The following Corporate Governance Guidelines (the “Guidelines”) have been adopted by the Board of Directors (the “Board”) of Borders Group, Inc. (the “Company”) to assist the Board in the exercise of its responsibilities. These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision making both at the Board and management level, with a view to enhancing shareholder value over the long term. The Guidelines are subject to modification from time to time by the Board.
The by-laws provide that the Board will have not less than 3 nor more than 11 members. The Board will fix the exact number of directors at any time after considering the recommendation of the Nominating and Corporate Governance Committee.
At least 2/3 of the directors shall be independent. No director shall qualify as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In making such determinations, the Board shall be subject to the standards set forth below, as well as any additional standards that the Board shall adopt.
A director is not independent if:
(i) The director is, or has been within the past three years, an employee of the Company, or an immediate family member of the director is, or has been within the past three years, an executive officer of the Company.
(ii) The director or an immediate family member has received, during any twelve-month period in the last three years, more than $120,000 in direct compensation from the Company, 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 service).
(iii) (A) The director is a current partner or employee of a company that is the Company’s internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time.
(iv) The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that other company’s compensation committee.
(v) The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
In addition, a director who is a party to any transaction or who has any relationship to the Company that would require disclosure in the Company’s Proxy Statement under Item 404 of Regulation S-K of the Securities and Exchange Commission, or whose immediate family member is a party to any such transaction or has any such relationship, shall be deemed to have a material relationship with the Company and thus not be independent unless either: (A) the transaction or relationship is of a nature covered by (i) - (v) above but does not meet the thresholds contained in such provisions, or (B) the Board determines, after reviewing the nature and amounts involved in the transaction or relationship, that the director’s ability to act in a fair and impartial manner will not be affected thereby.
For purposes of these Guidelines, a person’s immediate family 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
Directors who reach the age of 72, as well as directors who are officers of the Company and cease to serve as such and directors who change job responsibilities, shall submit an offer of resignation to the Board. Such offer shall be reviewed by the Nominating and Corporate Governance Committee, which shall make a recommendation to the Board as to whether or not such offer of resignation shall be accepted.
The Nominating and Corporate Governance Committee shall consider all director nominations annually.
The Board believes that variety in the lengths of service among the directors benefits the Company. Therefore, no term limits have been established.
The Nominating and Corporate Governance Committee will promptly consider the resignation submitted by a Director receiving a greater number of votes “withheld” from his or her election than votes “for” his or her election, and the Nominating and Corporate Governance Committee will recommend to the Board whether to accept the tendered resignation or reject it. In considering whether to accept or reject the tendered resignation, the Nominating and Corporate Governance Committee will consider all factors deemed relevant by the members of the Nominating and Corporate Governance Committee including, without limitation, (i) the stated reasons why shareholders “withheld” votes for election from such Director, (ii) the length of service and qualifications of the Director whose resignation has been tendered, (iii) the impact that the Director’s resignation would have on the Company’s compliance with the requirements of the Securities and Exchange Commission, the New York Stock Exchange and the Company’s Corporate Governance Guidelines; (iv) whether the resignation of the Director could result in the triggering of change in control or similar provisions under any contract by which the Company is bound or any benefit plan of the Company and, if so, the potential impact thereof; and (v) the Director’s contributions to the Company. In considering the application of such factors to each individual Director, the Board also shall consider the potential impact of the resignation of any other Director or Directors who received a greater number of votes “withheld” from his or her election than votes “for” his or her election in the applicable election.
In making its recommendation to the Board, the Committee may consider possible remedies in addition to acceptance of the resignation. Such remedies may include the deferral of action on the tendered resignation and the development and implementation a specific plan to cure the issues underlying the voting results. If the Committee recommends such an alternative, the Committee shall agree upon a plan with the Director and shall monitor the Director’s progress in implementing the plan. If at any time the Committee is not satisfied with the Director’s progress in implementing the plan, it may recommend to the Board that the resignation be accepted.
The Board will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the shareholders’ meeting where the election occurred. In considering the Nominating and Corporate Governance Committee’s recommendation, the Board will consider the factors considered by the Nominating and Corporate Governance Committee and such additional information and factors the Board believes to be relevant. Following the Board’s decisions on the Nominating and Corporate Governance Committee’s recommendation, the Company will promptly publicly disclose the Board’s decision whether to accept the resignation as tendered (providing a full explanation of the process by which the decision was reached and, if applicable, the reasons for rejecting the tendered resignation) in a Form 8-K filed with the Securities and Exchange Commission.
To the extent that the Board accepts one or more Directors’ resignations, the Nominating and Corporate Governance Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
OF THE BOARD
Non-management directors shall meet without management in regular executive sessions at each Board meeting. The Chairman of the Board, if a non-management director, shall chair the sessions of the non-management directors except in situations in which he or she is conflicted, in which case the Lead Independent Director shall serve as chair.
AND COMMITTEE AGENDA
The Nominating and Corporate Governance Committee shall oversee the orientation of new Board members in a manner designed to enhance the knowledge and skills necessary or appropriate for the performance of the director’s duties and responsibilities. The Committee also may recommend continuing education programs for directors as a group or for individual directors. The Company shall pay for the continuing education programs recommended by the Committee.
EVALUATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee shall periodically report to the full Board on its actions, including actions relating to performance and compensation of the CEO.
ACCESS TO MANAGERS AND OUTSIDE ADVISORS
The Board, as well as each Committee of the Board, shall have the right to retain, at the Company’s expense, such outside advisors as the Board or applicable Committee shall deem appropriate.
CONDUCT POLICY AND CODE OF ETHICS
DIRECTORSHIPS BY EXECUTIVE OFFICERS