Corporate Governance Guidelines

 

 

 

 

 

A.     BOARD COMPOSITION

1.     Selection of Chairman and CEO

The Board does not have a policy on whether or not the roles of Chief Executive Officer and Chairman should be separate and, if they are to be separate, whether the Chairman should be selected from the non-employee Directors or be an employee.

The Board believes that it should be free to make this choice from time to time in any manner that is in the best interests of the Company and its shareholders.

2.     Size of the Board

The Board currently has eight (8) members, and periodically reviews the appropriate size of the Board. The Company By-Laws provide for a maximum of eleven (11) Board members.

3.     Mix of Inside and Outside Directors

The Board believes that there should be a majority of independent Directors on the Board. However, the Board believes it may be desirable, at times, to have limited members of Management, in addition to the Chief Executive Officer, as Directors.

4.     Board Definition of What Constitutes Independence for Outside Directors

The Company complies with the Nasdaq National Stock Market Issuer requirements for independent directors (Nasdaq Stock Market Rule 4200).

The Board's Chairman is the independent director designated as the Lead Independent Director, who is responsible to coordinate the activities of the other independent directors and to perform various other duties.

5.     Board Membership Criteria

The Nominating/Corporate Governance Committee is responsible for reviewing with the Board from time to time the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. This assessment includes considering skills such as understanding of manufacturing, technology, finance and marketing, in addition to current members' desire to remain on the Board, all in the context of an assessment of the perceived needs of the Board at that point in time. Board members are expected to rigorously prepare for, attend, and participate in all Board and applicable Committee meetings. Each Board member is expected and required to ensure that other personal commitments do not materially interfere with the member's service as an outstanding director.

6.     Selection of New Director Candidates

The Board is responsible for selecting its own members. The Board delegates the screening process involved to the Nominating/Corporate Governance Committee.

7.     Directors Who Change Their Present Job Responsibility

The Board does not believe that directors who retire or change from the position they held when they came on the Board should necessarily leave the Board. There should, however, be an opportunity for the Board, via the Nominating/Corporate Governance Committee, to review the continued appropriateness of Board membership under these circumstances.

8.     Term Limits

The Board does not believe it should establish term limits. While term limits could help insure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of directors who over time have developed increasing insight into the Company and its operations and therefore provide an increasing contribution to the Board as a whole.

9.     Retirement Policy

The Board has not adopted a retirement policy for officers and directors.

10.   Board Compensation Review

It is appropriate for the staff of the Company to report from time to time to the Compensation Committee on the status of Board compensation in relation to other comparable U.S. companies.

Changes in Board compensation, if any, should come at the suggestion of the Compensation Committee, but with full discussion and concurrence by the Board.

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C.    BOARD MEETINGS

1.     Scheduling and Selection of Agenda Items for Board Meetings

Regular Board meetings are scheduled in advance typically six (6) times per year. Generally, the meetings are held in Fairview, Pennsylvania, which is the Company's headquarters, but occasionally a meeting is held at another location.

The Chairman of the Board and the Secretary of the Company, with the assistance of the Chief Executive Officer, draft the agenda for each Board meeting and distribute it in advance to the Board.

Each Board member is free to suggest the inclusion of items on the agenda.

2.     Board Material Distributed in Advance

Information and data that is important to the Board's understanding of the business are distributed in writing to the Board before the Board meets.

As a general rule, materials on specific subjects are sent to Board members in advance so that members have sufficient time to review the material in advance and Board meeting time is then focused on questions that the Board has about the material. Sensitive subject matters may be discussed at the meeting without written materials being distributed in advance or at the meeting.

3.     Board Presentations and Access to Employees

The Board has complete access to any Spectrum Control employee.

The Board encourages Management to schedule managers to present at Board Meetings who: (a) can provide additional insight into the items being discussed because of personal involvement in these areas, or (b) have future potential that Management believes should be given exposure to the Board.

4.     Outside Directors' Discussion

The Board's policy is to have a separate meeting time for the outside directors at each regularly scheduled Board meeting. The Lead Independent Director will assume the responsibility of chairing the regularly scheduled meetings of outside directors and shall bear such further responsibilities which the outside directors as a whole might designate from time to time.

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E.     BOARD COMMITTEES

1.     Number of Committees

The Board currently maintains three (3) Committees: Audit; Compensation; and Nominating/Corporate Governance. There will, from to time, be occasions on which the Board may want to form a new committee or disband a current committee depending upon the circumstances.

The Audit Committee has sole authority to engage the Company's independent auditors, and monitors the effectiveness of the audit effort, the Company's internal financial and accounting organization, controls and financial reporting.

The Compensation Committee reviews and makes recommendations to the Board on salary, incentive compensation practices and benefit programs for the compensation of the Chief Executive Officer and other key executives; recommends to the Board the amount and method of compensation of Board members; and reviews annually the operation and performance of incentive compensation plans that apply to the Chief Executive Officer and other key executives of the Company.

The Nominating/Corporate Governance Committee makes recommendations to the Board regarding the size and composition of the Board, establishes procedures for the nomination process and recommends candidates for election to the Board. The Committee has the responsibility for providing the evaluation of director performance, and recommending to the Board a successor to the Chief Executive Officer when a vacancy occurs through retirement or otherwise. This Committee also reviews and reports to the Board on matters of corporate governance (that is, the relationships of the Board, the Stockholders and Management in determining the direction and performance of the Company) and reviews and addresses these Guidelines and recommends revisions as appropriate.

2.     Assignment and Term of Service of Committee Members

The Board is responsible for the appointment of Committee Members and Committee Chairpersons. It is generally expected that each Committee Chairperson will have had previous service on the applicable Committee. Committee members' terms of service are determined by the full Board.

3.     Frequency and Length of Committee Meetings and Committee Agenda

The Committee Chairperson in consultation with Committee members, and appropriate members of Management, determine the frequency and length of the Committee meetings and develop the Committee's agenda. The agendas and meeting minutes of the Committees are available to the full Board, and other Board members are welcome to attend all Committee meetings.

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G.    MANAGEMENT REVIEW AND RESPONSIBILITY

1.     Formal Evaluation of Officers

The Compensation Committee conducts an evaluation annually in connection with the determination of the salary and incentive compensation of all officers, including the Chief Executive Officer.

2.     Succession Planning and Management Development

The Chief Executive Officer reviews succession planning and management development with the Board on an annual basis.

3.     Board Interaction with Institutional Investors, Press, Customers, Etc.

The Board believes that Management speaks for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company, but it is expected that Board members would do this with the knowledge of Management and, in most instances, at the request of Management.

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I.      KEY POLICIES

1.     Code of Conduct

2.     Insider Trading Policy

The Nominating/Corporate Governance Committee of the Board of Directors shall review this statement of policy on at least an annual basis and report to the Board with any recommendations it may have in connection therewith, and such review shall be referred to in the Company's Proxy Statements.

Approval/Effective Date: September 22, 2003