CBOT HOLDINGS, INC.

 

 

CORPORATE GOVERNANCE GUIDELINES

 

We are a Delaware corporation and as such, our business and affairs are managed by or under the direction of our board of directors, which is elected by our stockholders in accordance with, and subject to the qualification requirements set forth in, our certificate of incorporation and bylaws. The basic responsibility of our directors is to exercise their business judgment and act in what they reasonably believe to be the best interests of the corporation and our stockholders. Our day-to-day business and affairs are conducted by our employees and officers, under the direction of our President and Chief Executive Officer and the oversight of our board of directors.

 

The following guidelines have been approved by our board of directors and, along with the charters of the board’s committees, including the charters of the audit, compensation and nominating committees set forth as Exhibits A, B and C hereto, respectively. Our board of directors expects to review these guidelines and other aspects of our governance annually or more often if deemed necessary.

 

Board Responsibilities - Return to Top

 

In addition to its general oversight of management, our board of directors and/or its committees will be responsible for the performance of the following principal functions:

 

reviewing, approving and monitoring our business strategies, annual operating plan, budgets and major corporate actions;

selecting, evaluating and compensating our President and Chief Executive Officer;

providing counsel and oversight on the selection, evaluation and compensation of our other senior executive officers;

developing a succession plan for our President and Chief Executive Officer;

reviewing and approving succession planning for our other senior executive officers;

ensuring appropriate processes are in place for maintaining the integrity of the corporation; and

advising and counseling our senior executive officers as appropriate.

Board Composition

 

Size of Board and Selection Process - Return to Top

 

The size of our board of directors and the process by which they are elected or appointed are set forth in our certificate of incorporation and bylaws.

 

General Qualifications - Return to Top

 

In assessing potential new directors, the nominating committee of our board of directors should consider, among other criteria, the character, background and professional experience of candidates. Prior experience and familiarity with the derivatives industry are among the relevant criteria. Each nominee should possess good judgment and an inquiring and independent mind. Each nominee should also possess a reputation for the highest personal and professional ethics, integrity and values. The nominating committee should also carefully consider any potential conflicts of interest associated with each nominee that it is aware of.

 

Nominees must be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively, and should be committed to serve on our board of directors for their full terms. In addition, in determining whether to recommend a director for nomination for re-election, the nominating committee should also consider the director’s past performance, including attendance at meetings and participation and contributions to the activities of our board of directors, as well as the director’s ability to continue to make contributions to our board.

 

Independence of Directors - Return to Top

 

A majority of the members of our board of directors and all of the members of our audit, compensation and nominating committees must be independent directors under the New York Stock Exchange rules and the requirements set forth in our certificate of incorporation and bylaws. To be considered independent under the NYSE rules, our board of directors must affirmatively determine that a director does not have any direct or indirect material relationship with the corporation (either directly or as a partner, shareholder or officer of an organization that has a relationship with the corporation). To assist it in determining director independence our board has established that an individual meeting one of the following criteria shall not be considered an independent director:

 

a person who is, or was within the previous three years, an employee, or person whose immediate family member is an executive officer, of the corporation;

a person who receives, or has received in the three prior years, or whose immediate family member receives, or has received in the three prior years, more than $100,000 per year in direct compensation from the corporation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued services);

a person who is, or was within the three prior years, affiliated with or employed by, or whose immediate family member is, or was within the three prior years, affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the corporation;

a person who is, or was within the three prior years, employed, or whose immediate family member is, or was within the three prior years, employed, as an executive officer of another corporation where any of the corporation’s present executives serve on that corporation’s compensation committee; or

a person who is, or was within the three prior years, an executive officer or an employee, or whose immediate family member is, or was an executive officer of a corporation that makes payments to, or receives payments from, the corporation for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other corporation’s consolidated gross revenues.

For purposes of these independence standards, the term “the corporation” includes CBOT Holdings and any subsidiary and the term “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares such person’s home.

 

For relationships not covered by the independence standards above, the determination of whether a relationship is material, and therefore whether the director is independent, will be made by the directors who satisfy the independence standards set forth above and the basis for the determination will be explained in either our annual proxy statement or our annual report.

 

Each independent director will notify our board of directors as soon as practicable in the event that his or her circumstances change in any manner that may affect the board’s independence determination.

 

Service on Other Boards - Return to Top

 

We do not limit the number of other public corporation boards on which a director may serve. However, we do expect all directors to devote sufficient time and effort to their duties as a member of our board of directors. Our President and Chief Executive Officer may not serve on the board of a corporation for which an independent director on our board serves as an officer. Directors are required to notify the chairperson of the nominating committee prior to accepting an invitation to serve on the board or the audit, compensation or nominating committee of another public corporation to provide the nominating committee the opportunity to evaluate whether such role presents a conflict of interest or other issue.

 

Term Limits and Retirement - Return to Top

 

We do not favor term limits for directors, but believe that it is important to monitor the performance of our directors. While term limits could help ensure that there are fresh ideas and viewpoints available to our board of directors, term limits may result in the loss of the contribution of directors who have been able to develop valuable insight into our industry, business, and operations and, therefore, provide an important contribution to our board as a whole. We believe that, as an alternative to strict term limits, we can ensure that our board continues to evolve and adopt new viewpoints through the evaluation and nomination process described in these guidelines.

 

We also do not favor a mandatory retirement age for directors. However, we believe that employee directors should resign from the board upon their resignation, removal or retirement as an officer of the corporation.

 

We do not believe that non-employee directors who retire or change from the position they held when they came on our board of directors should necessarily leave the board. Promptly following such event, the director should notify the chairperson of the nominating committee. The nominating committee will then review the continued appropriateness of the affected director remaining on the board under the circumstances. The affected director should act in accordance with the nominating committee’s recommendation following such review.

 

Appointment of Board Officers - Return to Top

 

Our board of directors will appoint our Chairman of the Board, Vice Chairman of the Board, and Secretary. Our Chairman of the Board and Vice Chairman of the Board will be appointed to two-year terms coinciding with their terms as directors or until their earlier resignation or removal. Our Secretary will be elected to a one-year term.

 

It is our policy that employee directors should not participate in the appointment process for our Chairman of the Board, Vice Chairman of the Board, or Secretary.

 

Board Operations

 

Meeting Agendas - Return to Top

 

Our Chairman of the Board, in consultation with our President and Chief Executive Officer and Secretary, will establish a preliminary agenda for each meeting of our board of directors. Any director may request items to be included on the agenda, and any director may raise at any board meeting subjects that are not on the agenda for that meeting. Our Secretary will maintain a list of recurring agenda items and the timing of such agenda items throughout the year. To the extent practical and appropriate, the meeting agenda and information materials relating to the agenda issues will be provided to our directors before each scheduled board or committee meeting.

 

Attendance - Return to Top

 

Our directors are expected to prepare for, attend and participate in all board and applicable committee meetings. Directors should use their best efforts to attend board and committee meetings in person. When necessary, a director who is unable to attend in person may attend by telephone if appropriate under the circumstances. A director who is unable to attend a meeting (which it is understood will occur on occasion) or who wishes to participate telephonically is expected to notify our Secretary or Chairman of the Board in advance of such meeting. Directors should review material distributed in advance of such meetings.

 

Meetings of Non-Employee or Independent Directors - Return to Top

 

Executive sessions of only non-employee directors will be regularly scheduled in connection with meetings of our board of directors. Our Chairman of the Board, for so long as he or she is a non-employee director, will preside at such meetings. The non-employee directors may meet without management present at such other times as requested by the non-employee directors. In addition, if the non-employee directors include directors who are not independent, the independent directors shall meet in an executive session with only independent directors present at least once a year.

 

Director Orientation and Continuing Education - Return to Top

 

Our General Counsel and the Chief Financial Officer will be responsible for providing an orientation for new directors, and for periodically providing materials or briefing sessions for all directors on subjects that would assist them in discharging their duties. Each new director is encouraged, within six months of election to the board of directors, to spend a day at corporate headquarters for personal briefing by senior management on our strategic plans, financial statements and key policies and practices.

 

Each director is encouraged to participate in continuing education programs as necessary or appropriate to assist him or her in performing his or her responsibilities as a director. The Secretary will periodically advise directors of available educational opportunities.

 

Self-Assessment - Return to Top

 

Our board of directors and its committees should perform an annual self-assessment. Each year, the directors are expected to be requested to provide their assessments of the effectiveness of the board and the committees on which they serve. Any individual assessments will thereafter be organized and summarized by our legal department for discussion with the board and the committees.

 

Access to Management and Independent Advisors - Return to Top

 

We will provide each director with access to our management team. Our board of directors and its committees will have the right at any time to retain independent outside financial, legal or other advisors, at our expense.

 

Number of Meetings - Return to Top

 

Our board of directors will hold a minimum of four meetings per year.

 

Board Committees General - Return to Top

 

Our board of directors has established the following committees to assist it in discharging its responsibilities:

 

audit;

compensation;

executive; and

nominating.

Our board may, from time to time, form a new committee or disband a current committee depending on circumstances, in each case subject to the terms of our certificate of incorporation and bylaws. In addition, our board may determine to form ad hoc board and non-board committees from time to time, and determine the composition and areas of competence of such committees.

 

Committee Membership - Return to Top

 

The nominating committee of our board of directors will recommend to our board nominees for membership on standing board committees, including the audit, compensation, executive and nominating committees. The chairperson of each board committee, as well as all board committee members, shall be appointed, removed or replaced by a majority vote of our board of directors. All members of the audit committee, compensation committee and nominating committee will satisfy our independence standards, as well as all applicable regulatory requirements, if any. The individual qualifications of committee members should be reviewed annually for compliance with the various regulatory requirements mandated for the members of each particular committee.

 

Frequency and Length of Committee Meetings - Return to Top

 

Subject to any requirements in the applicable committee charter regarding the frequency of committee meetings, each committee chairperson, in consultation with committee members, will determine the frequency and length of the meetings of the committee.

 

Committee Agenda, Background Materials and Reports - Return to Top

 

The chairperson of each committee of our board of directors, in consultation with the appropriate members of our management and staff, will develop the committee’s agenda. Management will be responsible for assuring that, as a general rule, information and data that are important to the committee’s understanding of the matters within the committee’s authority and the matters to be considered and acted upon by a committee are distributed to each member of such committee sufficiently in advance of each such meeting or action taken by written consent to provide a reasonable time for review and evaluation of such information and data. The agenda for each meeting of the audit, compensation and nominating committees shall be distributed to other members of the board at the same time that it is distributed to committee members.

 

At each board meeting, the chairperson of the audit, compensation and nominating committees or his or her delegate shall report the matters considered and acted upon by such committee at each meeting or by written consent since the preceding board meeting, except to the extent covered in a previous written report to the full board, and shall be available to answer any questions the other directors may have regarding the matters considered and actions taken by such committee.

 

Compensation

 

Compensation of the Board - Return to Top

 

Our compensation committee will have the responsibility for recommending to our board of directors the level and form of compensation and benefits for directors. In discharging this duty, the compensation committee should be guided by best practices and emerging trends in director compensation, and director compensation will be benchmarked against industry peer groups and other companies with comparable revenue. While our board does not believe it is appropriate to specify the level of stock ownership an individual director should hold, each director is encouraged to develop a meaningful ownership position in our corporation over time. As director duties increase and as director compensation presumably increases correspondingly, careful consideration should be given in structuring any stock-based director compensation to avoid creating the perception that independent directors have any incentive to artificially support stock prices to maximize personal gain. Directors that are also officers or employees will not receive any additional compensation for their service as directors. The compensation committee will review director compensation and benefits annually.

 

Annual Compensation Review of the President and Chief Executive Officer and Senior Management - Return to Top

 

Our compensation committee should annually review the performance and compensation of the President and Chief Executive Officer. The compensation committee is responsible for setting annual and long-term performance goals for the President and Chief Executive Officer and for evaluating his or her performance against such goals. The committee is also responsible for setting annual and long-term performance goals and compensation for our other senior executive officers. Our compensation program is designed to reward individual and corporation-wide performance and to create incentives for both operating performance in the current year and for the long-term benefit of our business so as to align the interests of management with the interests of stockholders.

 

Loans to Directors and Officers - Return to Top

 

We will not make any personal loans or extensions of credit to or directors or senior executive officers.

 

Management

 

Same Positions of President and Chief Executive Officer - Return to Top

 

Pursuant to our bylaws, our President shall also be our Chief Executive Officer.

 

Selection of the President and Chief Executive Officer - Return to Top

 

Our board of directors, with the assistance of the nominating committee, shall be responsible for identifying potential candidates for, and selecting the President and Chief Executive Officer. In identifying potential candidates for, and selecting, the President and Chief Executive Officer, our board shall consider, among other things, a candidate’s experience, understanding of our business, leadership qualities, knowledge, skills, expertise, integrity and reputation in the business community. When it is appropriate or necessary, it is the board’s responsibility to remove the President and Chief Executive Officer.

 

Formal Evaluations of the President and Chief Executive Officer - Return to Top

 

Our compensation committee in an executive session should, on an annual basis, assess the performance of the President and Chief Executive Officer in relation to established goals. The chairperson of our compensation committee will subsequently report to our board of directors on any evaluation in an executive session.

 

Succession Planning - Return to Top

 

Our senior management should compile and evaluate a succession plan for their areas of responsibility which should be reviewed with our President and Chief Executive Officer and the Chief Operating Officer.

 

Our board of directors shall plan for the successor to the position of the President and Chief Executive Officer. To assist the board, the President and Chief Executive Officer shall provide a report to the Board in an executive session on an annual basis on succession planning for all of our senior officers with an assessment of senior managers and their potential to succeed our President and Chief Executive Officer and other senior management positions. There should also be available, on a continuing basis, our Chairman of the Board’s and President and Chief Executive Officer’s recommendation as successor should our President and Chief Executive Officer be unexpectedly disabled.

 

Management Development - Return to Top

 

There should be an annual report to our board of directors by our President and Chief Executive Officer on our program for management development. This report should be given to the board at the same time as the succession planning report noted above.

 

Board Interaction with Stakeholders - Return to Top

 

We believe that as a general matter our Chairman of the Board, President and Chief Executive Officer and certain other designated executive officers speak for the corporation, but recognize that individual directors may, from time to time, meet or otherwise communicate with members of our exchange subsidiary and other of our constituencies.

 

Code of Business Conduct and Ethics and Conflicts of Interest - Return to Top

 

Our board of directors has adopted a Code of Business Conduct and Ethics, Conflict of Interest Policy and Insider Trading and Disclosure Policy. The Conflict of Interest Policy incorporates various provisions of Delaware General Corporation Law, applicable provisions under the Commodity Exchange Act, as amended, and other applicable standards to ensure that our board and committee decisions are not adversely impacted by conflicts of interest. Directors are expected to avoid any action, position or interest that conflicts with an interest of the corporation, or gives the appearance of a conflict. We intend to annually solicit information from directors in order to monitor potential conflicts of interest and directors are expected to be mindful of their fiduciary obligations to the Corporation.

 

When faced with a situation involving a potential conflict of interest, directors are encouraged to seek advice from our General Counsel or from outside counsel designated by our General Counsel.

 

Our directors are also expected to act in compliance with our Code of Business Conduct and Ethics and Insider Trading and Disclosure Policy.

 

Receipt of Concerns or Complaints

 

General Concerns or Complaints - Return to Top

 

Any stockholder or other interested party who has a concern or inquiry regarding our conduct or the conduct of any director or senior executive officer may communicate directly with either our non-employee directors or the full board of directors. The chairperson of the nominating committee will receive all such communications on behalf of the non-employee directors and the full board. Communications may be confidential or anonymous, and may be submitted in writing to the chairperson of the nominating committee in care of the Secretary, at the address set forth on our website. All written communications will be received and processed by the Secretary and all substantive communications will be referred to the chairperson of the nominating committee. All such communications will be reviewed and, if necessary, investigated and addressed by the chairperson of the nominating committee and the status of such communications will be reported to the non-employee directors or the full Board on a quarterly basis. The Secretary will assist with the tracking of all concerns and inquiries. Additionally, the chair of the nominating committee may direct special treatment, including the retention of outside advisors or counsel, for any such concern or inquiry.

 

Accounting Concerns or Complaints - Return to Top

 

Concerns or complaints regarding our accounting, internal accounting controls or auditing matters, may be communicated directly to the audit committee. Such communications may be confidential and anonymous, and may be submitted in writing or reported by telephone. Written communications may be submitted to the chairperson of the audit committee, at the address set forth on our website. Telephone reports may be made by our employees via a toll-free hotline number that is provided to all employees. All communications will be reviewed, investigated and addressed in the ordinary course by the audit committee. The status of all such concerns and complaints will be reported to the audit committee on a quarterly basis, or more frequently as determined by the committee. The audit committee may direct that certain matters be presented to the full board and may direct special treatment, including the retention of outside advisors or counsel, for any concern or complaint addressed to them.

 

 

 

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