CORPORATE GOVERNANCE: CORPORATE GOVERNANCE GUIDELINES

As adopted by the Board of Directors on October 26, 1999, and amended on January 27, 2004

I. Functions of the Board
II. Composition of the Board
III. Director Compensation and Other Matters
IV. Board Meetings
V. Board Committees
VI. Management Review and Responsibility

 

I. FUNCTIONS OF THE BOARD

The directors of Knight Ridder are elected by the Company’s shareholders to oversee the affairs of the Company for the benefit of its shareholders. The board delegates to management the authority and responsibility for managing the everyday affairs of the Company.

The principal functions of the board and its committees (as more fully set forth below) are to:

·           Review and approve specific corporate actions as required by law and by applicable stock exchanges and/or trading systems on which the Company’s shares are listed or traded;

·           Select, regularly evaluate and, as necessary, replace the chief executive officer; determine senior management compensation; review executive succession planning;

·           Review and, where appropriate, approve major strategies, financial objectives and other plans of the Company;

·           Advise management on specific issues facing the Company;

·           Oversee processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance, and satisfy itself as to the adequacy of such process; and

·           Nominate directors and ensure that the structure and practices of the board provide for sound corporate governance.

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II. COMPOSITION OF THE BOARD

Size of the Board

The number of authorized board members is currently set at 10 members. The board believes that the optimum size for the board is between 9 and 13 directors. The board periodically reviews the size of the board and from time to time may increase the size temporarily in anticipation of retirements or to take advantage of the availability of an outstanding director candidate.

Selection of Board Members

The board is responsible for selecting candidates for board membership as well as for establishing the general criteria to be used in identifying potential candidates. The board delegates the screening process to the Nominating and Corporate Governance Committee which receives direct input from the chairman of the board and chief executive officer, and the other directors, as well as input from other resources such as outside consulting firms.

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Board Membership Criteria

The Nominating and Corporate Governance Committee is responsible for reviewing with the board from time to time the appropriate skills and characteristics required of board members in the context of the current composition of the board. The board selects director candidates who represent a mix of backgrounds and experiences that will enhance the quality of the board’s deliberations and decisions. The board is particularly interested in maintaining a mix that includes, but is not limited to, active or retired chief executive officers and senior executives, and particularly those with experience in operations, finance/banking, technology, marketing and international business, as well as leading entrepreneurs and academics. Diversity in its broadest sense, reflecting, but not limited to, geography, gender and ethnicity is also highly desirable.

Criteria to Qualify as an Independent Director

For purposes of these Guidelines, a director is considered independent if the board affirmatively determines that he or she has no other material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company. To assist the board in making such determination, a director will not be considered independent if any of the following categorical standards apply: (i) if he or she is, or has been, an employee of the Company or an affiliate of the Company during the last three years; (ii) if he or she receives, or has received, any direct compensation from the Company or from an affiliate of 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) during the last three years; (iii) if he or she is, or has been, affiliated with or employed in a professional capacity by the present or former internal or external auditor of the Company during the last three years; (iv) if he or she is, or has been, employed as an executive officer of another company where any of the Company’s present executives serve or have served on that other company’s compensation committee during the last three years; (v) if he or she is an executive officer or an employee of a company that makes payments to, or receives payments from, the Company for property or services in an amount that, in any single fiscal year, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues during the last three years; and (vi) if he or she has any immediate family members who (A) serve or have served as an executive officer of the Company or an affiliate of the Company during the last three years, (B) receive or have received direct compensation of more than $100,000 per year from the Company or an affiliate of the Company during the last three years or (C) satisfy the criteria set forth in clauses (iii) through (v) above. For purposes of this paragraph, 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 shares that director’s home, and an "affiliate" of the Company includes any parent or subsidiary in a consolidated group with the Company.

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Mix of Officer-Directors and Independent Directors

The board believes that, in addition to the chief executive officer, from time to time it may be appropriate for one or more officers of the Company to be members of the board. However, no officer of the Company other than the chief executive officer should expect to be elected to the board by virtue of his or her position in the Company. The board believes there should always be a substantial majority of independent directors.

Directors Who Change Job Responsibility

Individual directors who retire or change the principal position they held when they were initially elected to the board are expected to volunteer to resign from the board as of the date of retirement or change in position. The board does not believe that a director in this circumstance should necessarily be required to leave the board. Rather, the board believes the Nominating and Corporate Governance Committee should have the opportunity to assess each situation, based on the individual circumstances, and make a recommendation to the board.

Director Tenure and Retirement Policy

The board comprises three classes of directors, with approximately one-third of the directors assigned to each class. The members of each class are elected for a term of three years. There is no limit on the number of terms for which a director may be elected.

Except as noted below, Company officer-directors resign from the board at the time they retire or otherwise relinquish their executive officer title.

Effective
January 27, 2004: (a) all directors who are not employees of the Company may not be nominated by the board for election or reelection after they have reached age 70, and (b) all non-employee directors retire from the board effective at the annual meeting of shareholders that follows their seventieth birthday.

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Former Chief Executive Officers

In the discretion of the board, a former chief executive officer may continue to serve as a director following the date of his or her retirement as chief executive officer of the Company.

Lead Director

The board does not believe it is necessary to formally designate a lead director. When the independent directors meet without the chairman of the board, they may designate a director to chair the meeting whenever they believe that would be useful. In the absence of such designation by the board at meetings of the independent directors, the chairs of each of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee shall rotate as the chairs of such meetings.

 

 

 

III. DIRECTOR COMPENSATION AND OTHER MATTERS

Director Compensation

The management of the Company reports from time to time to the Nominating and Corporate Governance Committee concerning the existing board compensation program as compared to other large
United States corporations.

Any recommendations for changes in the board compensation program are made to the board by the chief executive officer following a review of the recommendations by the Nominating and Corporate Governance Committee.

 

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Director Equity Ownership

The board believes that directors should hold meaningful equity ownership positions in the Company. To assist in accomplishing that objective, the board believes that a significant portion of director compensation should be made in the form of Company equity. Pursuant to the Non-employee Director Compensation Plan, half of each director’s annual retainer is paid in Company stock. A director may also choose to receive the balance of the retainer in Company stock.

Director Attendance

Each director is expected to attend all meetings of the board and all meetings of board committees of which the director is a member. The board recognizes that occasional meetings may need to be scheduled on short notice when the participation of a director is not possible and that conflicts may arise from time to time that will prevent a director from attending a regularly scheduled meeting. However, the board expects that each director will make every possible effort to keep such absences to a minimum.

Conflicts of Interest

A director’s business or personal relationship may occasionally give rise to a material personal interest on a particular issue that conflicts, or appears to conflict, with the interests of the Company. The board, after consultation with counsel, determines on a case-by-case basis whether an actual or apparent conflict of interest exists. The board takes appropriate steps to identify such potential conflicts to ensure that all directors voting on an issue are disinterested with respect to that issue. In appropriate cases, a director with a conflict will be excused from participation on that issue. Directors also agree to comply with the Knight Ridder Code of Business Ethics.

 

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Conflicts of Interest Unique to Officers-Directors

On certain matters of corporate governance, such as officer-director compensation, the selection or removal of the chief executive officer, the assessment of the performance of the chief executive officer, and other matters pertaining to the senior management of the Company, the board’s decisions are made solely by the independent directors.

Board’s Interaction with Institutional Investors, the Press, Customers, and Other Constituencies of the Company

The board believes that management should speak for the Company. Individual directors may, from time to time, meet or otherwise communicate with various constituencies who are involved with the Company. It is expected that comments by individual directors will be with the knowledge of management and, in most instances, at the request of management. If comments from the board are appropriate, they should come from the chairman, or from the Company’s designated spokesperson.

Annual Performance Evaluation

The board shall conduct an annual self-performance evaluation of itself, which evaluation shall be conducted in such manner as the board deems appropriate, to determine whether it and its committees are functioning effectively.

 

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Director Orientation and Continuing Education

All new non-management directors will be provided with orientation materials upon joining the board and will be offered an opportunity to attend an orientation meeting with senior management to familiarize new directors with the Company’s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Ethics, its principal officers and its internal and independent auditors. The Company’s management will provide periodically, where appropriate, materials, briefings and continuing educational opportunities for all directors on subjects that would assist them in discharging their duties

 

 

 

IV. BOARD MEETINGS

Frequency of Board Meetings


The board meets four times annually, in January, April or May, July and October, and also holds an organizational meeting in conjunction with the annual meeting of shareholders. In addition, the board may hold additional meetings from time to time, either in person or by telephonic conference call, when circumstances warrant.

Selection of Agenda Items for Board Meetings

The chairman of the board establishes the agenda for each board meeting. Any director may suggest the inclusion of items on the agenda and may raise at any regular board meeting subjects for discussion that are not on the meeting’s formal agenda.

 

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Board Materials Distributed in Advance

Information that is important to the board’s understanding of the business of the Company is distributed in writing to the board prior to each board meeting, and periodically, as appropriate, between board meetings.

As a general rule, materials on specific subjects should be sent to directors in advance so that board meeting time may be conserved and discussion time focused on questions that the board has about the material. Sensitive subject matters may be discussed at the meeting without written materials being distributed in advance or at the meeting.

Attendance of Non-Directors at Board Meetings

The chairman, at his or her discretion, may invite senior officers of the Company to attend non-executive sessions of board meetings. The chairman, at his or her discretion, may also invite other employees of the Company to attend specific board meetings.

The board encourages management to schedule presentations at board meetings by managers who can provide additional insight into the items being discussed because of their personal involvement in these areas, and/or represent managers with future potential that management believes should be given exposure to the board.

In addition, board members have free access to all other members of management and employees of the company.

 

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Executive Sessions

On a regular basis, including annually when it reviews the performance of the chief executive officer, the board meets in executive session without the officer-directors or other members of management.

Corporate Strategy

The board believes that long-range, strategic issues should be discussed as a matter of course at regular board meetings. In addition, from time to time, and normally in January of each year, the board devotes an extended meeting to an update from management on the strategic issues and opportunities facing the Company.

Significant corporate strategy decisions are brought to the board in a timely way for its consideration. These decisions are discussed and approved by the full board.

 

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V. BOARD COMMITTEES

Standing Committees


The board presently has five standing committees: Audit, Compensation, Nominating and Corporate Governance, Environmental Affairs, and Executive.

The Audit Committee ensures that the Company conducts its business in conformance with appropriate legal and regulatory standards and requirements. The Audit Committee annually selects, appoints, evaluates, determines the compensation of, and retains the independent auditors, reviews the services to be performed by the independent auditors and the terms of their engagement, exercises oversight of their activities and, where appropriate, terminates and/or replaces the independent auditors. It reviews the results of each external audit and considers the adequacy of the Company’s internal controls. It also determines the duties and responsibilities of the internal auditors, reviews the internal audit program, and oversees other activities of the internal auditing staff.

The Compensation Committee administers the Company’s incentive compensation plans and its stock option plans, including the review and grant of stock options to all eligible employees and directors. The Compensation Committee reviews and approves corporate goals and objectives relevant to the chief executive officer’s compensation, evaluates such CEO’s performance in light of those goals and objectives, and together with the other independent directors determines and approves in an executive session (where appropriate) the CEO’s compensation level based on this evaluation. After receiving input from the CEO, it makes recommendations to the board in an executive session (where appropriate) with respect to non-CEO compensation, incentive-compensation plans and equity-based plans. The Compensation Committee oversees the selection of the chief executive officer and recommends to the board the process by which a new chief executive officer is selected.

 

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The Nominating and Corporate Governance Committee makes recommendations to the board regarding the size and composition of the board, establishes procedures for the nomination process, recommends candidates for election to the board, makes committee assignments and selects committee chairs. The committee also reviews and reports to the board on matters of corporate governance (that is, the relationships of the board and its committees, the shareholders and management in determining the direction and performance of the Company), reviews and make recommendations to the board with respect to non-employee director compensation (including equity plans), oversees the evaluation of the board and management, and reviews and addresses these Guidelines and recommends revisions, as appropriate.

Upon nomination by the chief executive officer, the board approves the election of Company officers.

The Environmental Affairs Committee oversees the policies of the Company formulated to carry out the Company’s commitment to preserving the natural environment of the communities it serves and the safety of its workplaces.

When the board is not in session, the Executive Committee may exercise all powers of the board delegated to it, except certain actions specified in the Company’s bylaws.

 

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Establishment of Committees

The charter of each committee is reviewed by the board periodically. The board has the flexibility to form a new committee or to disband a current committee, as it deems appropriate. The chair of each committee reports to the full board, whenever appropriate, with respect to those matters considered and acted upon by his or her committee. Management assigns an officer to provide and coordinate staff support for each committee.

Selection of Agenda for Committee Meetings

Each committee chair, in consultation with the appropriate members of management, develops the agenda for committee meetings. Any director who is a member of a committee may suggest the inclusion of additional items on the agenda. Directors may raise at any regular committee meeting subjects for discussion that are not on the meeting’s formal agenda.

Each committee chair may invite members of management, as appropriate, to attend committee meetings.

Frequency of Committee Meetings

Each committee chair, in consultation with the chairman of the board and committee members, determines the frequency of the meetings of the committee. Each committee prepares minutes of its meetings.

 

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Assignment and Rotation of Committee Members

The Nominating and Corporate Governance Committee is responsible for the assignment of directors to various committees after consultation with the chairman of the board and after giving due consideration to the desires of individual directors. The Nominating and Corporate Governance Committee is also responsible for the selection of committee chairs. The board has no set policy for the regular rotation of committee members or committee chairs. The Audit, Compensation, and Nominating and Corporate Governance committees consist solely of independent directors.

 

 

 

VI. MANAGEMENT REVIEW AND RESPONSIBILITY

Evaluation of Senior Executive Officers

The chair of the Compensation Committee conducts and reviews with the independent directors an annual evaluation of the performance of the chief executive officer and other senior executive officers in connection with determining their salary, bonuses and other awards or compensation.

 

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Selection of the Chairman and Chief Executive Officer

The Compensation Committee considers succession planning for the chief executive officer and recommends to the board an appropriate process by which a new chief executive officer is selected. The board has no required procedure for executing this responsibility because it believes this decision must be made in the way the board determines to be in the best interests of the Company in light of the circumstances surrounding each such decision.

The board is comfortable with the practice of combining the role of chairman of the board with the role of chief executive officer, believing it generally provides the most efficient and effective leadership model for the Company. The board anticipates that, in occasional circumstances and particularly during relatively short periods of leadership transition, these roles may be assigned to two different persons for a period of time.

Succession Planning and Management Development

The chief executive officer is responsible for advising the Compensation Committee and the board on planning for potential successor chief executive officers, as well as for other key senior leadership positions in the Company. The chief executive officer reviews such matters with the board annually.

Equity Ownership by the Chief Executive Officer and Other Senior Executives

The board believes that senior executive officers and other key employees of the Company should hold significant equity ownership positions in the Company. Specifically, the Company’s chief executive officer, president, senior vice presidents, and vice presidents and publishers of the company’s largest newspapers are required to purchase and hold shares of Knight Ridder common stock equal in value to four, three, two and one times their base salaries, respectively.

Resources and Authority of the Board

The board and its committees may obtain advice and assistance from outside legal, accounting or other advisors, as the board and its committees deem necessary to carry out their duties. In this regard, the board and its committees will have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to retain, terminate and approve the fees and other retention terms of special or independent counsel, accountants or other experts or consultants, as they deem appropriate, without seeking approval of management.