CPSI 2018 Proxy Statement

19 performance-based equity awards and performance-based cash incentive awards. Since 2014, the Compensation Committee has made annual grants of performance share awards and performance-based annual cash bonus awards under the 2014 Incentive Plan in order to further link executive compensation with the performance of the Company. Additionally, the Compensation Committee has granted time-based restricted stock awards, which have been made annually in order to provide management with an equity interest in the Company and which we believe help to motivate them and align their financial interests with those of our stockholders. We believe that our compensation program has been successful in retaining executive talent, in that all of the current NEOs except one have been employed by the Company for at least 17 years, and that it is important to continue to create incentives to ensure the retention of those executives and other employees who are critical to the success of our business. Compensation Improvements for 2018 As discussed above under “Corporate Governance and Board Matters,” we engaged proactively with our stockholders during 2017 to discuss corporate governance, our compensation programs and any other matters of interest. During those discussions, we heard feedback that caused us to take action with respect to our executive compensation program. Starting in late 2017, the Compensation Committee has made some significant improvements to our executive compensation program, including strengthening the link between executive compensation and the Company’s long-term performance, adding a peer comparison metric to our long- term equity incentive awards and requiring our executives to hold a meaningful stake in the Company’s common stock. Specifically, the Compensation Committee has taken the following actions, which are discussed throughout this CD&A: What we heard What we have done in response When effective Weighting equity compensation in favor of long-term, performance- based awards may focus the executives more on long-term performance Compensation Committee is (i) transitioning from a one-year performance period to a three-year performance period for the annual performance share awards and (ii) increasing the percentage of performance-based equity from 50% of the annual grants to 60% and decreasing the percentage of time-based equity from 50% of the annual grants to 40% March 2018 Executive pay should incentivize performance relative to the Company’s peers Introduced a “TSR Modifier” (as defined below) to our annual performance share awards so that the number of shares earned is adjusted upward or downward based on how our total shareholder return (“TSR”) compares to a healthcare index March 2018 Equity retention requirements strengthen the link between stockholder returns and the executive compensation program Amended our Corporate Governance Guidelines to require executive officers to retain 100% of their net shares received through CPSI’s equity plans until the relevant stock ownership guidelines are achieved October 2017 Oversight of Executive Compensation Our Compensation Committee is responsible for establishing, overseeing and reviewing executive compensation policies as well as validating and benchmarking the compensation and benefits provided to our NEOs. Our Compensation Committee is currently comprised solely of independent directors and has oversight of the executive compensation program. The primary goal of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities related to setting, monitoring and implementing a compensation philosophy and strategy designed to enhance profitability and fundamental value for the Company. It also reviews and approves the salary and other compensation of the CEO and our other executive officers, as well as the compensation and benefits of our non-employee directors, on an annual basis. The Compensation Committee determines incentive compensation targets and awards under various compensation plans and makes grants of restricted stock and other awards under our equity incentive plans. In determining the compensation of the NEOs, the Compensation Committee takes into account current compensation levels, Company and individual performance, peer group benchmarking and competitive market data. The Committee does not use a formula to weight these factors, but, instead, uses these factors to provide context within which to assess the significance of comparative market data and to differentiate the level of target compensation among our NEOs. After the end of the performance period to which a particular incentive award relates, the Compensation Committee reviews our performance relative to the applicable performance targets and recommends payouts based on that performance.