PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 14A of the Exchange Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act,” enables our shareholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. As previously disclosed, the Board has determined that it will hold an advisory vote on executive compensation on an annual basis, and the next shareholder advisory vote will occur at our 2018 Annual Meeting of Shareholders.
As described in detail in the CD&A section above, we design our executive compensation programs to, among other things, attract, motivate, and retain our named executive officers, who are critical to our success. Under these programs, we reward our named executive officers for the Company’s successful performance, the achievement of specific annual, long-term and strategic goals, and the realization of increased value for our shareholders. The executive compensation packages paid to our named executive officers are substantially tied to our key business objectives and total shareholder return, to align with the interests of our shareholders. The Board maintains oversight over our executive pay programs and adheres to the highest level of corporate governance with their design. To this end, they closely monitor evolving best practices, including the compensation programs and pay levels of executives at peer companies to ensure that our compensation programs do not fall outside of the normal range of relevant market practices.
We have two shareholder approved incentive plans that we use to motivate, retain and reward our executives. These cash and equity plans make up a majority of the pay we provide to our executives. As a result of this pay-for-performance focused structure, our named executive officers generally realized an amount significantly above their target compensation from 2015 – 2017. During this three year period, our Common Stock price appreciated 165% on a cumulative basis during the three-year period ended December 31, 2017, and we delivered strong financial and operational results. We believe our performance pay structure appropriately incents executives without excessive risk. In 2017, the Compensation Committee continued to emphasize its philosophy of pay for performance by utilizing TSR PRSUs and AEBITDA PRSUs.
We ask that you support the compensation of our named executive officers as disclosed in our CD&A and the accompanying tables contained in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, Summary Compensation Table and the other related tables and narrative disclosure.”
Because your vote is advisory, it will not bind us, the Compensation Committee, or our Board. However, our Board and our Compensation Committee value the opinions of our shareholders and will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs and policies.
THE BOARD 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.
REPORT OF THE AUDIT COMMITTEE
Management is responsible for the Company’s financial reporting process, including establishing and maintaining disclosure controls and procedures, establishing and maintaining internal control over financial reporting, evaluating the effectiveness of disclosure controls and procedures, evaluating and expressing an opinion on the effectiveness of internal control and the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.
KPMG LLP (“KPMG”) is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, as well as expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to monitor, evaluate and oversee these processes. The Audit Committee members are not employees of the Company, and are not professional accountants or auditors. The Audit Committee’s primary purpose is to assist the Board to fulfill its oversight responsibilities by reviewing the financial information provided to shareholders and others, the systems of internal controls that management has established to preserve the Company’s assets and the audit process. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews or procedures or to determine that the Company’s financial statements are complete and accurate and in accordance with accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed the audited financial statements with management. In giving the Audit Committee’s recommendation to the Board, it has relied on management’s representations that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and on the representations of the independent registered public accounting firm, KPMG, included in its report on the Company’s consolidated financial statements.
The Audit Committee is responsible for the appointment, subject to shareholder ratification, of the Company’s independent registered public accounting firm. The members of the Audit Committee are independent as defined by Section 303A of the NYSE Listed Company Manual.
In this context, the Audit Committee has reviewed and discussed with management management’s report on the effectiveness of the Company’s internal control over financial reporting as well as KPMG’s report related to its audit of (i) the consolidated financial statements; and (ii) the effectiveness of internal control over financial reporting. The Audit Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). In addition, the Audit Committee has received from KPMG the written disclosures and the letter from the independent registered accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and has discussed with KPMG its independence. The Audit Committee also considered whether KPMG’s provision of non-audit services to the Company is compatible with KPMG’s independence. KPMG advised the Audit Committee that KPMG was and continues to be independent accountants with respect to the Company.
The Audit Committee discussed with KPMG the overall scope and plans for its audits. The Audit Committee has met with KPMG, with and without management present, to discuss the results of its audits, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
Based upon the Audit Committee’s discussions with management and KPMG, the Audit Committee’s review of the representations of management and the report of KPMG to the Audit Committee, the Audit Committee recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC.
|Audit Committee Members|
|Mark G. Foletta|
|Andrew M. Stern|
|Paul E. Weaver|
PROPOSAL 3: RATIFICATION OF THE SELECTION OF OUR INDEPENDENT PUBLIC ACCOUNTING FIRM
The Audit Committee appointed KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2018. The Board proposes and recommends that the shareholders ratify this appointment.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG served as our principal independent registered public accounting firm for 2017. We expect representatives from KPMG to be present at the Annual Meeting. They will be given the opportunity to make a statement if they so desire and are expected to be available to respond to any appropriate questions. The following sets forth the fees paid or accrued for audit services and the fees paid for audit-related, tax and all other services rendered by KPMG for each of the last two years:
KPMG billed $1,733,953 and $1,885,000 for audit fees in 2017 and 2016, respectively. Audit fees consist of fees for professional services rendered in connection with the (i) annual audits of our consolidated financial statements, and the effectiveness of internal control over financial reporting and (ii) reviews of the interim consolidated financial statements included in quarterly reports.
KPMG billed $142,256 and $504,486 for audit-related services in 2017 and 2016, respectively. Audit-related fees consist principally of fees not reported under the “Audit Fees” heading, including fees primarily related to accounting consultations.
KPMG billed (1) $462,035 in 2017 for professional services rendered primarily relating to consultations related to an audit of the Company by the Internal Revenue Service and tax consultations primarily related to research and development credits, and (2) $408,122 in 2016 for professional services rendered primarily relating to consultations related to an audit of the Company by the Internal Revenue Service, tax consultations related to research and development credits and tax-related acquisition and integration matters.
All Other Fees
We did not incur any other fees billed by KPMG in 2017 or 2016.
Pursuant to the Audit Committee Charter, it is the policy of the Audit Committee to review in advance, and grant any appropriate pre-approvals of all auditing services to be provided by the independent registered public accounting firm and all non-audit services to be provided by the independent registered public accounting firm as permitted by Section 10A of the Exchange Act, and in connection therewith, to approve all fees and other terms of engagement. In 2016 and 2017, the Audit Committee approved all fees billed by KPMG prior to the engagement.
THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.
PROPOSAL 4: SHAREHOLDER PROPOSAL
The Company has been advised that Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA 90278, who has indicated he is a beneficial owner of at least $2,000 in market value of AMN’s Common Stock, intends to submit the following proposal at the Annual Meeting.
AMN is not responsible for the accuracy or content of this shareholder proposal, which is presented as received from the proponent in accordance with SEC rules.
“Proposal 4 – Special Shareowner Meeting Improvement
Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting. This includes removing any condition like “continuously for a period of at least one year” that was in our bylaws.
More than 100 Fortune 500 companies enable shareholders to call special meetings and to act by written consent. A shareholder right to call a special meeting and to act by written consent and are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. AMN Healthcare shareholders do not have the full right to call a special meeting that is available under Delaware law. Also AMN bylaws have an objectionable provision that a special shareholder meeting can be a shadowy telephonic ‘meeting.’
Any claim that a shareholder right to call a special meeting can be costly – may be largely moot. When shareholders have a good reason to call a special meeting – our board should be able to take positive responding action to make a special meeting unnecessary.
Please vote to improve our limited right to call a special shareholder meeting: Special Shareowner Meetings Improvement – Proposal 4”
The Board of Director’s Statement in Opposition
The Board has considered the proponent’s proposal to reduce the threshold to call a special meeting from the current 20% threshold to 10% and does not find it to be in the best interests of our shareholders for the following reasons: (1) this right is already provided with no material restrictions, (2) shareholders have an additional right to act by written consent; (3) our Bylaws do not contain anti-takeover provisions, and we are committed to, and are recognized for, our commitment to effective corporate governance, and (4) reducing the threshold from 20% to 10% would allow a small minority to create a financial and administrative burden on the majority of our shareholders and the Company. Over the past two years, we have formally engaged with our shareholders to discuss our corporate governance practices, and we have received positive feedback for allowing shareholders representing 20% of our common stock (in the aggregate) the right to call a special meeting, which has been noted as a corporate governance best practice. The Board’s deliberations with respect to this proposal reflect the outcomes of these discussions. Your Board recommends that you vote AGAINST Proposal 4.
Our shareholders currently have a meaningful right to call a special meeting that strikes a balance for the best interests of all shareholders
The Board supports a reasonable threshold for providing shareholders the right to call a special meeting, which is why our Bylaws currently allow holders of 20% of our outstanding common stock (in the aggregate) to call a special meeting with no material restrictions and to act by written consent. Our current threshold of 20% was carefully considered by our Board and designed to strike a balance between assuring that shareholders have the ability to call a special meeting, while protecting against the risk that a small minority, including those with special interests, could trigger the heavy expenses and distractions from the business to convene a special meeting, to pursue matters that are not widely viewed, unnecessary to require immediate attention, or for reasons that may not be in the best interests of AMN or our shareholders as a whole.
With the Company’s current shareholder composition, adoption of a 10% threshold would allow a single shareholder to call a special meeting. Given this potential, many companies have not adopted a provision that offers shareholders this right at all. Of all the S&P 500 and Russell 3000 companies that actually offer a special shareholder meeting right, approximately 78% and 74%, respectively, have a provision that is equivalent to, or more restrictive, than ours.
The Company is committed to engaging with shareholders and upholding corporate governance best practices
We strive to be a leader in corporate governance best practices and implemented a formal outreach program where we regularly elicit the views of investors on topics such as this (see “Overview of Our Corporate Governance Program” on page 15 and “Our 2017 Shareholder Outreach Summary” on page 16 of this Proxy Statement for further details).
The Board believes that the Company’s commitment to ongoing and consistent dialogue with shareholders, combined with the following corporate governance practices, sufficiently serves to protect AMN’s shareholders without the unnecessary risks and expenses associated with a 10% special meeting threshold: (1) “proxy access” access right to nominate directors, (2) annual director elections, (3) no staggered board, (4) no poison pill provisions, (5) no supermajority voting provisions and (6) shareholders’ existing right to call special meetings and act by written consent with no material restrictions. The Board’s position is underpinned by the Company’s commitment to, and maintenance of, the highest corporate governance QualityScore ranking available under the “Shareholder Rights” pillar designed by Institutional Shareholder Services’ (ISS) to assist investors in reviewing quality factors and assessing risk. For all the above reasons, among others, the proponent’s proposed 10% threshold for shareholders to convene a special meeting is neither necessary nor in shareholders’ best interest.