2003 Committee Charter : SAH
SONIC AUTOMOTIVE, INC.
CORPORATE GOVERNANCE GUIDELINES
As Adopted on December 11, 2002
1. Board Membership. The consideration of nominees for election as directors shall
be a continuous process and not confined to the time when an incumbent director leaves the
Board of Directors (the "Board") of Sonic Automotive, Inc. (the "Company"). Key management
personnel and directors who are not members of the Nominating and Corporate Governance
Committee (the "NCG Committee") are encouraged to submit the names of prospective directors
to the NCG Committee.
2. Director Qualification Standards. The following qualification standards shall be
reviewed by the NCG Committee when recommending to the Board nominees for election as
A. Independent Judgment. A director should have the ability to apply
independent judgment to a business situation. In addition, directors who are intended by the
NCG Committee and the Board to qualify as "independent directors" under applicable United
States Securities and Exchange Commission ("SEC") rules and regulations or applicable rules of
the New York Stock Exchange ("NYSE") or any other exchange on which shares of the
Company's Class A Common Stock are traded must meet the applicable criteria for
"independence" established by the SEC, NYSE or such other exchange. It is desirable that any
non-employee director be qualified as an "independent director" under rules and regulations of
the SEC, NYSE or such other exchange, as such rules and regulations are in effect from time to
B. Representation. A director should have the ability to represent broadly the
interests of all of the Company's stockholders and constituencies.
C. Maturity and Experience. A director should be mature and have broad
training and experience at the policy making level in business, economics, government,
education or technology. Ideally, a director should have expertise that is useful to the Company
and complementary to the background and experience of other Board members so that an
optimum balance of expertise among members of the Board can be achieved and maintained.
D. Time and Commitment; Service on Other Boards. A director should have
both the time and willingness to be an active member of the Board, as well as a member of one
or more Committees of the Board. A director should be committed to serving on the Board over
a period of years to develop knowledge about the Company's principal operations. While
service on the board of directors of other companies is not discouraged, the Board believes that
directors who are full-time employees of the Company or of other companies should serve on no
more than three (3) outside public company boards at a time (in addition to service on Sonic's
Board), and that directors who are not engaged in full-time employment should serve on no more
than five (5) outside public company boards at a time (in addition to service on Sonic's Board).
The Board may, however, make exceptions to this standard as it deems appropriate in the
interests of the Company's stockholders.
3. Board Leadership. In accordance with the By-Laws of the Company, the
Chairman of the Board shall preside over all meetings of the Board and supervise its affairs.
Although the offices of Chairman of the Board and Chief Executive Officer of the Company are
currently unified, there may be circumstances in the future under which these positions could be
separated and held by different individuals. In addition, the independent directors shall annually
designate an independent director to serve as the Lead Independent Director. The Lead
Independent Director's duties and responsibilities shall be as determined from time to time by
the independent directors, including without limitation, presiding in regularly scheduled
executive sessions with the non-employee directors without the presence of management and
coordinating feedback to the Chief Executive Officer on behalf of non-employee directors
regarding business issues and Board management. The NCG Committee shall recommend
annually a Lead Independent Director candidate for appointment by the independent directors.
4. Criteria of Board Composition, Size and Proportion.
A. Composition. The Board should be composed ideally of persons have a
diversity of skills, background and expertise that are useful to the Company and its future and
ongoing needs. The NCG Committee should consider existing Board composition in evaluating
potential new director candidates.
B. Size. The current By-Laws limit the number of directors at thirteen (13).
The NCG Committee should annually evaluate the current size of the Board and make
recommendations, as it deems appropriate, regarding changes in the size of the Board.
C. Proportion. The Board will consist of no less than a majority of
independent directors. Board membership should be in favor of independent directors, and it
shall be desirable to limit the representation of management on the Board. Should the Board
consist of less than a majority of independent directors at any time due to factors outside of the
Board's control, the Board will take such actions as it deems necessary or appropriate to restore
the composition of the Board to at least a majority of independent directors as soon as reasonably
5. Committee Membership.
A. Service. All non-employee directors who qualify as "independent
directors" should be willing and able to serve on one or more permanent Committees of the
Board. All of the members of the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee shall be independent directors.
B. Rotation. While rotation of Committee memberships may be desirable
under certain circumstances, the Board does not feel that rotating Committee assignments on a
fixed schedule should be mandated as a policy since there may be good reasons at any given time
to maintain an individual director's Committee membership for a longer period.
A. Attendance. All directors should attend regularly scheduled meetings of
the Board and special meetings, either in person or by telephone. It is the Board's strong
preference that directors attend meetings in person. For any director that fails to attend at least
seventy five percent (75%) of the regularly scheduled meetings of the Board in a particular
calendar year, the NCG Committee shall consider such director's attendance in its
recommendation to the Board regarding nomination of the director for re-election.
B. Number of Meetings and Scheduling. It is desirable that the Board have at
least five (5) regularly scheduled meetings per year. The Chairman of the Board should publish
the schedule of regularly scheduled Board meetings for the upcoming calendar year by no later
than October 1 of the preceding calendar year. Executive sessions of the independent directors
will be held at each regularly scheduled Board meeting, and the Lead Independent Director, or
his/her designee, will chair such executive sessions.
C. Selection of Agenda Items. The Chairman of the Board will establish the
agenda for each Board meeting. The Lead Independent Director will establish the agenda for
each executive session of the non-employee directors. Each Committee chairperson will
establish the agenda for Committee meetings. All members of the Board and its Committees are
encouraged to submit items for consideration by the Board and its Committees at the meetings.
D. Advance Distribution of Board and Committee Materials. Written
agendas for each Board or Committee meeting, along with other written materials pertinent to
the Board's or Committee's review and consideration of agenda items, shall be distributed by the
appropriate management personnel to the Board or Committee members in advance of each
7. Stock Ownership. All members of the Board are encouraged to own shares of the
Company's common stock. The Board may set policies, from time to time, for required levels of
Company stock ownership by directors, together with suggested ownership amounts of Company
stock by key management personnel.
8. Criteria of Tenure of Directors.
A. Retirement from Board. While the Board does not feel that setting a
mandatory retirement age for directors is appropriate or necessarily in the Company's best
interests, each director is encouraged to consider his or her own circumstances in this regard
before agreeing to stand for re-election as a director at the end of the director's term.
B. Change in Occupation or Profession. Non-employee directors must
inform the Board of any change in such director's occupation or profession, and must offer to
stand down at the end of the particular director's term following such a change.
C. Resignation of Employee Directors. Any director of the Company who is
also an employee of the Company must offer to resign from the Board (and from the boards of
directors or governing bodies of any subsidiary of the Company) upon the earlier to occur of (a)
retirement from the Company, (b) resignation from the Company, (c) other termination of
employment with the Company, or (d) downward revision of status or office in the Company.
9. Director Access to Management and Independent Advisors. Board members have
complete access to management of the Company and are encouraged to make regular contact.
The Chairman, at his or her discretion, may also invite independent advisors to the Company to
attend Board meetings. Committees of the Board may retain and consult with independent
advisors at the Company's expense as provided for in the respective Charters of each Committee.
Board members may consult with independent advisors regarding Company business or affairs,
provided that such consultations shall not be at the Company's expense unless approved in
advance by the NCG Committee. The NCG Committee will approve such requests as it deems
necessary or appropriate.
10. Chief Executive Officer. The Board, under the advice of the Compensation
Committee, shall conduct a review and assessment of the performance of the Chief Executive
Officer at least annually.
11. Key Management Personnel.
A. Evaluation of Performance. The Board, under the advice of the
Compensation Committee, shall adopt a process for performance reviews of key management
personnel of the Company, which reviews shall be conducted not less than annually.
B. Succession Planning. The Compensation Committee, in consultation with
the Chief Executive Officer, shall review not less frequently than annually the succession
planning for key management personnel of the Company. The Compensation Committee shall
annually report to the Board regarding its recommendations for succession planning for key
C. Attendance at Board Meetings. As recommended by, and at the discretion
of, the Chief Executive Officer, key management personnel shall attend meetings of the Board.
The Chief Executive Officer is encouraged to bring key management representatives to meetings
of the Board who: (i) can assist in explaining capital requests, (ii) can provide insight into factors
affecting their area of business or expertise in the Company, or (iii) the Chief Executive Officer
determines should be exposed to the Board.
12. Criteria of Removal of Directors.
A. Attendance. If over two (2) successive years attendance by a director at
meetings of the Board and meetings of any Committees of the Board falls below sixty percent
(60%), the director must offer to resign from the Board.
B. Disability or Illness. A director must resign from the Board if the director
is suffering from a disability or illness that prevents active participation in the affairs of the
Board over a sustained period.
C. Neglect or Other Causes. If a director neglects the director's duties or
other grounds exist under applicable law for removal, or the director fails to continue to satisfy
the criteria for tenure described in Section 8 hereof, the director must offer to resign.
13. Director Compensation. Non-employee directors of the Company shall receive
fees (which may include equity-based awards) for their services as a director as determined by
the Board from time to time, with advice from the Compensation Committee. In addition, the
Board, in its discretion and with advice from the Compensation Committee, may award
additional fees to non-employee directors for service on a Committee of the Board. All such fees
must be consistent with appropriate rules and regulations of the SEC, the NYSE or any other
exchange on which shares of the Company's Class A Common Stock are traded. Directors who
are also employees of the Company shall receive no additional compensation for service on the
14. Director Orientation. The NCG Committee shall develop and implement a
director orientation program for the purpose of educating new directors regarding the Company's
business and the duties and responsibilities of the Board and its members.
15. Director Continuing Education. Each director of the Company is encouraged to
attend, not less frequently than annually, seminars that focus on educating or updating directors
of public companies in the areas of corporate governance and responsibility or other areas that
are useful to the director's service to the Company. The NCG Committee shall review proposed
seminars for a particular director in advance to ensure that such seminars comply with applicable
SEC or stock exchange rules regarding continuing director education. Expenses of attending a
director continuing education seminar shall be paid by the Company if such director's attendance
of the seminar has received the prior approval of the NCG Committee.
16. Annual Performance Evaluation of the Board and Committees. The NCG
Committee shall recommend to the Board a process for an evaluation by the Board of the
performance and effectiveness of the Board. The Board shall conduct this performance
evaluation not less frequently than annually. The NCG Committee shall also recommend to each
standing Committee of the Board a process for self-evaluation by the particular Committee,
which evaluations shall be conducted not less than annually. The results of such annual
performance evaluations shall be reported to the Board by the chairpersons of each Committee.