      103.3%         820,735

Mr. Anderson

     $   608,465        75%        41.3%         188,563

Mr. Hargraves

     $   455,175        65%      105.0%         310,794

The fiscal year 2020 annual incentive plan payout for Ms. DeVore and Messrs. Alkire and McKasson was based 100% on the Corporate Score, for which the metrics, weightings, goals and payout ranges are summarized in the table below.

 

         
    

Corporate

Performance Metrics1

 

 

  Weighting  

 

 

Performance Goals2

 

   

Payout
Range
4

 

   

Achievement

 

 

  Threshold3  

 

 

  Target3  

 

   

  Stretch3  

 

   

2020 Actual
  Performance
1,6  

 

 

  Achievement  
of Target

 

 

Payout
  Percentage
7  

 

LOGO

 

Revenue  

 

35%

 

$1,248.0

 

 

$1,278.5

 

 

 

$1,302.9

 

 

 

0%—150%

 

 

$1,298.7

 

141.4%

 

  49.5%

 

Adjusted EBITDA5  

 

35%

 

$   575.1

 

 

$   589.1

 

 

 

$   600.3

 

 

 

0%—150%

 

 

$   575.6

 

  51.8%

 

  18.1%

 

Member Quality Index  

 

10%

 

        25%

 

 

        27

 

 

29

 

 

0%—150%

 

 

      29.8%

 

150.0%

 

  15.0%

 

Member Cost Index  

 

10%

 

        50%

 

 

100

 

 

150

 

 

0%—150%

 

 

      81.6%

 

  81.6%

 

    8.2%

 

Key Strategic Milestones  

 

10%

 

        50%

 

 

100

 

 

150

 

 

0%—150%

 

 

    125.0%

 

125.0%

 

  12.5%

 

Corporate Score       

 

103.3%

 

(1)

See “—Description of Executive Compensation Elements—Annual Incentive Plan and Equity Plan Metric Definitions” for the descriptions of these performance metrics.

(2)

In millions for Revenue and Adjusted EBITDA.

(3)

The payout range for each metric is 50% at threshold, 100% at target and 150% at or above stretch performance. The payout percentage for performance below threshold is 0%.

(4)

The total annual incentive award is capped at 150% of target.

(5)

See Appendix A for a description of the reconciliation of Non-GAAP Adjusted EBITDA to the nearest GAAP financial measure.

(6)

For Revenue and Adjusted EBITDA, 2020 Actual Performance includes adjustments to reported Revenue and Adjusted EBITDA related to certain acquisition activities in fiscal year 2020. See Appendix A for a reconciliation of these adjustments.

(7)

Calculated as the weighting for each metric multiplied by the Achievement of Target column, based on the performance goal table. Percentages reflect interpolation between threshold and target, or target and stretch achievement, as applicable, and are rounded.

Messrs. Anderson’s and Hargraves’ annual incentive plan payout was based 40% on the Corporate Score as summarized in the table above and 60% on the Performance Services Segment Score and Supply Chain Services Segment Score, respectively, for which the weightings, goals, and payout ranges are summarized in the tables below.

 

         
    

Performance Services

Performance Metrics1

 

 

  Weighting  

 

  Performance Goals2   Payout
Range
4
  Achievement
 

  Threshold3  

 

 

    Target3    

 

 

    Stretch3    

 

 

2020 Actual
  Performance
1  

 

 

Payout
  Percentage
6,7  

 

 

LOGO

 

Revenue  

 

50%

 

$358.8

 

$369.7

 

$377.0

 

0%—150%

 

$345.5

 

0.0%

 

Adjusted EBITDA5  

 

50%

 

$128.8

 

$131.9

 

$134.5

 

0%—150%

 

$109.9

 

0.0%

 

Performance Services Segment Score      

 

0.0%

 

(1)

See “—Description of Executive Compensation Elements—Annual Incentive Plan and Equity Plan Metric Definitions” for the descriptions of these performance metrics.

(2)

In millions for Revenue and Adjusted EBITDA.

(3)

The payout range for each metric is 50% at threshold, 100% at target and 150% at or above stretch performance. The payout percentage for performance below threshold is 0%.

 

 

 

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DESCRIPTION OF EXECUTIVE COMPENSATION PROGRAM ELEMENTS      

 

(4)

The total annual incentive award is capped at 150% of target.

(5)

See Appendix A for a description of the reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Segment Adjusted EBITDA to the nearest GAAP financial measure.

(6)

Calculated as the weighting for each metric multiplied by the percentage achievement based on the performance goal table. Percentages reflect interpolation between threshold and target, or target and stretch achievement, as applicable, and are rounded.

(7)

For Revenue and Adjusted EBITDA, 2020 Actual Performance includes adjustments to reported Revenue and Adjusted EBITDA related to intersegment adjustments in fiscal year 2020. See Appendix A for a reconciliation of these adjustments.

 

         
    

Supply Chain Services
Performance Metrics
1

 

 

  Weighting  

 

  Performance Goals2   Payout
Range
4
  Achievement
 

  Threshold3  

 

 

  Target3  

 

 

  Stretch3  

 

 

2020 Actual
  Performance
1,7  

 

 

Payout
  Percentage
6  

 

 

LOGO

 

Revenue  

 

50%

 

$889.2

 

$908.9

 

$925.9

 

0%—150%

 

$960.0

 

150.0%

 

Adjusted EBITDA5  

 

50%

 

$571.3

 

$585.2

 

$596.3

 

0%—150%

 

$574.8

 

  62.4%

 

Supply Chain Services Segment Score      

 

106.2%

 

(1)

See “—Description of Executive Compensation Elements—Annual Incentive Plan and Equity Plan Metric Definitions” for the descriptions of these performance metrics.

(2)

In millions for Revenue and Adjusted EBITDA.

(3)

The payout range for each metric is 50% at threshold, 100% at target and 150% at or above stretch performance. The payout percentage for performance below threshold is 0%.

(4)

The total annual incentive award is capped at 150% of target.

(5)

See Appendix A for a description of the reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Segment Adjusted EBITDA to the nearest GAAP financial measure.

(6)

Calculated as the weighting for each metric multiplied by the percentage achievement based on the performance goal table. Percentages reflect interpolation between threshold and target, or target and stretch achievement, as applicable, and are rounded.

(7)

For Revenue and Adjusted EBITDA, 2020 Actual Performance includes adjustments to reported Revenue and Adjusted EBITDA related to intersegment adjustments in fiscal year 2020. See Appendix A for a reconciliation of these adjustments.

The table below sets out the weighting of goals, achievement percentages, target payouts and actual fiscal year 2020 annual incentive plan payouts for each NEO.

 

     
    

Weighting of Goals

 

            

Award Amounts

 

 
         

NEO

 

  

Corporate Score

(%)

 

    

Segment Score

(%)

 

    

Achievement

Percentage

(%)

 

    

Target

(100% Payout)

($)

 

    

FY2020

Payouts

($)

 

 

Ms. DeVore

  

 

100%       

 

  

 

—       

 

  

 

103.3%

 

  

 

1,687,500

 

  

 

1,743,188

 

Mr. Alkire

  

 

100%       

 

  

 

—       

 

  

 

103.3%

 

  

 

1,096,563

 

  

 

1,132,749

 

Mr. McKasson

  

 

100%       

 

  

 

—       

 

  

 

103.3%

 

  

 

794,516

 

  

 

820,735

 

Mr. Anderson