Highlights of our Corporate Compliance Program attributes are as follows:
In 2005, Zimmer created a stand-alone Compliance Office. Also in 2005, Zimmer appointed a dedicated Chief Compliance Officer who became responsible for monitoring our day-to-day compliance activities. Zimmer’s Chief Compliance Officer has been and is currently a member of our Operating Committee and reports directly to our Chief Executive Officer. On no less than a quarterly basis, the Chief Compliance Officer has delivered, and continues to deliver, comprehensive presentations to our public company Board of Directors concerning Corporate Compliance Program matters.
In 2005, Zimmer established our current, disciplined Annual Needs Assessment (“ANA”) process. The ANA identifies and quantifies the services needed within each discrete service category and provides written support for the needs. It defines and limits consulting services for the year. The Compliance Office and an Arrangements Review Committee consisting of senior-level executives have been responsible for oversight, evaluation and approval of the ANA.
For the past several years, Zimmer has maintained the ANA and other data related to consulting agreements in a customized database controlled and managed by the Compliance Office. In the database, Zimmer maintains a record of the consulting services provided under the ANA. Reports are provided to senior executives which summarize the services provided and those remaining to be provided for the balance of the year.
In 2006, Zimmer developed a process for reviewing hourly services, which we refer to as the Engagement Order Process (“EOP”). The EOP became effective on January 1, 2007. The EOP is automated, auditable, and draws from the services set forth in the ANA. After the consultant completes the service identified in an engagement order, the consultant records the hours incurred in performing the service and signs a certification on the engagement order to initiate the payment process. Additionally, at a minimum, the requester of the service and their one over one manager must approve the payment.
Since before 2005, Zimmer has required written requests for consulting agreements. Beginning in 2005, each request must obtain a detailed matrix of the services by category and must be approved and certified by the requestor of the agreement, responsible executive management, the Arrangements Review Committee, the Compliance Office and the Legal Department. Consulting agreements involving payments above a certain threshold must also be approved by the Chief Executive Officer. All new consultant requests must meet an unfilled, bona fide, Zimmer commercial need and must be approved the Arrangements Review Committee.
In addition to the process described above, Zimmer’s payments to consultants are made at a fair market value rate of no more than $500 per hour for time actually expended by the consultant. A nationally known, independent organization with expertise in valuation conducted an analysis for payment of $500 per hour. For those few consultants receiving remuneration in excess of $500 per hour, Zimmer obtained an additional fair market value analysis from an independent organization to support the higher fair market value rates.
Product development team consultants are compensated at a fair market value rate of $500 per hour (or rate otherwise calculated and supported by an independent organization) for pre-product launch development time, and these consultants may also receive royalty payments with regard to the product the team develops. Zimmer’s current royalty payment ranges were calculated and analyzed by a reputable independent organization. A company employee serving on or supporting the development team must certify product development team payments.