The following Corporate Governance Guidelines have been adopted by the Board of Directors (the "Board") of Dendrite International, Inc. (the "Company") to assist the Board in the exercise of its responsibilities. These Corporate Governance 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 long-term shareholder value. These Corporate Governance Guidelines are not intended to change or interpret any Federal or state law or regulation, including the New Jersey Business Corporation Act, Restated Certificate of Incorporation or Amended and Restated By-Laws of the Company. These Corporate Governance Guidelines are subject to modification from time to time by the Board.
The business and affairs of the Company shall be managed by or under the direction of the Board. A director is expected to spend the time and effort necessary to properly discharge such director's responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board and committees on which such director sits, and to review prior to meetings material distributed in advance for such meetings. A director who is unable to attend a meeting (which it is understood will occur on occasion) is expected to notify the Chairman of the Board or the Chairman of the appropriate committee in advance of such meeting.
Directors shall at all times act with integrity, loyalty, not in furtherance of personal or private interests or relationships, and solely in the interests of the Company, its shareholders as a whole and, to the extent permissible under applicable law, the Company’s employees, customers, vendors and the community. Directors shall at all times safeguard and maintain the confidentiality of all information concerning the business, finances, performance, prospects and affairs of the Company.
The Board's goal is to build long-term value for the Company's stockholders and to assure the vitality of the Company for its customers, employees and the other individuals and organizations who depend on the Company.
To achieve these goals the Board will monitor both the performance of the Company (in relation to its goals, strategy and competitors) and the performance of the Chief Executive Officer, and offer him or her constructive advice and feedback. The Board is also responsible for overseeing the Company's efforts to ensure that management and employees operate in a legal and ethically responsible manner. When it is appropriate or necessary, it is the Board's responsibility to remove the Chief Executive Officer or any other executive officer and to select his or her successor.
The Board does not require the separation of the offices of the Chairman of the Board and the Chief Executive Officer. The Board shall be free to choose its Chairman of the Board in any way that it deems best for the Company at any given point in time.
The Board believes that it should generally have no fewer than 5 and no more than 9 directors. This range permits diversity of experience without hindering effective discussion or diminishing individual accountability. The size of the Board could, however, be increased or decreased if determined to be appropriate by the Board. For example, it may be desirable to increase the size of the Board in order to accommodate the availability of an outstanding candidate for director.
The Board shall be responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders. The Corporate Governance and Nominating Committee is responsible for assisting the Board in identifying and screening individuals qualified to become new Board members and recommending to the Board candidates for election or appointment as director. When formulating its Board membership recommendations, the Corporate Governance and Nominating Committee shall also consider advice and recommendations from others as it deems appropriate.
Nominees for director shall be selected on the basis of, among other things: (1) the appropriate mix of educational and professional background and business experience to make a significant contribution to the overall composition of the Board; (2) global business and social perspective; (3) if appropriate, whether the candidate would be considered an audit committee financial expert or independent; (4) demonstrated personal and professional character and reputation consistent with the image and reputation of the Company; willingness to apply sound and independent business judgment; and ability to work productively with the other members of the Board; and (5) availability for the substantial duties and responsibilities of a director of the Company. The Corporate Governance and Nominating Committee also considers such other factors as may be appropriate including the current composition of the Board and evaluations of prospective candidates.
The Company does not have a policy limiting the number of other public company boards of directors upon which a director may sit. However, the Corporate Governance and Nominating Committee shall consider the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee is a member.
The Board shall be comprised of at least a majority of directors who qualify as independent directors ("Independent Directors") within the meaning of the rules of the National Association of Securities Dealers, Inc. applicable to issuers of securities traded on the Nasdaq Stock Market (the "NASDAQ Rules") and the Securities and Exchange Commission and within the meaning of the Company’s own independence standards .
The Board shall review annually the direct and indirect relationships that each director has with the Company in order to determine that those directors serving as Independent Directors have no relationship with the Company that would impair his or her independence. In making such determinations the Board shall use the criteria established by NASDAQ Rules for determining director independence as well as such other criteria as may be developed by the Board from time to time.
Each director, whether or not characterized as “independent”, shall at all times act and perform his or her director responsibilities with independence, will promptly and fully disclose any actual or potential conflict of interest, and shall refrain from acting or voting with respect to a matter as to which such director has a conflict of interest unless such action or vote is approved by the Board after full disclosure.
If the Chairman of the Board is not an Independent Director, the Company's Independent Directors will designate one of the Independent Directors on the Board to serve as a lead Independent Director (the "Lead Director"). If the Chairman of the Board is an Independent Director then he or she shall serve as Lead Director. The Lead Director's duties and authority will include: (1) presiding at all meetings of the Board of Directors at which the Chairman is not present, including executive sessions of the independent directors; (2) serving as a liaison between the Chairman and the independent directors; (3) reviewing and consulting with management on agendas for meetings of the Board of Directors and materials sent to the Board; (4) approving meeting schedules to assure that there is sufficient time for discussion of agenda items; (5) calling meetings of the independent directors; and (6) if requested by significant shareholders, being available for communication on issues of corporate policy, consistent with legal requirements. In performing the duties described above, the Lead Director is expected to consult with the Chairmen of the appropriate Board committees and solicit their participation in order to avoid diluting the authority or responsibilities of such committee Chairmen.
Directors who are also employees of the Company are expected to resign from the Board at the same time they leave employment with the Company, unless a majority of the independent directors at such time request that such a director remain on the Board.
The Board does not believe that non-employee directors who retire or change the position they held when they became a member of the Board should necessarily leave the Board. Promptly following such event, the director must notify the Corporate Governance and Nominating Committee, which shall review the continued appropriateness of the affected director remaining on the Board under the circumstances. The affected director is expected to act in accordance with the Corporate Governance and Nominating Committee's recommendation following such review.
The Company has not established a mandatory retirement age for members of the Board. It is the general policy of the Company that following a director's 70th birthday, the Corporate Governance and Nominating Committee will determine if that director shall be nominated for re-election or reappointment to the Board.
In connection with each director nomination recommendation, the Corporate Governance and Nominating Committee shall consider the issue of continuing director tenure and take steps as may be appropriate to ensure that the Board maintains an openness to new ideas and a willingness to critically re-examine the status quo.
While the Board does not impose limits upon the tenure of directors, the Board is generally of the view that when any director has served continuously for more than ten (10) years, the Corporate Governance and Nominating Committee may from time to time assess the continued appropriateness of such director remaining on the Board.
The Company believes that compensation for non-employee directors should be competitive and should encourage increased ownership of the Company's stock through the payment of a portion of director compensation in Company stock, options to purchase Company stock or similar compensation. The Compensation Committee will periodically review the level and form of the Company's director compensation, including how such compensation relates to director compensation of companies of comparable size, industry and complexity. Changes to director compensation will be proposed to the full Board for consideration.
Director's fees (including equity grants and any additional amounts paid to chairs of committees, members of committees and the Lead Director) are the only compensation a member of the Audit Committee may receive from the Company.
The Independent Directors shall meet in executive session without management on a regularly scheduled basis, but no less than two times a year. The Lead Director shall preside at such executive sessions, or in such director's absence, another Independent Director designated by the Lead Director shall preside at such executive sessions.
The Corporate Governance and Nominating Committee will sponsor an annual self-assessment of the Board's performance as well as the performance of each committee of the Board, the results of which will be discussed with the full Board and each committee. The assessment should include a review of any areas in which the Board or management believes the Board can make a better contribution to the Company.
Normally it is management's job to formalize, propose and implement strategic choices and the Board's role to approve strategic direction and evaluate strategic results. However, as a practical matter, the Board and management will be better able to carry out their respective strategic responsibilities if there is an ongoing dialogue among the Chief Executive Officer, other members of top management and other Board members. To facilitate such discussions, members of senior management who are not directors will generally be invited to participate in Board meetings when appropriate.
Board members shall have access to the Company's management and, as appropriate, to the Company's outside advisors, for appropriate and proper Board and Committee purposes . Board members shall coordinate such access through the Chief Executive Officer, and Board members will use judgment to assure that this access is not distracting to the business operation of the Company.
The Board encourages the Chief Executive Officer to bring members of management from time to time into Board meetings to (i) provide management insight into items being discussed by the Board which involve the manager; (ii) make presentations to the Board on matters which involve the manager; and (iii) bring managers with significant potential into contact with the Board. Attendance of such management personnel at Board meetings is at the discretion of the Board. Should the Chief Executive Officer desire to add additional members of management as attendees on a regular basis, this should be suggested to the Board for its concurrence.
Information and materials that are important to the Board's understanding of the agenda items and other topics to be considered at a Board meeting should, to the extent practicable, be distributed sufficiently in advance of the meeting to permit prior review by the directors. In the event of a pressing need for the Board to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting. Information or materials which a director wishes to discuss or present at a Board or Committee meeting shall be distributed to the Board or such Committee sufficiently in advance of such meeting to permit the other directors, adequate review time. Such distribution shall be conducted through the Lead Director.
The Board believes that management generally should speak for the Company. Each director shall refer all inquiries from institutional investors, analysts, the press , customers , shareholders and other third parties to the Chief Executive Officer or his or her designee , except that inquiries from shareholders or others wishing to communicate with the Board or a Committee or with the Independent Directors should be referred to the Corporate Secretary who shall generally forward such communications to the Board Independent Directors or as appropriate to the particular Committee Chairperson . Except as approved by the Board or the Chairman of the Board, individual directors shall not engage in discussions or communications with third parties concerning financial performance, potential acquisitions, joint ventures, stock investments or strategic alternatives and shall promptly communicate with the Lead Director any such third party inquires or other communications concerning such matters .
The Company shall provide new directors with a director orientation program to familiarize such directors with, among other things, the Company's business, strategic plans, significant financial, accounting and risk management issues, compliance programs, conflicts policies, code of ethics and standards of business conduct, corporate governance guidelines, principal officers and independent auditors. Each director is expected to participate in continuing educational programs in order to maintain the necessary level of expertise to perform his or her responsibilities as a director.
The Chairman of the Board shall prepare and circulate to the entire Board an Agenda prior to each regularly scheduled meeting of the Board. Each Agenda shall set forth a general description of the items to be considered by the Board at the specified meeting. The Chairman of the Board may then adjust an agenda to include special items not contemplated during the initial preparation of that Agenda.
Each Board member shall be free to suggest inclusion of items on an Agenda as well as free to raise at any Board meeting subjects that are not specifically on the Agenda for that meeting , although each director shall discuss with the Lead Director as soon as reasonably possible any specific matters or subjects which such director intends to raise or discuss at a Board or Committee meeting.
The Company shall have at least the following three standing committees: Audit, Corporate Governance and Nominating, and Compensation. The purpose and responsibilities for each of these committees shall be outlined in committee charters adopted by the Board. The Board may want, from time to time, to form a new committee or disband a current committee depending on circumstances. In addition, the Board may determine to form ad hoc committees from time to time, and determine the composition and areas of competence of such committees.
Each of the Audit Committee, the Corporate Governance and Nominating Committee and the Compensation Committee shall be composed entirely of Independent Directors satisfying applicable legal, regulatory and NASDAQ requirements necessary for an assignment to any such committee.
The Corporate Governance and Nominating Committee shall be responsible, after consultation with the Chairman of the Board, for making recommendations to the Board with respect to the assignment of Board members to various committees.
The Corporate Governance and Nominating Committee shall annually review the Committee assignments and shall consider the rotation of the Chairman and members with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors. With regard to the Chairman of the Compensation Committee and the Corporate Governance and Nominating Committee, such position shall rotate at least once every three years.
The Board shall be responsible for identifying potential candidates for, and selecting, the Company's Chief Executive Officer. In identifying potential candidates for, and selecting, the Company's Chief Executive Officer, the Board shall consider, among other things, a candidate's experience, understanding of the Company's business environment, leadership qualities, knowledge, skills, expertise, integrity, and reputation in the business community, and any recommendations made by the Compensation Committee.
The Compensation Committee will provide a summary of its annual performance review to the non-management directors in executive session at the first regularly scheduled meeting of the Board each fiscal year. After agreement by the non-management directors to the evaluation, the Lead Director will meet with the Chief Executive Officer to discuss the Board's assessment. The Chief Executive Officer may then take the opportunity to discuss his or her reaction to the evaluation.
The Board shall plan for the succession to the position of the Chief Executive Officer and shall determine that a satisfactory system is in effect for education, development and orderly succession of senior and mid-level managers.