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I. POLICY STATEMENT

This policy provides guidance related to compensation of College Officers and other Key Employees, as defined herein. It is the College’s policy that compensation paid to any employee must be fair, reasonable, and not excessive, consistent with all state and federal laws applicable to California nonprofit public benefit corporations. This policy is intended to ensure thorough and independent review of executive compensation; consistency in process and results across successive administrations; and balance between short-term retention goals and long-term financial and management considerations. Finally, this policy clarifies when the College’s Board of Trustees, acting through its Executive Committee, becomes involved in compensation decisions.

II. APPLICABILITY

This policy governs the College’s process and decisions related to compensation of Highly Compensated Employees, as defined herein. It also governs the process and decisions related to the compensation of any College employee or contractor when such compensation involves Special Terms, as defined herein.

III. DEFINITIONS

College Officers – The officers, other than trustees, who are described in Article III of the College By-Laws. “College Officers” always includes the President, Dean of the College, Treasurer, Secretary, and one or more Vice Presidents, and may include other individuals who are chosen by the Board of Trustees.

Key Employee – Consistent with Internal Revenue Service definitions, an employee whose reportable compensation exceeds $150,000 and who (i) has influence or authority over the College as a whole, (ii) manages or has authority over a segment or activity that represents 10% of the College’s assets, income, activities, or expenses, or (iii) has authority to control 10% or more of the College’s capital expenditures, operating budget, or compensation for employees. For purposes of this policy, Key Employees will include the College’s Chief Operating Officer, Chief Financial Officer, Controller, and in-house General Counsel, if any, whether or not such persons are also College Officers.

Highly Compensated Employees – (i) College Officers, (ii) Key Employees, and (iii) the five most highly compensated employees with reportable compensation of at least $100,000 

Special Terms –Terms of employment that obligate the College to provide any of the following, except as provided in the Faculty Handbook, the Employee Handbook, an applicable Collective Bargaining Agreement, or another College policy that is generally applicable to all employees or a broad category of employees:

(i) a term of employment for more than one year;

(ii) a regular faculty position or tenure (including any related compensation);

(iii) a paid sabbatical;

(iv) deferred compensation, including compensation that is subject to Section 409A, 457(b), and/or 457(f) of the Internal Revenue Code;

(v) future salary increases or bonuses;

(vi) compensation or benefits that are based on those provided to another person, position, or group of persons;

(vii) a retention incentive payment, meaning a payment that will vest if the employee remains in their position as of a specified future date;

(viii) severance, liquidated damages, or fees (including consulting fees) representing one or more years of base salary at the end of employment;

(ix) any material benefit that is substantially inconsistent with Occidental’s normal policies, procedures, or practices.

IV. POLICY

A. The Executive Committee’s Role in Executive Compensation Decisions

1. Compensation of the President, Dean of the College, and Treasurer or Chief Financial Officer.[1]  The Executive Committee of the Board of Trustees (“Executive Committee”) is responsible for determining the total compensation and benefits provided to the College’s President. In addition, the Executive Committee is responsible for reviewing and approving the total compensation and benefits provided to the Treasurer and the Dean of the College, upon receiving the President’s recommendation. In carrying out these responsibilities, the Executive Committee will follow a process that complies with state and federal laws, including at least the elements listed below.

• Confirmation that no Executive Committee member or other person or entity involved in the decision has a conflict of interest with respect to the compensation arrangement at issue;
• Use of comparability data to determine whether the proposed compensation is reasonable, in light of the value of the services provided and the amount paid to similar individuals at similar institutions;[2]
• Consideration of all benefits paid to the individual by the College, including but not limited to base salary, bonuses, fees, severance payments, retirement benefits, fringe benefits, deferred compensation, paid sabbaticals, housing, life insurance, disability benefits, and health insurance;
• Consideration of whether the compensation arrangement would result in a potential excise tax or other liabilities, and an explanation as to why the person’s compensation—including any excise tax—would nevertheless be reasonable and in the College’s best interests;
• Consultation with the College’s General Counsel and/or outside legal counsel, as necessary to understand the potential employment, tax, and administrative implications of the compensation arrangement;[3] and
• Documentation in the minutes of the Executive Committee regarding the terms of compensation and benefits and related reasoning; the nature and source of comparability data obtained and relied upon; any expert (including legal) opinions or materials that were relied upon; potential conflicts of interest and how they were resolved; and each participant’s vote.

2. Timing of Executive Committee Review. The process described in this Section IV.A should occur annually, beginning about three months before the end of the fiscal year. In addition, this process should occur upon hiring, whenever a term of employment is renewed or extended, and upon each substantive modification of compensation or benefits (except cost of living increases and other changes that are generally applicable to College employees), if such events are not aligned with the fiscal year end.

3. Review of Special Terms. Whenever the President proposes to offer Special Terms to any Highly Compensated Employee,[4] the President will inform the Executive Committee, General Counsel, and Chief Operating Officer of such proposed terms, and provide an opportunity for the Executive Committee to review and make a recommendation. The Executive Committee will consider input received from the General Counsel and Chief Operating Officer in making a recommendation to the President; provided that neither the General Counsel nor the Chief Operating Officer will be consulted on matters potentially affecting their own compensation. See Potential Conflicts of Interest, Section IV.C, below. In situations involving the compensation of either the General Counsel or the Chief Operating Officer, the Committee may consult with outside counsel and other appropriate internal or external advisors to solicit necessary information.

4. Presidential Transitions. During the period of a presidential transition, the Executive Committee may elect to develop offers to retain certain Highly Compensated Employees, either independently or by recommendation to the President. Any such offers will be subject to the same review process as described above in this Section IV.A. For purposes of this policy, a presidential transition is the time between the outgoing College president’s announcement of departure and the date when the next president begins.

5. Compensation in Excess of $1 Million or Parachute Payments. Only the Board of Trustees, acting through its Executive Committee, has the authority to approve the following types of compensation. The Executive Committee will consult with a qualified tax professional before approving any such compensation:

• Compensation in excess of $1 million for a taxable year;
• Payment to a Highly Compensated Employee that is contingent on the employee’s involuntary separation from the organization, and where the present value of the payment is equal to or exceeds three times the employee’s average taxable wages; or
• Any compensation to any individual that might result in an excise tax under Internal Revenue Code Section 4960.

B. Compensation of Other Highly Compensated Employees

Compensation of Highly Compensated Employees (other than the President, Chief Operating Officer, and Dean of the College) will be determined according to the College’s regular compensation processes; provided that such processes must include at least the following elements:

• Use of comparability data to determine whether the proposed compensation is reasonable, in light of the value of the services provided and the amount paid to similar individuals at similar institutions;
• Consideration of all benefits paid to the individual by the College, including but not limited to base salary, bonuses, fees, severance payments, retirement benefits, fringe benefits, deferred compensation, paid sabbaticals, housing, life insurance, disability benefits, and health insurance;
• Retention of records regarding the compensation offered; nature and source of comparability data obtained and relied upon; and any expert (including legal) opinions or materials that were relied upon; and
• Review of any Special Terms consistent with Section IV.A.3 of this policy.

 

The process described above should occur upon hiring, whenever a term of employment is renewed or extended, and upon each substantive modification of compensation or benefits (except cost of living increases and other changes that are generally applicable to College employees).

C. Potential Conflicts of Interest

Consistent with the College’s Conflict of Interest Policy, individuals involved in determining the compensation of Highly Compensated Employees must avoid the potential for or appearance of conflicts of interest. Executive compensation decisions at the College must be free from conflicts and based upon an unbiased assessment of the value of the employee’s service to the College and relevant market comparators. 

To this end, no individual may participate in the review process or give professional advice related to that individual’s own compensation and benefits. 

In addition, a person who is involved in determining the compensation of a Highly Compensated Employee must disclose any interests (personal, financial, professional, or otherwise) that may create a potential or perceived conflict with the College’s interests. The President and Trustees must disclose such potential conflicts to the Chair of the Board of Trustees or to the Chair of the Audit Committee. All other individuals shall disclose potential conflicts to the President or to the General Counsel. Upon receiving a disclosure, the recipient will determine whether the potential conflict may be avoided, and will otherwise exclude the disclosing party from the compensation decision.

V. POLICY HISTORY

Responsible Officers: General Counsel, Chief Human Resources Officer

Effective Date: April 19, 2024

Approved by the Board of Trustees on April 19, 2024

 

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[1] The College may at times employ a Chief Financial Officer and/or Chief Operating Officer, either of whom may concurrently serve as the College’s Treasurer. The Executive Committee will review and approve the compensation of the person who is serving as Treasurer, whatever other title(s) that person may hold.    

[2] At least once every two years, this step should include retaining an external compensation consultant to review the total compensation of each executive covered in this Section IV.A.1.

[3] The General Counsel is responsible for conferring confidentially and as appropriate with the College’s Chief Operating Officer, Chief Financial Officer, Chief Human Resources Officer, Benefits Manager, and/or other internal stakeholders to ensure that the College can reasonably offer and administer the proposed compensation and benefits.

[4] Special Terms generally should not be offered by College officials other than the President, nor to employees other than Highly Compensated Employees.