Responsibilities of the Board of Directors
The Board of Directors, which is elected by the shareholders, is the ultimate decision-making body of First Data, except with respect to matters reserved to the shareholders. The Board of Directors selects the Chief Executive Officer and certain other members of the executive management of First Data, who are charged with directing First Data's business. The primary function of the Board of Directors is therefore oversight - defining and enforcing standards of accountability that enable executive management to execute their responsibilities fully and in the interests of shareholders. The Board is committed to establishing and maintaining the highest standards of ethics and integrity as a culture at First Data, and expects First Data's management to ensure that such a tone and culture is followed in all aspects of First Data's operations. Consistent with that function and that culture, the following are the primary responsibilities of the Board:
In discharging their responsibilities, Directors must exercise their business judgment to act in a manner that they believe in good faith is in the best interests of First Data and its shareholders. Directors are also expected to spend the necessary time to discharge their responsibilities appropriately and to ensure that other existing or future commitments do not materially interfere with their responsibilities as members of the Board.
Composition of Board
Selection of New Directors. The Board is responsible for nominating directors for election by the stockholders and filling any vacancies on the Board that may occur. The Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership. In formulating its recommendations, the Corporate Governance Committee will consider recommendations offered by any shareholder, director or officer of First Data.
Membership Criteria. Nominees for director shall be selected on the basis of experience, integrity, skills, diversity, ability to make independent analytical inquiries, understanding of First Data's business environment, and willingness to devote adequate time to Board duties -- all in the context of an assessment of the perceived needs of the Board at that point in time.
Percentage of Independent Directors. The Board believes that independent outside directors should constitute a majority of the Board of Directors.
Definition of Independent Directors. A director is independent if he/she has had no material relationship with First Data and otherwise satisfy the independence requirements of the New York Stock Exchange. Each year the Board shall review each director's relationships to First Data and determine which directors are independent. The Board believes that the following relationships are immaterial for purposes of determining independence and will review all other relationships on a case by case basis to determine the independence of the director.
Size of the Board. The Board believes that it should generally have no fewer than eight and no more than twelve directors. This range permits diversity of experience without hindering effective discussion or diminishing individual accountability.
Chairperson. First Data's bylaws do not require that the same person be the Chairman and Chief Executive Officer.
Change in Job Responsibility. It is the sense of the Board that when a Director's principal occupation or business association changes substantially from the position he or she held when originally invited to join the Board, the Director shall tender a letter of resignation to the Corporate Governance Committee. Such Committee will review whether the new occupation, or retirement, of the Director is consistent with the specific rationale for originally selecting that individual and the guidelines for board membership. The Committee will recommend action to be taken regarding the resignation based on the circumstances of retirement, if that is the case, or in the case of a new position, the responsibility and type of position, and industry involved.
Other Directorships and Committee Memberships. Each Director is expected to ensure that other existing and planned future commitments do not materially interfere with the member's service as a Board or Committee member. Independent Directors are encouraged to limit the number of other boards (excluding non-profit) and board committees on which they serve and should advise the Chairman of the Board before accepting an invitation to serve on another board or board committee.
Mandatory Retirement Age. The Board currently does not believe that a mandatory retirement age for directors is in the best interest of First Data but from time to time will review the desirability of establishing one.
Term Limits. The Board currently does not believe that term limits are in the best interest of First Data but from time to time will review the desirability of establishing term limits.
Board Compensation. The Compensation and
Benefits Committee will review the status of Board compensation for
non-employee directors in relation to other large
Changes in Board compensation, if any, should come at the suggestion of the Compensation and Benefits Committee, but with full discussion and concurrence by the Board.
Orientation of New Directors. The Board shall provide for an orientation process for new Directors that includes background material, meetings with senior management and visits to Company facilities.
Continuing Education. The Board encourages all Directors to stay abreast of developing trends for directors from the variety of sources available. First Data will bear all reasonable expenses in connection with such continuing education.
Frequency of Meetings. There shall be a minimum of five regularly scheduled meetings of the Board each year. One of these meetings shall be devoted primarily to long-term strategic planning. Directors are expected to attend all meetings.
Selection of Agenda Items for Board Meetings. The Chairman of the Board will establish the agenda for each Board meeting. Each Board member is free to suggest the inclusion of item(s) on the agenda as well as raise subjects that are not specifically on the agenda at any meeting.
Board Materials Distributed in Advance. As a general rule, presentations on specific subjects should be sent to the Board members in advance so that Board meeting time may be conserved and discussion time focused on questions that the Board has about the material. On those occasions when prior distribution is not possible or not recommended, the presentation will be distributed and discussed at the meeting. Directors are expected to review all advance meeting materials prior to the meeting.
Executive Sessions of Non-Management Directors. The Non-Management Directors of the Board will meet at least two times each year in regularly scheduled executive sessions and at such other times as determined by the Non-Management Directors. Executive Sessions will be chaired by the Chairperson of the Corporate Governance Committee. First Data will disclose the name of the presiding director and a method for communicating directly with them.
Assessing the Board's Performance. The Board, the Corporate Governance Committee, the Audit Committee, the Compensation and Benefits Committee and the Oversight Committee shall be responsible for conducting annual self-evaluations. The Corporate Governance Committee shall be responsible for establishing the evaluation criteria and implementing the process for such evaluations.
Board Committee Matters
Number, Structure and
Assignment and Rotation of Committee Members. The Board shall be responsible for appointing the chairs and members to the committees on an annual basis. The Board shall annually review the Committee assignments and shall consider the rotation of chairs 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. Committee members are expected to attend the meetings of committees on which they serve.
Frequency and Length of Committee Meetings. The Committee chairperson, in consultation with committee members, will determine the frequency and length of the meetings of the Committee.
Committee Agenda. The Committee chairperson, in consultation with the appropriate members of the Committee and management, will develop the Committee's agenda.
Board Relationship to Senior Management and Independent Advisors
Board Access to Senior Management and Independent Advisors. Board members have complete access to management and independent advisors. Board members shall use sound business judgment to be sure that this contact is not distracting to the business operation of First Data.
Non-Director Attendance at Board Meetings. The Board welcomes the regular attendance of senior management at each Board meeting. Furthermore, the Board encourages management to bring others who can meaningful contribute to the Board meeting.
Board's Interaction with Institutional Investors, Press, Customers, Etc. The Board believes that management generally should speak for First Data. It is suggested that each director refer inquiries from institutional investors, the press or customers to management. If comments from the Board are appropriate, they should, in most circumstances, come from the Chairman.
Formal Evaluation of the Chief Executive Officer. The Board has ultimate responsibility for determining the goals and objectives of First Data and of the Chief Executive Officer as well as evaluating the performance of First Data and the Chief Executive Officer relative to those goals and objectives. To assist the Board in discharging that responsibility and with input from the Board, the Compensation and Benefits Committee shall conduct a formal evaluation of the Chief Executive Officer annually. The evaluation should be based on objective criteria including performance of the business, accomplishment of long-term strategic objectives, development of management, etc. The Chairperson of the Compensation and Benefits Committee shall report the results of the evaluation at an executive session of the non-management directors.
Succession Planning. The Chief Executive Officer shall prepare and distribute to the Board an annual report on succession planning. The plan shall include a short-term succession plan which delineates a temporary delegation of authority to certain officers of First Data, if all or a portion of the senior officers should unexpectedly become unable to perform their duties.
The Board shall be responsible for selecting the Chief Executive Officer and approving the appointment of Executive Vice Presidents of First Data. In connection with the succession plan, the Chief Executive Officer should make available to the Board his or her recommendations and evaluations of potential successors. If selection of a new Chief Executive Officer should be necessary, the Board shall consider the recommendations but make an independent assessment of potential internal and external candidates in selecting the successor.
Voting Policy. All shareholder meeting proxies, ballots and voting records that identify the particular vote of a shareholder should be confidential. The vote of any shareholder should not be revealed to anyone other than a non-employee tabulator of votes or an independent election inspector, except (i) as necessary to meet applicable legal and stock exchange listing requirements, (ii) to assert claims for or defend claims against First Data, (iii) to allow the inspectors of election to certify the results of the shareholder vote, (iv) in the event a proxy solicitation in opposition to First Data or the election of the Board of Directors takes place, (v) if a shareholder has requested that their vote be disclosed, or (vi) to respond to shareholders who have written comments on proxy cards.