Governance Policies and Guidelines
GUIDELINES OF ROHM AND HAAS COMPANY
(As Amended, Approved and Adopted July 2007)
Set forth are the Corporate Governance Policies and Guidelines of Rohm and Haas Company (“Company”).
A. Structure and Membership
In accordance with the Company’s Bylaws, the Board will be composed of three to 20 directors. It is the sense of the Board that the optimal board size is 8 to 15 directors with no more than two management directors.
At least a majority of the directors will be independent, meeting the criteria for independence under governing law, rules, regulations and the listing standards of the New York Stock Exchange. No director will qualify as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). A director will be deemed to have a “material relationship” with the Company, if:
a. The director has been an employee, or an immediate family member of the director has been an executive officer, of the Company within the last three years.
b. The director is an employee, or an immediate family member is an executive officer, of a company that has received payments from or made payments to the Company for property or services in an amount which, in any of the last three fiscal years, exceeded the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
c. The director is an executive officer of a charitable organization that received, within the last preceding three years, contributions from the Company which in any single fiscal year exceeded the greater of $1 million or 2% of such charitable organization’s consolidated gross revenues.
d. The director, or an immediate family member of the director, has received, during any twelve month period within the last three years, more than $100,000 per year in direct compensation from the Company (other than for directors’ fees).
e. (i) The director or an immediate family member is a current partner of a firm that is the company’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Company’s audit within that time.
f. The director or an immediate family member, is or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers serves or served on that other company’s compensation committee.
The Board’s determinations of a director’s independence will be disclosed by the Company in its annual proxy statement.
The chairperson of the Nominating and Governance Committee, which currently is composed of all of the non-management directors, will preside over Nominating and Governance Committee meetings and Board executive sessions, and will facilitate the functioning of the Board and the relationship between and among the Board and its committees.
4. Board Membership Criteria
a. The Board seeks director candidates from diverse professional and personal backgrounds who possess a broad spectrum of experience and expertise as well as a reputation for honesty and integrity. Among other criteria, the Board may consider the following skills, attributes and competencies in a new member: (i) sound business and personal judgment; (ii) senior management experience and demonstrated leadership; (iii) accountability and integrity; (iv) financial literacy; (v) maturity and self-confidence; (vi) industry or business knowledge including science, technology and marketing acumen; (vii) independence from management; (viii) independence of thought and ideas; (ix) diversity of origin, background and thought; (x) demonstrated commitment to the concepts of sustainable development, including social responsibility and environmental, health and safety stewardship; and (xi) other board appointments and service.
b. Recognizing the increasing time commitments for directors, the Board limits the number of boards on which executive officers and directors may serve as follows:
i. The Chief Executive Officer should not serve on more than two boards of public companies in addition to the Rohm and Haas board.
ii. Executive officers, other than the Chief Executive Officer, should not serve on more than two boards of public companies.
iii. Actively employed directors should not serve on more than two other boards of public companies in addition to the Rohm and Haas board, and other directors should not serve on more than four other boards of public companies in addition to the Rohm and Haas board.
c. Directors and executive officers should advise the Chairman of the Board and the Chair of the Nominating and Governance Committee in advance of accepting an invitation to serve on another a board of a public company.
Election of Directors
The Nominating and Governance Committee will identify, and recommend that the Board select, the director nominees for the next annual meeting of the stockholders. All directors will be elected annually.
New Director Orientation and Continuing
Education of Directors
The Board, with the assistance of the Nominating and Governance Committee and management, will orient new directors to the policies and practices of the Board and the Company, and encourage its directors to attend continuing education programs.
7. Tenure, Retirement/Resignation and Succession
a. Tenure – Directors will hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until the directors’ earlier resignation or removal.
b. Retirement – Non-management directors will not stand for re-election after passing her/his 70th birthday. Management directors will retire at age 65.
c. Resignation by Management Directors – Management directors will tender their resignation from the Board upon their resignation, removal or retirement as an officer of the Company; provided, however, that the Company’s CEO may, provided the Board approves, continue to serve as a director after her/his resignation or retirement for a period of up to one year after the date she/he ceases to be CEO.
d. Directors Changing Present Job Responsibilities – Any non-management director who changes his/her primary job responsibilities from those held at the time of his/her election to the Board will tender a letter of resignation from the Board. The Board will consider the tender of resignation and, in its sole discretion, determine whether such change in responsibilities will impair the director’s ability to effectively serve on the Board, and may waive the requirement for resignation where it has determined the ability of the director to serve is not impaired.
e. Succession – In accordance with the Company’s Bylaws, any vacancy in the Board may be filled by a majority vote of the remaining directors even though less than a quorum, or by the stockholders at any meeting held prior to the filling of such position by the Board. If there are fewer than three directors in office, the remaining director or directors shall appoint the additional directors required to provide a Board of Directors of at least three directors.
Duties and Responsibilities
The Board will have the powers and responsibilities prescribed by law, rule or regulation and as set forth in the Company’s Bylaws and in its charter. The Board’s general oversight responsibilities include, among other things, to (i) ensure that the Company operates in a legal, ethical and socially responsible manner, consistent with the concept of sustainable development, (ii) monitor fundamental financial and business strategies and major corporate actions, (iii) review major risks facing the Company and review options for mitigation, and (iv) provide substantive advice and counsel to the Company’s management in creating long-term economic value for its stockholders.
2. Board Meetings
a. Agenda – The Chairman of the Board will establish the agenda for each Board meeting, and at the beginning of the year a schedule of agenda subjects to be discussed during the year. The Chairman may consult with the chairperson of the Nominating and Governance Committee and other Board members, senior management and others as is appropriate, for suggestions for additional items for the agenda and for discussion at the meetings.
b. Executive Sessions – The non-management directors will meet in regularly scheduled executive sessions without the presence of the management directors or other members of the Company’s management. The chairperson of the Nominating and Governance Committee will preside at these executive sessions, and the name of that director will be publicly disclosed in the Company’s annual proxy statement.
c. Meeting Materials – Materials for review, discussion and/or action by the Board should, to the extent practicable, be distributed sufficiently in advance of meetings to permit meaningful review prior to the meetings. It is recognized that circumstances may preclude the advance dissemination of meeting materials.
d. Attendance of Non-Directors – The General Counsel/Secretary and an assistant secretary shall attend all Board meetings. It is the sense of the Board that, from time to time, the attendance of key executive officers may contribute to the meeting discussions and to the effectiveness of the Board’s actions.
e. Number of Meetings, Attendance and Preparation – the Board shall hold a minimum of five (5) meetings per year. Directors are expected to attend all meetings and, prior to the meetings, to have reviewed all written materials disseminated to them.
Conflicts of Interest
Directors are expected to avoid any action, position or interest that conflicts with the interest of the Company, or gives the appearance of a conflict. The Company annually will solicit information from the members in order to monitor potential conflicts of interest, and directors are expected to immediately inform the Company of any action, position or interest acquired that conflicts or appears to conflict with the Company’s interest. Directors are expected to be mindful of and abide by their fiduciary responsibilities to the Company. The Board has established a Policy with Respect to Related Party Transactions.
Director Compensation and Review
Management directors do not receive compensation for their service as directors.
The Executive Compensation Committee will recommend and the Board will determine the form and amount of fees for director’s service. Director fees shall be paid in a mixture of cash and Rohm and Haas Company deferred stock units, where the amount of stock units shall not be less than 50% of the total amount of fees. One deferred stock unit entitles the director to one share of Rohm and Haas common stock when the director leaves the Board. A director may choose to accept a greater than 50% share of her/his fees in deferred stock units.
Assessment of the Board and Committee
Annually, the Board will review and assess its own performance and the performance of its committees. To assist the Board in its assessments, the Nominating and Governance Committee will prepare a report containing comments it solicits from all directors regarding the Board’s performance. The Board’s assessment of its committees shall be based in part on annual performance reports prepared by the committees on the results of their self-evaluations.
Access to Senior Management, Advisors and Others
The Board will have complete and unfettered access to senior management, the Company’s internal auditor and its independent auditor. The CEO will invite key executives to the Board meetings at which the CEO believes they can meaningfully contribute to the Board discussions.
The Board shall, as it deems necessary and appropriate in its judgment to carry out its responsibilities, retain and seek advice from internal and independent external legal, accounting and other advisors, and the Company will provide sufficient funding for the retention of these advisors.
Interaction with Third Parties and the Public
The Board believes that management should speak for the Company and that the Chairman should speak for the Board.
The Board believes that maintaining confidentiality of information and deliberations is imperative to the effective conduct of Board business.
The Board has established, and may periodically modify, policies and principles for CEO selection and performance review. The criteria for selection of a CEO includes consideration of the individual’s professional and personal backgrounds as well as the individual’s reputation for honesty and integrity. The Board should consider the following competencies when evaluating a CEO candidate: (i) industry knowledge and experience, (ii) business judgment, (iii) management skills and experience, (iv) leadership, (v) knowledge of international business and markets, (vi) corporate governance, (vii) financial literacy, and (ix) demonstrated commitment to the concepts of sustainable development, including social responsibility and environmental, health and safety stewardship.
In the event of the sudden and emergency departure or retirement of the CEO, the Board may temporarily appoint either a director or an executive officer of the Company, as CEO, until the Board has selected an individual to fill the CEO position on a permanent basis.
The Chairman will present reports annually to the non-management directors on the Company’s program for management development and succession planning.
Chief Executive Officer Performance Review
Annually, the Nominating and Governance Committee will perform an assessment of the performance of the CEO, based on a review of Company goals and objectives and other appropriate criteria, and shall communicate the results of its assessment to the CEO and to the Executive Compensation Committee. This assessment may be used by the Executive Compensation Committee to facilitate the performance of its responsibilities regarding the setting of the CEO’s compensation.
A. Structure and Membership
Board Committees and Committee Charters
The Board currently has the following five (5) committees: Audit, Executive, Executive Compensation, Nominating and Governance, and the Committee on Sustainable Development. The Audit, Executive Compensation and Nominating and Governance Committees will be composed entirely of independent directors. All members of the Audit Committee must meet the additional requirement of independence in that they shall not accept any consulting, advisory or other compensatory fees from the Company or shall not be an affiliated person of the Company or its subsidiaries Additionally, all members of the Audit Committee shall be financially literate, at least one member shall have accounting or financial management experience and meet the requirements of an “audit committee financial expert” as defined by the SEC.
The Audit, Executive Compensation and Nominating and Governance Committees will have appropriate written charters in compliance with requirements imposed by applicable laws, rules, regulations and listing standards, and which shall be made available on the Company’s web site at “www.rohmhaas.com.” All other committees will have written charters reflecting Company goals and policies.
Assignments of Committee Members and Chairs
The Board, on the recommendation of the Nominating and Governance Committee, annually appoints committee members and chairs. Membership should be based on the director’s knowledge, interest and areas of expertise. Committee members and chairs shall serve in those positions for five years, unless circumstances otherwise warrant.
Frequency of Meetings, Attendance, Agenda
and Meeting Materials
The committees shall meet as often as they may deem necessary and appropriate in their judgment. However, the Audit, Executive Compensation and Nominating and Governance Committees shall meet not less than four (4) times per year. All committees may establish their own rules of procedure, which shall be consistent with the Company’s Bylaws and the charters for any of the committees.
Committee members are expected to meet in person, but participation in a meeting by telephone is acceptable. A majority of the members of a committee attending in person or, when appropriate by telephone, shall constitute a quorum.
The chairperson of a committee, in consultation with committee members and management, will develop the agenda for the meetings. Each committee establishes a schedule of agenda subjects at the beginning of each year. Materials for review, discussion and/or action by the committee should, to the extent practicable, be distributed sufficiently in advance of meetings to permit meaningful review prior to the meetings. It is recognized that circumstances may preclude the advance dissemination of meeting materials.
Following each of its meetings, each committee will deliver a report of its meeting to the Board including a description of all actions taken by the committee at the meeting. The committees shall keep written minutes of its meetings, and these minutes shall be maintained with the books and records of the Company.
Each committee may form and delegate authority to subcommittees when appropriate, and may designate one or more of its members the authority to act on behalf of the committee, provided, however, that no such delegation or designation shall be permitted if the authority so delegated or designated is required by law, regulation, listing standard or Company Bylaws to be exercised by the committee as a whole.
B. Duties and Responsibilities of the Committees
The Audit Committee will be composed of not less than three directors, each of whom is deemed independent under governing law, rules, regulations and the listing standards of the New York Stock Exchange, and shall have the powers and responsibilities prescribed by law, rule or regulation, and as set forth in its charter.
The Executive Committee will be composed of not less than two directors, at least one of whom shall be deemed independent, and shall exercise all of the powers of the Board except it shall not have the power to take any action that under law, rule or regulation is reserved to the full Board or to other committees, and it shall not have the power to change the number of directors, fill vacancies in the Board or fill any vacancy in the Executive Committee, and it shall not have the power to take any action unless there is a quorum of independent directors involved in the action.
Executive Compensation Committee
The Executive Compensation Committee will be composed of not less than three directors, each of whom is deemed independent under governing law, rules, regulations and the listing standards of the New York Stock Exchange, and will have the powers and responsibilities prescribed by law, rule or regulation, and as set forth in its charter.
Nominating and Governance Committee
The Nominating and Governance Committee will be composed of all or some, but not less than three, of the non-management directors, each of whom is deemed independent under governing law, rules, regulations and the listing standards of the New York Stock Exchange, and shall have the powers and responsibilities prescribed by law, rule or regulation, and as set forth in its charter.
5. Committee on Sustainable Development
The Committee on Sustainable Development will be composed of at least four directors, at least three of whom are deemed independent, and shall have the powers and responsibilities prescribed by law, rule or regulation, and as set forth in its charter.
Other committees shall be constituted at the Board’s discretion, and will have the powers and responsibilities as may be conferred to them by the Board, which may be exercised so long as consistent with governing law, rules, regulations or Company Bylaws, and not expressly reserved by law, rule, regulation, bylaw, charter or other authority to another committee.
Code of Business Conduct and Ethics
The Company conducts its operations and business affairs in a legal, ethical and socially responsible manner. It maintains a Code of Business Conduct and Ethics applicable to all directors, officers and employees. The Code is available on the Company’s website at www.rohmhaas.com.
The Board believes that it is imperative that timely, accurate, complete and reliable disclosure in compliance with applicable laws, rules and regulations is made on all material matters including (i) the Company’s financial condition, results of operations and cash flows, (ii) business performance, (iii) foreseeable risk factors, (iv) stock ownership by directors and executive officers, and (v) executive management, officer and director