Corporate Governance Guidelines
1. Director Qualifications
The Board will have a majority of directors who meet the criteria for independence required by the New York Stock Exchange. The Nominating and Corporate Governance Committee is responsible for reviewing with the Board the requisite skills and characteristics of candidates for Board membership. This assessment will include the candidate’s qualification as independent, as well as consideration of his or her skills and experience in the context of the needs of the Board. The Nominating and Corporate Governance Committee in accordance with the policies and principles in its charter will select nominees for directorship and recommend them to the full Board. The invitation to join the Board should be extended by the Chairman of the Board, on behalf of the Board.
The Board presently has seven members. It is the sense of the Board that a size of seven to nine is about right. However, the Board would be willing to go to a somewhat larger size in order to accommodate the availability of an outstanding candidate or candidates.
It is the sense of the Board that individual directors who change the principal responsibility they held when they were elected to the Board should volunteer to resign from the Board. It is not the sense of the Board that directors who retire or change from the position they held when the came on the Board should necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating and Corporate Governance Committee to review the continued appropriateness of Board membership under the circumstances.
No director may serve on so many other public company boards that his or her ability to devote their time and attention to his or her duties to the Board or to the Company’s affairs would be compromised. Determination of the existence of such a situation would be at the discretion of the Chairman of the Nominating and Corporate Governance Committee. Directors should advise the Chairman of the Board and the Chairman of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another public company board. No director may be nominated to a new term if such nomination would violate the mandatory retirement rules found in Article II, Section 8 of the Company’s Bylaws.
The Board does not believe it should establish term limits. While term limits could help insure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of directors who have been able to develop, over a period of time, increasing insight into the Company and its operations and, therefore, provide an increasing contribution to the Board as a whole. As an alternative to term limits, the Nominating and Corporate Governance Committee will review each director’s qualifications to continue on the Board in connection with the selection of nominees to take office when the director’s term expires, and will conduct a more detailed review of each director’s suitability to continue on the Board following alternate expirations of the director’s term (i.e., generally every six years).
2. Director Responsibilities
The basic responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders. In discharging that obligation, directors should be entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors. The directors shall also be entitled to have the Company purchase reasonable directors’ and officers’ liability insurance on their behalf, to the benefits of indemnification to the fullest extent permitted by law and the Company’s charter, bylaws and any indemnification agreements, and to exculpation as provided by state law and the Company’s charter.
Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Information and data that are, in the Chairman’s judgment, important to the Board’s understanding of the business to be conducted at a Board or committee meeting and which may be considered complex or time consuming to digest and review, should generally be distributed in writing to the directors before the meeting, if reasonably available, and directors should review these materials in advance of the meeting.
The Board has no policy with respect to the separation of the offices of Chairman and the Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination when it elects a new chief executive officer.
The Chairman will establish the agenda for each Board meeting. Each Board member is free to suggest the inclusion of items on the agenda. Each Board member is free to raise at any Board meeting subjects that are not on the agenda for that meeting.
The independent directors, comprising members of the Management Committee, will meet in executive session at least annually and more frequently if needed. The director who presides at these meetings will be chosen by a vote of the independent directors and his name will be disclosed in the annual proxy statement. In addition, interested parties may communicate directly and confidentially with the Management Committee by submitting a communication in an envelope marked “Confidential” addressed to the Management Committee in care of the Company’s Corporate Secretary.
The Board believes that the management speaks for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company. However, it is expected that Board members would do this with the knowledge of the management and, absent unusual circumstances or as contemplated by the committee charters, only at the request of management.
3. Board Committees
The Board will have at all times an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Subject to applicable transition rules established by the New York Stock Exchange, all of the members of these committees will be independent directors under the criteria established by the New York Stock Exchange.
Committee members will be appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee following its consultation with the Chairman of the Board and with due consideration given to the desires and skills of individual directors. The Board will also designate one member of each committee to be its chairman. It is the sense of the Board that consideration should be given to rotating committee members periodically, but the Board does not feel that rotation should be mandated as a policy. Each committee will have a written charter. The charters will set forth the purposes, goals and responsibilities of the committees as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure and operations and committee reporting to the Board.
The chairman of each committee, in consultation with other committee members, will determine the frequency and length of the committee meetings consistent with any requirements set forth in the committee’s charter. The chairman of each committee, in consultation with other members and Company management as appropriate, will develop the committee’s agenda.
At the beginning of the year, each committee will establish a schedule of agenda subjects to be discussed during the year (to the degree these can be foreseen). The schedule for each committee will be furnished to all directors. The Board and each committee have the power to hire independent legal, financial or other advisors, as they may deem necessary, without consulting or obtaining the approval of any officer of the Company in advance.
Each committee shall have the authority, to the extent it deems necessary or appropriate, to engage and obtain advice and assistance from legal, accounting or other advisors. The Company shall provide for appropriate funding for payment of compensation to any such advisors, as well as administrative expenses necessary or appropriate in carrying out committee duties.
The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.
4. Director Access to Officers and Employees
Directors have full and free access to officers and employees of the Company. Any meetings or contacts that a director wishes to initiate may be arranged through the CEO or made directly by the director. The directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Company and will, to the extent not inappropriate, copy the CEO on any written communications between such director and an officer or employee of the Company. The Board also welcomes regular attendance at each Board meeting of senior officers and, for appropriate parts of the meeting, other managers of the Company. To the extent necessary and appropriate, directors also have access to the Company’s independent advisors using the same procedures.
5. Director Compensation
The Compensation Committee, in accordance with the policies and principles set forth in its charter, will determine or recommend to the Board the form and amount of director compensation. The Compensation Committee will consider that directors’ independence may be jeopardized if director compensation and perquisites exceed customary levels, if the Company makes substantial charitable contributions to organizations with which a director is affiliated, or if the Company enters into consulting contracts with (or provides other indirect forms of compensation to) a director or an organization with which the director is affiliated.
6. CEO Evaluation
The Compensation Committee will conduct an annual review of the CEO’s performance, as set forth in its charter. The Board of Directors will review the Compensation Committee’s report in order to ensure that the CEO is providing appropriate leadership for the Company in the long- and short-term.
7. Annual Performance Evaluation
The Board of Directors will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating and Corporate Governance Committee will receive comments from all directors and report annually to the Board with an assessment of whether the Board and its committees are generally functioning effectively. This assessment will then be discussed and taken into account by the full Board in its consideration of any appropriate action or response.
8. Director Orientation and Continuing Education
All new directors will be given the opportunity to participate in an Orientation Program, which should be conducted within two months of the annual meeting at which he or she is elected. This orientation will include presentations by senior management to familiarize new directors with the Company’s operations, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct and Ethics, its principal officers, and its internal and independent auditors. All other directors are also invited to attend the Orientation Program.
9. Management Succession
The entire Board will continue to work with the Nominating and Corporate Governance Committee to establish, review and revise policies, guidelines and procedures regarding CEO succession in the event of an emergency or retirement of the CEO, including policies and procedures for nominating and evaluating potential successors to the CEO. The CEO should at all times make available his or her recommendations regarding such policies and procedures.