The Clorox Company

Audit Committee, Nominating and Governance Committee and Management Development and Compensation Charters

 

AUDIT COMMITTEE CHARTER

 

Purpose and Authority

 

The Audit Committee is established by the Board of Directors (“Board”) for the purposes of:

 

assisting the Board in overseeing the:

integrity of the Company's financial statements

independent auditor's qualifications and independence

performance of the Company's internal audit function and independent auditor,

Company's system of disclosure controls and system of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established,

Company's compliance with legal and regulatory requirements, and

 

 

preparing the report required by the Securities and Exchange Commission (“SEC”) proxy rules to be included in the Company's annual proxy statement.

The Audit Committee will report regularly to the Board regarding its execution of its duties and responsibilities.

 

The Audit Committee is empowered to obtain advice and assistance from outside legal, accounting or other advisors, and to fully investigate any matter brought to its attention, as deemed appropriate to perform its duties and responsibilities. The Company shall provide appropriate funding, as determined by the Audit Committee, for the Audit Committee's administrative expenses, and for compensation to the independent auditor and to any advisors that the Audit Committee chooses to engage.

 

This charter shall be reviewed and updated annually. Additionally, the Audit Committee will perform an annual assessment of its performance relative to the purpose, duties and responsibilities outlined herein.

 

Composition And Meetings

The membership of the Audit Committee shall consist of at least three directors, as determined by the Board, who are generally knowledgeable in financial and auditing matters. Each member shall be an independent director (as defined by all applicable rules and regulations), and free of any relationship that, in the opinion of the Board, would interfere with his or her individual exercise of independent judgement. The Board should determine whether at least one member of the Committee qualifies as an “Audit Committee financial expert” in compliance with the criteria established by the SEC for purposes of making appropriate disclosures in periodic filings as required by the SEC.

 

The Committee will meet at least four times annually. As part such meetings, the Committee will meet, at least annually, with management, the vice president of Internal Audit and the independent auditors in private executive sessions. Additionally, the Committee will meet quarterly with the independent auditors and management to discuss the annual and quarterly financial statements, including the Company's disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations, quality of earnings, reserves and accruals, suitability of accounting principles, highly judgmental areas, audit adjustments, whether or not recorded, and such other areas of inquiry as may be appropriate, and to recommend to the Board whether the audited financial statements should be included in the Annual Report on Form 10-K.

Responsibilities

The Audit Committee's primary responsibilities include:

 

Information Released to the Public: Discuss with management and the independent auditors the general nature of information to be disclosed and the type of presentation to be made in earnings press releases, and in financial information and earnings guidance provided to analysts and rating agencies. Review other relevant reports or financial information submitted by the Company to any governmental body or the public, including management certifications as required by the Sarbanes-Oxley Act of 2002.

 

 

Independent Auditors:

Appoint, retain, compensate and oversee the work performed by the independent auditor for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee, and the Committee has the ultimate authority and responsibility to evaluate the performance of the independent auditor and, where appropriate, terminate the independent auditor. The Audit Committee has responsibility for resolution of disagreements between management and the independent auditors in the event that they arise. The Audit Committee will consider and approve, in advance, any audit and permissible non-audit services to be performed by the independent auditor (other than those de minimus exceptions permitted by the Sarbanes-Oxley Act of 2002), with applicable reporting in periodic reports required by Section 13(a) of the Securities Exchange Act of 1934.

 

 

At least annually, obtain and review a report by the independent auditor describing: the firm's internal quality control procedures; any material issues raised by the most recent internal quality control review, peer review, or any inquiry or investigation by any governmental or professional authorities within the last 5 years, and the firm's actions to address such issues; and all relationships between the independent auditor and the Company, including the auditor's written affirmation that the auditor is in fact independent.

 

 

Hold timely discussions with the independent auditor regarding:

any problems or difficulties encountered during the audit and management's response, including any restrictions on the scope of the independent auditor's activities or on access to requested information and any significant disagreements with management;

critical accounting policies and practices, including alternative treatments within generally accepted accounting principles, ramifications of using such alternative treatments, and the auditor's conclusions about the treatment selected by the Company;

other reports of the independent auditor, including the auditor's attestation on management's internal control report, management letter and schedule of unadjusted audit differences.

 

 

Set hiring policies for employees or former employees of the independent auditors.

 

 

Internal Audit: Oversee the internal audit function, including:

Reviewing and advising management on the selection and retention of the vice president of Internal Audit.

 

 

Review internal audit activities, including budget, staffing, scope and results of work performed.

 

 

Financial Reporting Processes: In consultation with the independent auditor and internal auditors, review:

The Company's financial reporting processes and internal control structure.

 

 

Analysis prepared by management regarding significant financial reporting issues, accounting principles, judgments and estimates, off-balance sheet structures and taxation matters.

 

 

Significant related party transactions.

 

 

The effect of pending and newly-implemented regulatory and accounting initiatives related to the Company's financial statements.

 

 

Compliance and Risk Management: Review management's practices to identify, manage and monitor compliance with applicable government and regulatory requirements, including:

Discussion with management of the status of pending litigation, taxation matters, environmental issues and other areas of oversight to the legal and compliance area as may be appropriate.

 

 

Oversight of compliance with the Company's Code of Business Conduct, including periodically reviewing and updating the Code, and evaluating management's activities to monitor compliance with the Code.

 

 

Discussion of policies with respect to risk assessment and risk management.

 

 

Anonymous Reporting: Establish and maintain procedures for the confidential, anonymous submission by Company employees regarding questionable accounting or auditing matters. Maintain procedures to receive, retain and address complaints regarding accounting, internal controls or auditing matters.

 

 

Qualified Legal Compliance Committee: Act as the Company's Qualified Legal Compliance Committee, to review matters raised by the Company's attorneys with respect to material violations of federal or state securities law, fiduciary duties or similar federal or state law (as defined in) by the Company, its officers, directors, employees or agents, with the appropriate authority and responsibility as set forth in the regulations:

To receive, retain and consider any report of evidence of a material violation under the regulations, and to inform the Company's general counsel and Chief Executive Officer of any such reports, as required;

 

 

To determine whether an investigation is necessary and, if so, to notify the Board of Directors and initiate an investigation, with retention of additional expert personnel as deemed necessary; and

 

 

At the conclusion of any such investigation, to inform the general counsel, Chief Executive Officer and the Board of Directors of the Committee's recommended Company response to address the evidence noted, along with any other recommended actions (as determined by a majority vote of the Committee), including the authority to notify the SEC in the event that the Company fails, in any material respect, to implement an appropriate response that the Committee has recommended the Company to take.

 

 

Other Responsibilities: Perform other activities consistent with this Charter, the Company's by-laws and governing law, as the Committee or the Board deems necessary or appropriate.

^top

NOMINATING AND GOVERNANCE COMMITTEE CHARTER

 

Purpose and Authority

The Nominating and Governance Committee (the “Committee”) is established by the Board of Directors (the “Board”) for the purposes of:

 

Identifying and recruiting individuals qualified to become Board members

Recommending to the Board individuals to be selected as director nominees for the next annual meeting of stockholders and

Reviewing and recommending to the Board changes in the corporate governance principles applicable to the corporation, including the Board of Directors Plan of Organization.

The Committee will report regularly to the Board regarding its execution of its duties and responsibilities.

 

The Committee shall have the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other retention terms, and to retain and terminate counsel and other consultants that it deems necessary to carry out its duties.

 

This Charter shall be reviewed and updated as necessary annually. The Committee shall also perform an annual evaluation of its performance relative to the purpose, duties and responsibilities described herein. The Committee may delegate any of its duties and responsibilities to subcommittees.

 

Composition and Meetings

The Committee shall consist of at least three directors who are determined by the Board to be independent as that term is defined by the New York Stock Exchange.

 

The Board shall select Committee members at the first Board meeting following the annual meeting of stockholders. The Board, by majority vote, may remove a member of the Committee without cause at any duly noticed meeting of the Board.

 

The Committee shall meet at least twice three times annually, and additional times as necessary.

 

Duties and Responsibilities

The Committee shall:

 

Oversee the operation of the Board of Directors Plan Of Organization and the evaluation of the overall performance of the Board, its committees and management and make recommendations to the Board to make appropriate changes in its Plan of Organization and governance principles as necessary.

 

 

Establish criteria for membership on the Board.

 

 

Recommend annually to the Board the slate of Director candidates to be proposed for election to the Board. The Committee seeks candidates with diverse backgrounds and experiences who are expected to be able to contribute in a meaningful way to the Board's deliberations respecting the Company's business strategies, financial and operational performance and corporate governance practices.

 

 

Recommend to the Board criteria regarding the composition of the Board, total size and proportion of Management to Independent Directors.

 

 

Recommend to the Board criteria related to tenure as a Director, such as the retirement policy for Directors.

 

 

Oversee Director orientation and continuing education.

 

 

Make recommendations to the Board with respect to Director independence determinations.

 

 

Review, at least every two years, Board compensation and recommend to the Board any changes that seem appropriate.

 

 

Recommend to the Board the general criteria regarding the structure, function and composition of Board committees and, each year, specific Board assignments of individual Directors to these committees, including the selection of committee chairs.

 

 

Consider stockholder nominations for Board membership.

 

 

Nominate individuals for election to the Board between annual stockholders meetings.

 

 

Review and make recommendations regarding stockholders proposals related to governance.

^top

 

MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE CHARTER

 

Purpose and Authority

The Management Development and Compensation Committee (the “Committee”) is established by the Board of Directors (the “Board”):

 

To discharge the Board's responsibilities relating to compensation of the Company's Chief Executive Officer (“CEO”) and Management Executive Committee members;

To review and approve the Company's compensation policies and plans;

To oversee the management of the various pension, savings and other benefit plans that cover the Company's employees;

To produce the annual report on executive compensation for inclusion in the Company's proxy statement in accordance with applicable rules and regulations; and

To oversee the Company's management development and succession planning processes.

“Executive Officers” as used in this charter means members of the Company's Management Executive Committee and vice presidents who head significant functions and business units.

 

The Committee will report regularly to the Board regarding its execution of its duties and responsibilities.

 

The Committee shall have the authority to retain and terminate, and to approve the fees and other retention terms of, such consultants, outside counsel and other experts and advisors as it deems necessary to carry out its duties.

 

This Charter shall be reviewed and updated as necessary annually. The Committee shall also perform an annual evaluation of its performance relative to the purpose, duties and responsibilities described herein. The Committee may delegate any of its duties and responsibilities to subcommittees.

 

Composition and Meetings

 

The Committee shall consist of at least three directors who are determined by the Board to be “independent” as that term is defined by the NYSE, “non-employee” as defined in SEC Rule 16b-3(b)(3)(i) and “outside” as required for purposes of Internal Revenue Code §162(m).

 

The Board shall select Committee members at the first Board meeting following the annual meeting of stockholders. The Board, by majority vote, may remove a member of the Committee without cause at any duly noticed meeting of the Board. The Committee shall meet at least four times per year either in person or by teleconference. A majority of the members of the Committee must be present at a meeting to constitute a quorum.

 

Duties and Responsibilities

 

The Committee shall:

 

With respect to executive compensation:

Review and approve the Company's goals and objectives that provide a basis for decisions concerning the compensation of the CEO and the members of the Management Executive Committee.

Evaluate the CEO's performance in light of the Company's goals and objectives and periodically determine the CEO's salary and other compensation based on that evaluation, taking into account the input of non-employee directors who are not on the Committee.

Review periodically with the CEO the performance of the members of the Management Executive Committee in light of the Company's goals and objectives and approve their salary and other compensation based on that evaluation.

Annually determine and certify for each participant in the Executive Incentive Compensation Plan and for each Management Executive Committee participant in the Short-term Incentive Plan the extent to which performance goals have been met and the amount of any award to be made.

Determine the amount of individual awards to be made to Executive Officers under the Company's long-term incentive compensation plans.

Review and approve recommendations of the CEO regarding retirement income and other deferred benefit plans applicable to Executive Officers.

Review and approve recommendations of the CEO regarding new Management Executive Committee positions, before the job is filled. (Each recommendation should be supported by a job description, proposed salary range for the position, and tentative incentive compensation).

 

 

With respect to incentive compensation and equity plans:

Make recommendations to the Board with respect to the structure of overall incentive and equity-based plans that are subject to shareholder approval.

Review and approve performance measures and related targets, applicable target, threshold and maximum awards and maximum aggregate funding for participants in the Short-term Incentive Plan who are not Management Executive Committee members.

Administer all stock option, restricted stock and other long term compensation plans and programs.

Review and approve aggregate share levels for long-term incentive plan awards to employees who are not Executive Officers.

Initiate studies of new executive compensation plans and of existing plans, as the economy and tax laws change.

 

 

With respect to benefit and health & welfare plans:

Review and approve recommendations of the Employee Benefits Committee regarding amendments to the Company's tax qualified retirement plans such as Pension and 401(k) Plans. Authority to approve amendments that are recommended by legal counsel and do not have a substantial adverse impact on the Company and that are necessary to comply with law or are ministerial in nature and do not affect the level of plan benefits offered under the plan has been delegated to The Clorox Company Employee Benefits Committee.

Oversee the administration of ERISA employee benefit plans. Responsibility for administering the plans has been delegated to The Clorox Company Employee Benefits Committee.

 

 

With respect to director compensation, annually review the compensation of non-employee directors and the principles upon which such compensation is determined and make any recommendations to the Nominating and Governance Committee.

 

 

With respect to succession:

Recommend to the Board candidates for the CEO.

Review the plans of the Company with regard to the training and availability of qualified personnel for appointment to Executive Officer positions.

Participate with the CEO in planning for the succession of Executive Officers through an annual succession planning review.

Provide all directors the opportunity to participate in talent and succession planning review.

 

 

With respect to reporting:

Prepare the report of the Committee to be included in the Company's proxy statement annually.