Budget Amendment ID: FY2013-S4-28-R3
3rd Redraft OTH 28
Executive Compensation for Mutual Companies
Messrs. Montigny and Joyce and Ms. Jehlen and Ms. Chang-Diaz moved that the proposed new text be amended by adding, after section 161, the following new section:-
“SECTION __. (a) Chapter 175 of the General Laws is hereby amended by inserting after section 19W the following 3 sections:-
Section 19X: (a) A mutual company, as defined by section 19G, shall provide clear, concise and understandable disclosure of all compensation awarded to, earned by or paid to the named executive officers or directors designated in subsection (b). Mutual companies shall conspicuously publish disclosure in a format readily accessible to members.
(b) For the purposes of this section and section 19Z, a “named executive officer or director” shall mean (i) a person serving as a company’s principal or chief executive officer or acting in a similar capacity during the last completed fiscal year regardless of compensation level, (ii) a person serving as a company’s principal or chief financial officer or acting in a similar capacity during the last completed fiscal year regardless of compensation level, (iii) a company’s 3 most highly compensated executive officers other than the chief executive officer and chief financial officer who were serving as executive officers at the end of the last completed fiscal year, (iv) up to 2 additional persons for whom disclosure would have been provided under clause (iii) but for the fact that the individual did not serve as an executive officer of the company at the end of the last completed fiscal year; and (v) a company’s directors.
Section 19Y. (a)(1) A majority of directors at a mutual company, as defined by section 19G, shall be independent directors.
(2) No director shall qualify as independent unless the board of directors affirmatively determines that the director has no direct material relationship with the mutual company and is not a partner, shareholder or other officer of an organization that has a material relationship with the company.
(b) (1) A mutual company, as defined by section 19G, shall have a compensation committee composed entirely of independent directors..
(2) The compensation committee shall have a written charter stating the committee’s purpose and responsibilities, which, at a minimum, shall be to have the direct responsibility to:
(i) review and approve the mutual company’s goals and objectives relevant to the chief executive officer’s compensation, evaluate the chief executive officer’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors, determine and approve the chief executive officer’s compensation level based on this evaluation; and (ii) make recommendations to the board with respect to non-chief executive officer compensation and incentive compensation and equity based plans that are subject to board approval.
(c) The commissioner of insurance shall promulgate regulations utilizing industry best practices to define the term “independent” as used in subsections (a) and (b), provided however that a director shall not be considered independent if the director: (i) is, or has been within the last 3 years, an employee of the mutual company, or an immediate family member is, or has been within the last 3 years, an executive officer, of the mutual company; (ii) has received, or has an immediate family member who has received, during any 12-month period within the last 3 years, more than $120,000 in direct compensation from the mutual company, other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service; (iii) is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the mutual company for property or services in an amount which, in any of the last 3 fiscal years, exceeds the greater of $1,000,000 or 2 per cent of such other company’s consolidated gross revenues; or (iv) is or an immediate family member is, or has been within the last 3 years, employed as an executive officer of another company for which any of the mutual company’s present executive officers at the same time serves or served on that company’s compensation committee.
The commissioner shall update such regulations as necessary.
Section 19Z. The commissioner of insurance shall promulgate regulations requiring that a mutual holding company, at least once every 3 years, include with a proxy, consent, authorization, solicitation or notice of the annual meeting of a mutual holding company a separate resolution subject to a non-binding vote to approve or disapprove the compensation of the named executive officers or directors.”; and
by inserting after section 155 the following 2 sections:-
“SECTION 156. Under section 19Y of chapter 175 a majority of directors at a mutual company shall be independent directors not later than January 1, 2017.
SECTION 157. Under section 19Y of chapter 175, a mutual company shall have a compensation committee composed entirely of independent directors not later than January 1, 2017.”.