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I. PURPOSE; COMPOSITION
The Compensation Committee is appointed by the Board of Directors of Cerner Corporation (the “Corporation”) primarily to review and approve the Corporation’s compensation policies and practices, establish compensation for Directors, evaluate the Corporation’s Chief Executive Officer’s performance and establish compensation accordingly, review and approve the total compensation of the Corporation’s Section 16 Officers, review and approve executive Performance-Based Compensation Plan targets and earned payouts and equity stock grants to the Corporation’s Section 16 Officers and adopt and approve major changes in the Corporation’s benefit plans and compensation philosophy. The Compensation Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section II of this Charter. These responsibilities are in addition to those duties set out for a member of the Board.
The Compensation Committee must be comprised of at least two members. Each member of the Compensation Committee must be a member of the Board of Directors and must otherwise be independent as defined in (i) Section 10C of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder and (ii) NASDAQ Rule 5605(a)(2), all as may be amended from time to time. In affirmatively determining the independence of any director who will serve on the Compensation Committee, the Board must consider all factors specifically relevant to determining whether a director has a relationship to the Corporation which is material to that director's ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Corporation to such director; and (ii) whether such director is affiliated with the Corporation, a subsidiary of the Corporation or an affiliate of a subsidiary of the Corporation.At least two members of the Compensation Committee also shall qualify as “outside” directors within the meaning of Internal Revenue Code Section 162(m) (as amended, 162(m)”) and as “non-employee” directors within the meaning of Rule 16b-3 under the Exchange Act.
The members of the Compensation Committee shall be appointed by the Board on the recommendation of the Nominating, Governance & Public Policy Committee. One member of the Compensation Committee shall be appointed as Committee Chairman by the Board. Compensation Committee members may be replaced by the Board.
II. RESPONSIBILITIES AND AUTHORITY
Cerner’s Board of Directors established the charter for the Compensation Committee by delegating to the Committee the authority to:
(a) Evaluate the performance and establish total compensation (including salary, equity-based awards and other components) of the Chairman and Chief Executive Officer. The Chief Executive Officer may not be present during voting or deliberations by the Compensation Committee on his compensation;
(b)Select an appropriate compensation peer group and periodically review executive compensation in relation to this peer group;
(c) Review and approve all compensation (including salary, equity-based awards, personal use policies and other components) of the Section 16 executive officers of the Corporation;
(d)Administer the Corporation’s incentive compensation and equity-based compensation plans and any incentive program providing for performance-based awards under Section 162(m) with respect to Section 16 executive officers or those associates who are or are expected to be “covered employees,” as defined in Section 162(m), approve all such grants or awards that are intended to be exempt from the application of either or both of such provisions, take such actions in furtherance of the same, including reviewing and recommending approval of the Corporation’s incentive compensation plan by the Corporation’s shareholders every fifth year (or such other number of years as required by Section 162(m) of the Internal Revenue Code), and shall further have such responsibilities as set forth from time to time in such plans or programs;
(e) Review and approve metrics and targets which form the basis of the Corporation’s incentive compensation, bonus or qualified retirement plans and review proposed executive bonus payouts prior to payment;
(f)Review, approve and establish a grant date for equity grants to officers;
(g) In consultation with senior management, review and approve the general compensation philosophy, policies and practices of the Corporation applicable to other associates;
(h)Conduct an annual review of the potential risk to the Corporation from its compensation programs and policies, including any incentive plans, and determine whether such programs and policies incentivize unnecessary or excessive risk taking;
(i) In consultation with senior management, review the general compensation philosophy, policies and practices of the Corporation applicable to all associate benefit plans;
(j) Review and make recommendations to the Board of Directors regarding the establishment of equity compensation plans and review and approve updates thereto, as well as the termination of equity compensation plans;
(k) Review and approve the establishment, amendment and termination of qualified retirement plans;
(l) Review and approve the establishment, amendment and termination of any associate stock purchase plans;
(m) Periodically review actions taken by officers with respect to associate benefit plans;
(n) Review and make recommendations to the Board of Directors regarding the establishment of non-employee Director compensation;
(o) Establish and periodically review stock retention guidelines for the officers of the Company;
(p) Review and discuss with management the disclosures under the section of the annual Proxy Statement titled “Compensation Discussion and Analysis” (the “CD&A”) and based on such review, make a recommendation to the Board of Directors as to whether the CD&A should be included in Cerner’s Annual Report on Form 10-K and, as applicable, Cerner’s Proxy Statement;
(q) Produce an annual report of the Compensation Committee for inclusion or incorporation by reference into Cerner’s Annual Report and Proxy Statement;
(r) Review and discuss items required to be included in Cerner's annual Proxy Statements pursuant to Rules 14a-21(a) and 14a-21(b) under the Securities Exchange Act of 1934 (the so-called "Say-on-Pay" and "Say-When-on-Pay" votes, respectively) and make recommendations to the Board of Directors regarding such matters;
(s) Review and discuss the results of "Say-on-Pay" and "Say-When-on-Pay" votes;
(t) Determine and recommend to the Board of Directors, for reporting to the SEC within 150 calendar days of a shareholder vote, the frequency of Cerner’s "Say-on-Pay" vote to be held at annual meetings of Cerner's shareholders;
(u) Conduct an annual review of its own performance, which may be a part of the annual Board evaluation process conducted by the Nominating, Governance and Public Policy Committee;
(v) Receive reports from subcommittees and make regular reports to the Board of Directors on the Compensation Committee’s activities;
(w) Review and reassess this Charter annually and recommend any proposed changes to the Board of Directors for approval;
(x) Carry out such special assignments as the Board of Directors may, from time to time, give to the Compensation Committee; and
(y) Retain outside compensation consultants, independent legal counsel and other consultants to review executive compensation, Board member compensation or perform any other analysis the Compensation Committee deems appropriate after taking into consideration the following factors for such compensation consultants, independent legal counsel and other consultants (other than in-house legal counsel):
1. the provision of other services to the Corporation by the person that employs the compensation consultant, legal counsel, or other adviser;
2. the amount of fees received from the Corporation by the person that employs the compensation consultant, legal counsel, or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel, or other adviser;
3. the policies and procedures of the person that employs the compensation consultant, legal counsel, or other adviser that are designed to prevent conflicts of interest;
4. any business or personal relationship of the compensation consultant, legal counsel, or other adviser with a member of the Compensation Committee;
5. any stock of the issuer owned by the compensation consultant, legal counsel, or other adviser; and
6. any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the Corporation.
Notwithstanding the foregoing, the Compensation Committee need not conduct an independence assessment for a compensation adviser that acts in a role limited to the following activities for which no disclosure is required under Item 407(e)(3)(iii) of Regulation S-K: (a) consulting on any broad-based plan that does not discriminate in scope, terms, or operation, in favor of executive officers or directors of the Corporation, and that is available generally to all salaried employees; or (b) providing information that either is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice.
The Compensation Committee shall be directly responsible for the appointment, compensation, and oversight of the work of such advisers. The Corporation will provide for appropriate funding, as determined by the Compensation Committee as a committee of the Board, for payment of compensation to any advisors employed by the Compensation Committee.
The Compensation Committee shall meet as often as may be deemed necessary or appropriate, with a target of at least two meetings annually. As part of its job to foster open communication, the Compensation Committee shall meet with representatives of the Corporation’s human resources group on a regular basis. The Compensation Committee may request any officer or associate of the Corporation or the Corporation’s outside counsel to attend a meeting of the Compensation Committee or to meet with any members of, or consultants to, the Compensation Committee.
IV. ADDITIONAL MATTERS
To the extent permitted by applicable law and the rules of the NASDAQ Stock Market, as amended from time to time, the Compensation Committee may delegate authority to individual Compensation Committee members or such subcommittees as the Compensation Committee deems appropriate and shall review the actions of all such individuals or subcommittees as appropriate.
Adopted by the Compensation Committee on May 19, 1997,Revised by the CC on Dec. 3, 1998,Revised by the CC and the Board of Directors onJan. 21, 2000, Dec. 5-6, 2002, and March 8-9, 2005, andRevised by the Board of Directors on May 22, 2008, and March 8-9, 2011, Feb. 28 and March 1, 2013, March 5, 2014, and November 30, 2015.
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