The Board of Directors is elected by the shareholders to govern the affairs of the Company for the long-term benefit of its shareholders. The Board also considers, when appropriate, the interests of other constituencies including the Company’s employees, customers, suppliers, and the communities in which it does business. The Board strives to promote the success of the Company’s business through the election of qualified executive officers.
Ethics and Compliance Program
The Board and the Audit Committee of the Board are responsible for overseeing management’s implementation of the Company’s ethics and compliance program. Under that program, employees are required to conduct the Company’s business in an ethical and lawful manner.
As part of the ethics and compliance program, the Company has established a code of conduct entitled “Our Values in Action.” Our values are what we stand for as a Company. They govern the way we treat our customers and each other, guide our community interactions, and strengthen our commitment to excellence and integrity. “Our Values in Action” provides guidance, discussion and training regarding the ethical expectations for BellSouth employees and other affected parties. The principles in the code reinforce our commitment to ethical business practices and to compliance with internal policies and external laws and regulations.
The Board of Directors has approved “Our Values in Action.” This code applies to our directors, officers and all of our employees, including our Chief Executive Officer, Chief Financial Officer, and Controller. The code satisfies the Securities and Exchange Commission’s requirements for a code of ethics for senior financial officers. Any waiver of the code for a member of the Board of Directors or an executive officer would require – the approval of the Audit Committee and would be promptly disclosed to our shareholders. No waivers have been granted under the code. All employees are expected to report any situation where they believe ethical expectations, external laws or our internal policies are being violated. The full text of “Our Values in Action” can be found on the Company’s website at www.bellsouth.com/corporate_governance.
The Board believes that governance of the Company is enhanced by having a highly independent Board. To that end, all members of the Board are non-management directors, with the exception of the Chief Executive Officer and the President and Chief Operating Officer.
The Director Nominating and Corporate Governance Committee of the Board annually assesses the outside affiliations of each director to determine if any of these affiliations could cause a potential conflict of interest or could interfere with the independence of the director. The Committee has established the criteria for independence set out below.
An independent director is one who:
Additionally, Audit Committee members must not receive any compensation from BellSouth other than director’s fees.
The Board has delegated to the Director Nominating and Corporate Governance Committee the responsibility for reviewing and recommending nominees for membership on the Board. In discharging this responsibility, the Committee receives input from the Chairman of the Board, other Board members and the Committee’s professional search firm. It also considers and evaluates any candidates recommended by shareholders.
It is the belief of the Board that its membership should bring to the Company a broad range of experience, knowledge and judgment. A candidate’s breath of experience should enable him or her to contribute meaningfully to the governance of a complex multi-billion dollar enterprise. The candidate should not represent the interests of particular constituencies. In reviewing a candidate, the Committee considers the ethical standards of the candidate and whether the candidate would be independent as defined in these Corporate Governance Principles and in the rules of the New York Stock Exchange. The Committee expects a high level of involvement from the directors and will review a candidate’s service on other boards to provide that the candidate has sufficient time to devote to BellSouth Board duties.
Directors should make every attempt to attend all Board meetings, meetings of Committees on which they serve, and the annual meeting of shareholders.
Annual Election of Directors
The directors are elected each year by the shareholders at the Annual Meeting of Shareholders.
The Director Nominating and Corporate Governance Committee reviews the qualifications and independence of each director to be elected and determines whether it recommends their re-election to the Board.
Shareholders who would like to recommend director candidates for consideration by the Director Nominating and Corporate Governance Committee should notify the Office of the Corporate Secretary in writing at BellSouth Corporation, Room 19A01, 1155 Peachtree Street, N. E., Atlanta, Georgia 30309-3610. This notification must be received by the Company during the time period specified in BellSouth’s By-laws and must provide information about the nominee’s qualifications for Board membership and other information required by the By-laws. A copy of the By-laws is available on the Company’s website at www.bellsouth.com/corporate_governance.
Directors Who Change Jobs
Board members who change their primary business or profession in which they were engaged when elected to the Board should offer their resignation from the Board so that the Director Nominating and Corporate Governance Committee may determine whether continued membership on the Board is appropriate. The Board believes that directors should not necessarily leave the Board upon a change in business or professional responsibilities. The Director Nominating and Corporate Governance Committee will consider such change in evaluating the appropriate mix of skills and experience necessary for the Board to perform its duties effectively.
Size of Board
The Board presently has eleven members. The number of members is changed from time to time depending upon the needs of the Board and the availability of qualified candidates. Generally, the Board size should vary from nine to twelve members.
Former CEO's Membership
The Board expects that no officer of the Company will serve as a member of the Board following retirement from the Company, except that any person who was Chief Executive Officer immediately prior to retirement may continue to serve as a director of the Company for one additional year following retirement.
The Board has not established term limits for its members.
It is the sense of the Board that a director should not serve beyond the annual meeting following his or her 70th birthday.
Number of Committees
The Board currently has six Committees: Audit; Director Nominating and Corporate Governance; Executive; Executive Nominating and Compensation; Finance/Strategic Planning; and Public Policy. The Board reviews the charter of each Committee annually to evaluate the responsibilities of the Committee in accordance with current laws and regulations and consistency with established governance practices.
Frequency of Meetings
Generally, the Audit, Executive Nominating and Compensation, and Finance/Strategic Planning Committees meet in conjunction with the regularly scheduled meetings of the full Board. The Audit Committee meets more frequently as required to oversee the certifications of the Chief Executive Officer and Chief Financial Officer of the periodic financial statements. The Director Nominating and Corporate Governance and Public Policy Committees meet biannually. Additional meetings of the Board and its Committees are held if circumstances create the need for such special meetings. The Executive Committee meets only when called by the Chairman of the Board or by two other members of the Executive Committee.
Assignment and Rotation
The Board believes it is valuable for directors to have an opportunity to participate in and/or lead the various Committees of the Board. Therefore, it is the sense of the Board that Committee members and Committee Chairs should be rotated periodically. However, the Board views that such moves should be timed so that the Committees have continuity and the benefit of experienced members.
The Committee members and the Secretary of each Committee establish an annual calendar outlining the proposed agendas for Committee meetings. Prior to each meeting, the Committee Chair and the Committee Secretary review the agenda to make necessary revisions to meet current business needs and to incorporate input from the directors.
The Chairman of the Board and the Corporate Secretary establish an annual calendar outlining the proposed agendas for Board meetings. The annual calendar is distributed to Board members for their review and input. Prior to each meeting, the agenda is reviewed and necessary revisions are made.
Advance Distribution of Materials
The Board is provided with materials in advance of each meeting for review and study. Members of management compile most of the material. Additional information from other sources such as comments from analysts or assessments from governance groups is also provided. Any other information deemed to be helpful by the directors can also be requested.
Access to Management
Directors have access to members of management at BellSouth at their discretion. Selected officers of the Company, e.g., the Chief Financial Officer, the Controller, the Corporate Secretary and the General Counsel, attend a portion of each Board meeting. Other executive officers and key personnel are invited to attend Board and Committee meetings when appropriate. The annual Strategic Planning Retreat also affords the directors the opportunity to meet with other members of the management team, such as the leaders of the various Business Units.
Access to Outside Advisors
The Board and its Committees may engage independent consultants such as consultants regarding executive compensation matters or other advisors or consultants as they deem necessary to fulfill their duties to the shareholders.
The non-management directors meet in Executive Session during each Board meeting. Matters relating to compensation, succession planning, strategy and other more sensitive areas are discussed at these sessions. The position of Presiding Director of the Executive Session rotates among the Committee Chairs based upon the subject matter for discussion during the session. The Presiding Director solicits topics for discussion from the other directors and provides feedback from the Executive Session to the Chief Executive Officer or the Corporate Secretary. The Board also meets in Executive Session at each Board meeting with the Chairman.
New Director Orientation and Continuing Education
All new Board members participate in a new director orientation program, which includes sessions with the Chief Executive Officer and other executive officers.
Committee orientation is provided to new members of the Audit, the Director Nominating and Corporate Governance and the Executive Nominating and Compensation Committees.
With respect to continuing education, all Board members attend an annual Strategic Planning Retreat at which they are provided extensive information about the Company’s strategies. The Board reviews Company results at each regularly scheduled meeting. The Director Nominating and Corporate Governance Committee as well as individual directors and the other Committees recommend topics of interest to be presented as part of the continuing education program. Examples of these presentations are on topics such as: regulatory accounting; revenue recognition; regulatory and legislative issues and trends relevant to telecommunications; IT logical security; evolving technology; and transparency in financial reporting. Additionally, directors regularly receive publications related to Board service, analyst reviews, and relevant information.
The Director Nominating and Corporate Governance Committee is responsible for overseeing the annual evaluation process for the Board and for reporting the performance evaluation results to the Board. This evaluation includes a review of all standing Committees.
Chief Executive Officer (CEO) Evaluation
The Director Nominating and Corporate Governance Committee has the responsibility of overseeing the process for evaluating the CEO’s performance. The Executive Nominating and Compensation Committee performs the annual evaluation of the CEO’s performance. The Committee Chair contacts each member of the Board to receive each member’s input regarding the CEO’s performance and reports the results of the evaluation to the full Board. The Executive Nominating and Compensation Committee uses its evaluation results to determine the compensation for the CEO. It considers the Company’s performance, the relative total shareholder return, the value of similar incentive awards to CEOs of comparable companies, the awards given to the CEO in past years, and other criteria deemed appropriate by the Committee. The Committee also receives advice from its compensation consultant. The Committee Chair discusses the CEO’s compensation with the independent Directors before and after approval by the Committee.
The Executive Nominating and Compensation Committee, in consultation with the CEO, oversees the Company’s executive succession plans for executive officers. The Committee and the CEO discuss these succession plans with the Board. The Executive Nominating and Compensation Committee recommends candidates for executive officer positions for election by the Board.
A review of Board compensation is undertaken at least every two years, or at such other time as circumstances may warrant.
Stock ownership guidelines are established for the directors to better align their interests with those of the shareholders. Additional stock options are granted to the directors for exceeding target ownership levels. Director compensation is appropriately balanced between cash, stock options, and stock grants.
Procedures for Handling Shareholder and Other Communications to the Non-Management Directors
The non-management members of the Board of Directors have instructed the Corporate Secretary’s office to initially review all communications directed to them. Communications which are not relevant to the duties and responsibilities of the Board are not reported to the Board. Such communications would include:
In order to expedite a response to the remaining communications, including communications regarding ordinary business matters, the non-management directors have instructed management to research and to respond on their behalf. The Corporate Secretary summarizes these communications for the Audit Committee and provides copies to the members of the Committee at their request. At each regular meeting, the Committee reviews the summary, which indicates whether the issues raised in the correspondence have been resolved. The Chair of the Audit Committee reports any significant matters to the full Board.
Procedures for Handling Communications Regarding Accounting, Internal Accounting Controls or Auditing Matters
Any communications related to BellSouth’s accounting, internal accounting controls or auditing matters will be referred to the Audit Committee. The Chair of the Audit Committee is advised promptly of any allegations pertaining to a serious accounting infraction involving senior managers of the Company or any other potentially material complaint. Any such matters are then investigated as directed by the Audit Committee. Results of such investigations are reported to the Board.
Contact Our Directors
Shareholders and other interested parties who wish to communicate with the Company’s non-management directors may direct correspondence to a particular director, or to the non-management directors as a group, by e-mail at Feedback.Directors@BellSouth.com or by addressing written correspondence to the Office of the Corporate Secretary, BellSouth Corporation, Suite 19A01, 1155 Peachtree Street, N.E., Atlanta, GA 30309-3610.
As amended by the Board of Directors on February 28, 2005.