Corporate Governance Guidelines
of the Board of Directors of
InfraSource Services, Inc.
(Adopted as of November 14, 2005)
The following Corporate Governance Guidelines have been adopted by the Board of Directors (the “Board”) of InfraSource Services, Inc. (the “Company”) to assist the Board in the exercise of its responsibilities. These Corporate Governance Guidelines are not intended to change or interpret any Federal or state law or regulation, including the Delaware General Corporation Law, or the Company’s Certificate of Incorporation (as amended or restated) or Bylaws. Recognizing that best practices for corporate boards of directors and practical considerations will change over time, the Board will monitor developments in these areas and will amend these guidelines as it deems appropriate.
I. Board Purpose and Responsibilities. The business and affairs of the Company are managed under the direction of the Board. The Board represents and acts on behalf of the stockholders of the Company. The Board is responsible for establishing and helping the Company achieve business and organizational objectives through oversight, review and counsel. The Board, directly and through its Committees, performs a number of specific functions, including:
A. Approves and monitors critical business and financial strategies of the Company.
B. Approves and monitors major corporate actions.
C. Assesses major risks facing the Company and options for their mitigation.
D. Oversees processes designed to ensure the Company’s, and the Company’s employees’, compliance with applicable laws and regulations and the Company’s Code of Business Conduct and Ethics.
E. Oversees processes designed to ensure the accuracy and completeness of the Company’s financial statements.
F. Monitors the effectiveness of the Company’s internal controls.
G. Selects, evaluates, and sets appropriate compensation for the Company’s Chief Executive Officer (“CEO”), President and Chief Financial Officer.
H. Oversees the selection, evaluation and compensation of senior corporate staff.
I. Oversees succession planning for the CEO, senior corporate management and senior management of the Company’s operating companies.
J. Reviews the recommendations of Company management for, and elects, the Company’s principal officers.
K. Oversees the compensation of the Company’s principal officers elected by the Board.
II. Board Size, Composition and Qualifications
A. Size. Although a board of directors comprised of approximately seven members seems appropriate at this time, this approach is flexible depending on the circumstances of the Company and the qualifications of proposed candidates.
B. Composition. Beginning not later than the first anniversary of the date on which the Company ceases to be a controlled company as defined in the New York Stock Exchange (the “NYSE”) corporate governance rules, the Board will be comprised of a majority of independent members. For purposes of these guidelines, “independence” will be determined in accordance with the independence standards of the NYSE and applicable laws and regulations.
C. Selection of New Directors.
1. The Board will be responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of stockholders. The Governance and Nominating Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership.
2. The Governance and Nominating Committee will consider candidates recommended by the Company’s stockholders. In considering candidates submitted by stockholders, the Governance and Nominating Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Governance and Nominating Committee may establish procedures, from time to time, regarding stockholder submission of candidates.
D. Qualifications for Non-Employee Board Members. Among the qualifications considered in the selection of candidates, the Company shall look at the following attributes and criteria of candidates: experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest, independence from the Company’s management and the Company and such other relevant factors that may be appropriate in the context of the needs of the Board.
E. Employees as Board Members. The CEO will ordinarily be a member of the Board. Otherwise, to be considered for Board membership, employees of the Company must have senior management responsibility for broad areas of the Company’s operating or functional groups. Directors who are also employees of the Company are expected to resign from the Board at the same time they leave employment with the Company.
F. Tenure and Retirement. All Board members will be elected for one-year terms. The Board believes that neither an arbitrary term limit on Board members’ service nor an arbitrary retirement age is appropriate; however, length of service and age will be factors considered in selecting candidates for nomination or re-nomination.
G. Conflicts of Interest. In addition to abiding by the Company’s Code of Business Conduct and Ethics, each Board member must recuse himself or herself from any decision affecting his or her personal, business or professional interests, and should consider whether it would be appropriate to recuse himself or herself from any related discussion.
H. Change in Occupation of Independent Board Member. An independent Board member must offer his or her resignation for consideration by the Governance and Nominating Committee in the event of a significant change in that Board member’s principal occupation. The Committee will consider such factors as it deems relevant in determining whether to recommend that the offer of resignation be accepted and will present its recommendation to the Board for action.
III. Board Meetings
A. Regular Meeting Calendar
1. Dates and Times. The Board will meet in person at least four (4) times per year, unless it determines that more or fewer meetings are required. Meetings will typically occur during the following months: April, July, October and December.
2. Topics. The Board agenda will include regular in-depth reviews of the key issues affecting the Company overall, and various Company businesses and functions. Appropriate time will be allotted for Board member questions and input.
At least once per year, the Board will meet to review the performance and succession plan for the Company’s CEO, and for other principal officers (the meetings may be separate). Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO. The Board’s evaluation of the CEO’s performance will be shared with the CEO.
B. Distribution of Materials. Board members generally expect to receive information and materials in advance of the Board meetings where important to the Board’s understanding or to facilitate discussion. For regularly scheduled Board meetings, the Company will use best efforts to distribute information and materials to Board members at least one week in advance. Distribution shall be made electronically to the extent reasonably practicable for both the sender and the recipient. It is expected that Board members will review all such materials in advance of the Board meetings and make such other advance preparations as may be appropriate to make Board meetings as productive and efficient as reasonably possible. In the event of a pressing need for the Board to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting.
C. Attendance of Directors. Attendance by directors is expected at all Board and Committee meetings for the full length of such meetings. A director who is unable to attend any Board or Board Committee meeting (which it is understood will occur on occasion) is expected to notify the Chairman of the Board (the “Chairman”) or the chairman of the appropriate Committee in advance of such meeting.
D. Special Meetings. The Chairman or the CEO will call additional meetings as necessary to address important or urgent Company issues. The President or any member of the Board may also call a special meeting. Special meetings may be held in person, or by telephone or other form of interactive electronic communication.
E. Attendance of Management Personnel at Board Meetings. The Board encourages the CEO to bring members of management from time to time into Board meetings to: (i) provide management insight into items being discussed by the Board which involve the manager; (ii) make presentations to the Board on matters which involve the manager; and (iii) bring managers with significant potential into contact with the Board. Attendance of such management personnel at Board meetings is at the discretion of the Board. If the CEO desires to add additional members of management as attendees on a regular basis, this should be suggested to the Board for its concurrence.
IV. Board Leadership
A. Chairman. The Board will be chaired by one (1) member. The Chairman will be appointed by vote of a majority of members of the Board present at a duly constituted meeting, and may be removed at any time by the same vote. The CEO may be appointed as the Chairman. Unless the CEO serves as Chairman, the Chairman will act as a key liaison with the CEO, will set the Board agenda with the assistance of the CEO, will chair the executive sessions described in Section IV.C below, and will communicate Board member feedback to the CEO.
B. Presiding Director. If the Chairman is the CEO of the Company or otherwise not independent, then one of the independent members of the Board will be named as Presiding Director. The Presiding Director, if there is one, will act as a key liaison with the CEO, will assist the Chairman in setting the Board agenda, will chair the executive sessions described in Section IV.C below, and will communicate Board member feedback to the CEO. Any Presiding Director will be chosen annually by a majority of the non-employee members of the Board present at a duly constituted meeting after consultation with the Governance and Nominating Committee. The name of, and a means of directly contacting, any Presiding Director will be made public.
C. Executive Sessions of Non-Employee Directors. Regardless of who holds the position of Chairman, the non-employee members of the Board will meet outside the presence of any Company employee at every regularly scheduled Board meeting, and at such other times as the Chairman or Presiding Director may call such a meeting. Executive sessions will be led by the Chairman, if the Chairman is an independent member of the Board, or otherwise by the Presiding Director (or, in the Chairman’s or the Presiding Director’s absence, another non-employee director designated by the Chairman or the Presiding Director, as appropriate).
D. Executive Sessions of Independent Directors. If all of the non-employee members of the Board are not independent, the independent members of the Board will meet outside the presence of any Company employee or any member of the Board who is not independent at least once each year as called by the Chairman or Presiding Director.
Any interested parties desiring to communicate with the Chairman or the Presiding Director or any other non-employee directors regarding the Company (including matters related to any complaint or concern about the Company’s accounting, internal accounting controls or auditing matters) may directly contact such director or directors by writing to them at InfraSource Services, Inc., 500 West Dutton Mill Road, Aston, Pennsylvania 19014, Attention: Presiding Director/Non-Management Director, c/o Legal Department.
E. Board Agendas. The Chairman, in consultation with the CEO or the Presiding Director, as the case may be, will determine the agenda for each meeting. All Board members should propose to the Chairman or the Presiding Director the inclusion of additional agenda items that they deem necessary or appropriate in carrying out their duties.
V. Board Committees
A. Purpose. The purpose of Board Committees is to help the Board effectively and efficiently fulfill its responsibilities, although the Committees do not displace the oversight responsibilities of the Board as a whole. The specific purpose and responsibilities of each Board Committee are outlined in such committee’s charter adopted by the Board. Board Committees will report the results of their significant activities to the full Board or make recommendations to the full Board as appropriate.
B. Standing Committees. The Board has established three standing Committees of the Board. The Governance and Nominating Committee will regularly review the Board’s committee structure and make recommendations to the full Board as needed. The Board may add, eliminate, and change the charter or composition of any Committee at any time, except to the extent that such a change would violate the Company’s Certificate of Incorporation (as amended or restated), Bylaws, the listing standards of the NYSE or applicable law. The three standing Committees are as follows:
1. Audit Committee: The Audit Committee has the responsibilities set forth in its charter with respect to the quality and integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements; the Company’s overall risk management profile; the independent auditor’s qualifications and independence; the performance of the Company’s internal audit function and independent auditors; and preparing the annual Audit Committee Report to be included in the Company’s proxy statement.
2. Compensation Committee: The Compensation Committee has the responsibilities set forth in its charter with respect to overseeing overall Company compensation policies and their specific application to the CEO and other principal officers elected by the Board and to members of the Board; and preparing an annual report on executive compensation for inclusion in the Company’s proxy statement.
3. Governance and Nominating Committee: The Governance and Nominating Committee has the responsibilities set forth in its charter with respect to identifying individuals qualified to become members of the Board; recommending to the Board when new members should be added to the Board; recommending to the Board individuals to fill vacant Board positions; recommending to the Board the director nominees for the next annual meeting of stockholders; periodically developing and recommending to the Board updates to the Company’s Corporate Governance Guidelines and Code of Business Conduct and Ethics; assisting the Board and the Company in interpreting and applying the Company’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, and other issues related to Company and employee governance and ethics; and evaluation of the Board and each Committee and their respective members.
C. Committee Membership. Each standing Committee will include at least one independent member of the Board on the effective date of the Company’s initial public offering, at least a majority of independent directors within 90 days of the effective date of the Company’s initial public offering, for the Audit Committee, all independent directors not later than the first anniversary of the effective date of the Company’s initial public offering, and for all other standing Commitees, all independent directors within the permitted phase-in period following the date on which the Company ceases to be a controlled company as defined in the NYSE corporate governance rules. Notwithstanding the foregoing, in all events the membership of any Committee shall meet any minimum standards established from time to time by the NYSE or applicable law.
D. Assignment and Rotation of Committee Members. The Governance and Nominating Committee will, after consultation with the Chairman, make membership recommendations for all Committees to the full Board for action at the first Board meeting following the annual meeting of stockholders.
E. Committee Agendas. The Chairman of each Committee will, after consultation with appropriate members of Company management, determine the agenda for each meeting. The Chairman or the Presiding Director and other Committee members may also suggest the inclusion of items on the agenda.
VI. Board Compensation
A. Compensation Committee Responsibility. The Compensation Committee of the Board will annually review the compensation of Board members, and will make recommendations to the full Board.
B. Compensation Philosophy. In making its recommendations to the full Board concerning the compensation of Board members, the Compensation Committee should consider the following goals:
1. Board members should be fairly compensated for the work involved in overseeing the management of a company the size and scope of the Company.
2. Board member compensation should be competitive with director compensation at other U.S. companies the size and scope of the Company.
3. Board member compensation should align Board members’ interests with the long-term interests of the Company’s stockholders.
Director’s fees (including any fees paid in the form of stock options or grants and any additional amounts paid to chairs of committees and to members of committees of the Board) are the only compensation a member of the Audit Committee may receive from the Company; provided, however, that a member of the Audit Committee may also receive fixed amounts of compensation under a retirement plan (including deferred compensation) from the Company for prior service with the Company so long as such compensation is not contingent in any way on continued service.
A director who is also an employee of the Company shall not receive additional compensation for such service as a director.
VII. Board Access to Management and Independent Advisors
A. Management. Non-employee members of the Board are encouraged to contact and/or meet with Company employees without principal officers being present for purposes of gathering information. The Company will, on a regular basis, provide specific opportunities for this type of interaction. However, no individual director should give direction to Company employees during these meetings; such direction should be provided by the full Board to the Company’s CEO.
B. Independent Advisors. The Board will hire such independent advisors, including attorneys, accountants, investment bankers, and other consultants, as it deems necessary or appropriate to carry out its duties.
VIII. Board Orientation and Continuing Education
A. Orientation. The CEO of the Company will arrange for new members of the Board to meet with senior operating and functional managers of the Company, in order that the new member can become familiar with the Company’s business, strategic plans, significant financial, accounting and risk management issues, financial statements, senior managers, internal auditors, independent auditors and key policies, guidelines and practices. This orientation should begin as soon as practicable after the new Board member is elected, and should be complete within one (1) year after he or she joins the Board.
B. Continuing Education. From time to time, the Company will provide Board members with presentations from Company and/or third party experts on topics that will assist Board members in carrying out their responsibilities. The Company encourages its Board members to participate in continuing education programs to assist them in performing their Board responsibilities.
IX. Service on Other Boards and Other Audit Committees
A. Non-Employee Directors.
1. Other Boards. The Company does not limit the number of other public company boards on which a non-employee director may serve. However, the Company does expect all directors to devote sufficient time and effort to their duties as a Board member. This is a factor to be considered in the annual individual director evaluation process.
2. Other Audit Committees. The Company’s independent directors serving on the Audit Committee may not serve on more than two (2) other public company audit committees in addition to the Company’s unless the Board determines that such simultaneous service would not impair the ability of such member to effectively serve on the Company’s Audit Committee.
B. Employee Directors.
1. Chief Executive Officer. The Company’s CEO may not serve on more than two (2) outside public boards without the approval of a majority of the non-employee members of the Board, and must consult with the Board before accepting an appointment to an outside Board. Service on charitable or educational boards does not count towards this limit, unless a majority of the non-employee members of the Board determines that such service constitutes an unreasonable demand on the CEO’s time.
2. Other Employee Board Members. Members of the Board who are Company employees (other than the CEO) may not serve on more than one (1) outside public Board without the approval of a majority of the non-employee members of the Board, and must consult with the CEO before accepting any appointment to an outside Board. The CEO will consult, as appropriate, with the Chairman (if the CEO is not the Chairman) or the Presiding Director with respect to such appointments. Service on charitable or educational boards does not count towards this limit, unless a majority of the non-employee members of the Board determines that such service constitutes an unreasonable demand on the employee Board member’s time.
C. Principal Officers of the Company Elected by the Board. No principal officer of the Company elected by the Board may serve on the board of a major competitor or customer, or a major potential competitor or customer. Principal officers should normally avoid serving on the Board of a major or potential major supplier, contractor, or consultant. All principal officers must consult with the Company’s CEO before accepting an appointment to an outside Board. The CEO will consult with the Board prior to any officer accepting a position on the Board of any major or potential major supplier, contractor, or consultant, and will inform the Board of any outside board memberships accepted by a principal officer of the Company.
X. Director Attendance at Annual Meetings of Stockholders. Directors are invited and encouraged to attend the Company's annual meeting of stockholders. A director who is unable to attend the Company’s annual meeting of stockholders (which it is understood will occur on occasion) is expected to notify the Chairman.
XI. Stock Ownership Guidelines. Each non-employee member of the Board (other than members affiliated with a controlling stockholder) may be required to own common stock of the Company in accordance with any Company’s stock ownership guidelines for non-employee directors that may be established from time to time. Employee members of the Board may be required to own stock of the Company in accordance with any Company’s stock ownership guidelines for Company executives that may be established from time to time.
XII. Board Self-Evaluation. The Board will annually (typically in December) discuss the report of the Governance and Nominating Committee concerning the performance of the Board and its members.