Ceridian Corporation Corporate Governance Policies and Guidelines
1. Role of Board and Management. Ceridian's business is conducted by its employees and management, under the direction of its Chief Executive Officer (CEO) and the oversight of the Board of Directors (Board). The Board is elected by the stockholders each year to oversee management and to assure that long-term interests of the stockholders are being served. Board members are expected to devote sufficient time and attention to carry out their director duties and responsibilities to Ceridian and ensure that their other responsibilities do not materially interfere with their responsibilities as directors of Ceridian.
2. Independent Directors on Board. The Board believes that a substantial majority of the directors must be "independent." For these purposes, a director is considered "independent" if he or she does not have any direct or indirect material relationship with Ceridian. The Board will review all proposed direct and indirect relationships of each director with Ceridian, and will reevaluate at least annually all existing direct and indirect relationships of each director with Ceridian. No director qualifies as an independent director unless the Board affirmatively determines that the director has no material relationship to Ceridian (either directly or as a partner, shareholder or officer of an organization that has a relationship with Ceridian). Ceridian will identify which directors are independent and disclose the basis of its determinations on Board member independence.
The Board has adopted the criteria for independence established in the New York Stock Exchange listing standards and will deem a director not independent if:
For relationships not covered by these guidelines, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, will be made by the directors who satisfy the independence guidelines set forth above. For purposes of these guidelines, an 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 share such person's home.
3. Assessment of Board Size and Composition. The Nominating and Corporate Governance Committee ("Governance Committee") shall at least annually review the size and composition of the Board to assess whether the personal experience and expertise of the individual directors, and the overall mix of experience, expertise, independence and diversity of backgrounds among all the directors, will enable the Board to most effectively monitor Ceridian's performance and participate in providing direction to Ceridian. Such annual review shall also include director succession planning, in light of expected future needs of the Board and Ceridian and application of policies pertaining to tenure on the Board, so as to ensure that Board effectiveness is not diminished during periods of transition. The Governance Committee shall recommend to the full Board any changes deemed necessary or desirable. In assessing Board size, the Governance Committee shall seek to insure that there are sufficient independent directors to perform the functions assigned to the various Board committees, while at the same time ensuring that the Board as a whole can function effectively in terms of discussion and decision-making.
4. Number and Responsibilities of Board Committees. The current committees of the Board are the Audit Committee, the Compensation and Human Resources Committee ("Compensation Committee"), the Governance Committee and the Executive Committee. Such additional or replacement committees may be established as the Board, upon recommendation from the Governance Committee, determines is necessary or desirable in light of Ceridian's circumstances at any particular time and the Board's desire to most effectively utilize directors' time, experience and expertise. The responsibilities of Board committees shall be as set forth in their charters, which shall be approved by the full Board.
5. Composition of Board Committees. All members of the Audit Committee, Compensation Committee and Governance Committee must be independent (as defined in Item 2 above). Notwithstanding the foregoing, members of the Audit Committee must also meet the additional membership requirements set forth in the New York Stock Exchange listing standards and Rule 10A-3 under the Securities and Exchange Act of 1934, as amended. Ceridian will disclose its independence determinations relating to the membership of the Audit, Compensation and Governance Committees. The Board believes that a majority of the members of the Executive Committee should be non-management directors, and that the chairman of the Board chairs the Executive Committee. The Governance Committee shall review Board committee structure and assignments at least annually, and recommend any changes to the full Board. The Board believes that it is generally desirable for terms of service on a committee to be staggered among the committee members so as to provide necessary continuity, and for the next chairperson of a committee to be designated at least one year in advance of any such change to facilitate the transition. Such designation shall be made by the Governance Committee, with input from the current committee chair.
6. Board Leadership and Lead Director. The Board believes that the chairpersons of the Audit, Compensation and Governance Committees should appropriately assume leadership roles within the Board and during Board meetings and executive sessions of the Board pertaining to issues within the purview of the committees which they chair. The Board believes that by taking this approach, its decision-making processes will be enhanced.
The Board further believes that the chair of the Governance Committee shall have the following responsibilities and be referred to, as appropriate, as the Lead Director:
· Organize and preside over executive sessions of the Board, other than the portions of such sessions that are led by the chairs of the Audit or Compensation Committees
· Coordinate the activities of the independent directors
· Make recommendations to the Board regarding the structure and timing of Board meetings
· Suggest and recommend to the chairman of the Board matters that should be considered by the Board
· Assist the chairman of the Board in setting Board meeting agendas
· Counsel the chairman of the Board as to appropriate materials to be provided to the Board
· Serve as a member of the Executive Committee
7. Board and Committee Agendas and Meetings. The agenda for any Board meeting shall be developed by the chairman of the Board with the assistance of the Lead Director, the agenda for executive sessions of the Board shall be developed by the Lead Director, and the agenda for any committee meeting shall be developed by the chair of the respective committee. Any director, in the case of the Board agenda, or any committee member, in the case of a committee agenda, is free to direct the inclusion of additional items on the agenda.
The Board meets at regularly scheduled meetings and special meetings during the year at which it reviews and discusses reports by management on Ceridian's performance, plans and prospects. The non-management directors also meet in executive session at regularly scheduled board meetings. In the event that all of the non-management directors are not also "independent", all of the "independent" directors will also meet in executive session at least once per year. Directors are expected to attend Board and committee meetings having reviewed any materials provided to them in advance of the meeting.
8. Annual Evaluation of Board and Committee Performance. The Governance Committee shall oversee the annual evaluation of the performance of the Board as a whole, with a view toward increasing the effectiveness of the Board. The structure of such evaluation process, including the use of outside consultants, shall be recommended to the full Board by the Governance Committee. The Board will discuss the results of its self-evaluation process. The Audit, Compensation and Governance Committees of the Board shall also conduct annual self-evaluations. The results of such evaluations will be discussed with the Board.
9. New Director Candidates. The Board delegates to the Governance Committee the responsibility to identify potential director candidates, to screen such candidates and to recommend candidates to the full Board. The Governance Committee considers suggestions from many sources, including stockholders, regarding possible director candidates. In discharging this responsibility, the Governance Committee shall seek persons who demonstrate strength of character, independent thought, practical wisdom and mature judgment, who possess specific skills, expertise and experience to effectively complement the other members of the Board, and who are willing and able to devote the necessary time and attention to the affairs of Ceridian.
10. Directors Who Change Their Employment Status. Upon a change in the employment status of any non-management director (whether by resignation, retirement, reassignment or termination), that director shall submit a letter to the Governance Committee offering not to stand for re-election to the Board at the next annual meeting of Ceridian's stockholders. The Governance Committee shall have complete discretion as to whether such offer shall be accepted. Any member of the Governance Committee to whom this policy applies shall recuse himself or herself from such deliberations.
11. Retirement. Any non-management director must retire from the Board no later than the next annual meeting of Ceridian's stockholders occurring after his or her 70th birthday. Any director who is also an officer of Ceridian shall retire from the Board immediately upon retirement or termination as an officer and employee of Ceridian.
12. Director Orientation and Continuing Education. The Chief Financial Officer and Chief Administrative Officer shall 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 shall meet at Ceridian's corporate headquarters for personal briefing by senior management on Ceridian's strategic plans, its financial statements, and its key policies and practices. Board members may also attend, at Ceridian's expense, seminars, conferences, and other continuing education programs designed for directors of public companies.
13. Access to Independent Advisors and Management. The Board and its committees shall have the right at any time to retain independent outside financial, legal or other advisors. The Board and its committees shall have access to any officer, manager or employee within Ceridian at any time while conducting its business.
14. Evaluation of the Chief Executive Officer. The non-management directors shall meet annually to evaluate the performance of the chief executive officer. The results of this evaluation shall be communicated to the chief executive officer by the chairperson of the Compensation Committee or his or her designee. The evaluation shall be based on objective criteria developed by the Compensation Committee.
15. Succession Planning and Management Development. The Board delegates to the Compensation Committee the responsibility for monitoring the processes for managing executive succession, diversity and development for positions other than the chief executive officer. Management shall report at least annually to the Compensation Committee regarding these processes and the results thereof, and shall report to the full Board as directed by the Compensation Committee. The full Board shall be responsible for succession planning with respect to the chief executive officer position, and shall discuss such succession planning annually with its CEO.
16. Non-management Director Compensation. The Board delegates to the Governance Committee the responsibility to assess the form and amount of compensation provided by Ceridian to its non-management directors, and to recommend any changes in such compensation. Any changes in the form or amount of compensation provided to non-management directors must be approved by the full Board. It is the policy of the Board that a substantial amount of a director's compensation be equity based compensation. As such, non-employee directors currently receive as stock compensation (a) at least 50% of their annual Board retainer in restricted or deferred Ceridian common stock, (b) a one-time restricted stock award that vests over five years upon initial election to the Board valued at $150,000, and (c) a 8,000 share stock option that vests in six months upon election or re-election to the Board by Ceridian's stockholders.
17. Director Stock Ownership Guidelines. Each non-employee director will own, including restricted shares, at least four times the current annual retainer in Ceridian stock within five years of joining the Board.
18. Voting for Directors. Any nominee for director in an uncontested election (i.e., an election where the only nominees are those recommended by the Board) who receives a greater number of votes "withheld" from his or her election than votes "for" such election (a "Majority Withheld Vote") will promptly tender his or her resignation for consideration to a special committee to be formed and comprised of all of the independent directors on the Board other than those directors who received a Majority Withheld Vote (the "Committee"). If all independent directors received a Majority Withheld Vote, then all the independent directors shall be members of the Committee. The Committee is expressly authorized on behalf of the Board to consider the best interests of Ceridian and its stockholders and to determine whether to accept the tendered resignation or to take some other action with respect to such director. The Committee will take action within 90 days following the uncontested election. Thereafter, the Committee will promptly disclose their decision and an explanation of how the decision was reached to the impacted director and to the public in a Current Report on Form 8-K filed with the Securities and Exchange Commission. Any director who receives a Majority Withheld Vote shall remain active and engaged in Board activities during this process, and, except in the event that such director is an independent director and all independent directors receive a Majority Withheld vote, shall not participate in the Committee action regarding whether to accept the tendered resignation offer or to take some other action. This corporate governance guideline will be summarized in each proxy statement relating to an election of directors of Ceridian.
19. Confidential Stockholder Voting. The Board believes that all stockholder meeting proxies, ballots and voting tabulations that identify the vote of a particular stockholder should be kept confidential if the stockholder has requested confidential treatment on the proxy card or ballot. If the stockholder so requests, no such document shall be available for examination, nor will the identity and vote of any stockholder be disclosed prior to the final tabulation of the vote at the stockholders' meeting except (i) as necessary to meet applicable legal requirements; (ii) to allow the independent election inspectors to count and certify the results of the vote; or (iii) in the event of a proxy solicitation in opposition to the Board based on an opposition proxy statement filed with the Securities and Exchange Commission. The independent election inspectors may inform Ceridian whether or not a particular stockholder has voted.
20. Ethics and Conflicts of Interest. The Board expects its directors, as well as officers and employees, to act ethically at all times and to adhere to the policies comprising Ceridian's Code of Conduct set forth on Ceridian's website. If an actual or potential conflict of interest arises for a director, the director shall promptly inform the CEO and the Chair of the Governance Committee. The full Board will evaluate the conflict of interest and determine whether a conflict can be resolved or waived. If the conflict cannot be resolved or waived, the director will be asked to resign. All directors will recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Board shall resolve any conflict of interest question involving the CEO or other senior executive officer, and the CEO shall resolve any conflict of interest issue involving any other officer of Ceridian. If a conflict is waived for a member of the Board, the CEO, the principal financial officer, principal accounting officer, controller or other executive officer of Ceridian, Ceridian will promptly disclose such waiver to its stockholders.
21. Reporting of Concerns to the Audit Committee. Concerns about Ceridian's conduct, or about its accounting, internal accounting controls or auditing matters, may be communicated to the Audit Committee. These communications may be confidential or anonymous, and may be submitted electronically or in writing pursuant to information published in Ceridian's Code of Conduct or on Ceridian's website. All such concerns will be forwarded to the Audit Committee members for their review. The status of all outstanding concerns addressed to the Audit Committee will be reported to full Board on a quarterly basis. The Audit Committee may direct special treatment, including the retention of outside advisors or counsel, for any concern addressed to them.
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