The business and affairs of Pulse Electronics Corporation (“the
Company”) are conducted by its employees, managers, and officers under the
direction of the Chief Executive Officer to enhance long-term shareholder
value. The Company’s Board of Directors oversees the business of the Company
to ensure these goals are met and believes that sound corporate governance
practices provide an important framework to assist them in fulfilling these
responsibilities. Accordingly, the Board has formally adopted corporate
governance guidelines relating to its functions, structure and operations.
These guidelines, which the Board reviews periodically, are set forth below.
Each Director stands in a fiduciary relationship to the Company
and must perform his/her duties as a director in good faith, in a manner
he/she reasonably believes to be in the best interests of the Company and
with such care (including reasonable inquiry), skill and diligence as a
person of reasonable prudence would use under similar circumstances.
2. Board Functions
of Major Strategies and Financial Objectives; Acquisitions and Divestitures.
Each year the Board will review and approve the one-year business and
financial goals and three-year strategic plans and will regularly monitor
performance and progress against these plans. In this role, the Board will
strive to act as an effective advisor and counselor to senior management,
focusing on strategy and direction, and avoiding the temptation to become
involved in operational management.
In addition, the Board will review and approve or disapprove any acquisition
or sale of a business if the total consideration for such transaction exceeds
The Board is responsible for annually assessing the major business risks
faced by the company and the strategies and plans for addressing those risks.
Management, Development and Succession.
The Board will devote sufficient time to become familiar with the senior
leadership team of the Company, and will review annually, with the Chief
Executive Officer, senior management succession planning and development.
Contingency plans will be available to assure the smooth transition of
management functions in the event of the unexpected loss of any senior
manager in the Company.
Executive Officer Selection, Evaluation and Compensation.
The Board is responsible for selecting and evaluating the CEO., Through its
Compensation Committee, the Board approves the compensation of the CEO and
other executive officers, and together with the CEO, will jointly set annual
goals for the CEO and evaluate his/her performance against these goals. The
evaluation will be based on objective criteria which shall include, among
other factors, corporate performance, development of management, and the
accomplishment of annual objectives and long-term strategic goals.
In addition, the Company's executive compensation program is designed and
administered with clear and strong linkages to its business strategy, short
term and long-term goals, particularly the creation of shareowner value, and
to develop talented executives and motivate them to work for the long-term
advantage of the Company’s primary stakeholder groups. The Compensation
Committee will have the responsibility of approving the executive
compensation plan and for reviewing and approving the CEO’s goals and
objectives relevant to his/her compensation. Any material changes in
Company’s executive compensation plans shall be brought to the full board for
review and approval.
The Board and its committees will each set achievement goals annually,
covering specific categories such as fiduciary oversight; Board governance
and process; strategic planning; executive development and succession and
financial matters. The Board, through the leadership of the Governance
Committee, will annually evaluate the functional effectiveness of the Board
and its committees against these goals. Each director will complete a written
and quantitative assessment of the Board and the Board will meet annually to
discuss these assessments. The purpose of this evaluation is to increase the
effectiveness of the Board as a whole, as well as its individual members.
Similar annual assessment mechanisms will be established by each committee of
It is expected that members continue to update their knowledge of governance
matters and board responsibilities by relevant continuing education. Expenses
incurred by members will be reimbursed in accordance with the policy attached
to these Guidelines as Schedule 1.
The Board, through the Compensation Committee, will periodically review the
Company’s director compensation compared with companies that are of similar
size and scope to ensure that such compensation is reasonable and
competitive. Director compensation shall be strictly limited to cash and
stock awards which comply with the Board’s policies on such matters, and the
amount of which will be reported to the shareholders annually. No other form
of compensation (deferred or otherwise), benefits or indirect remuneration
shall be permitted.
selection, retirement and resignation of Directors.
The Board will normally consist of between five and nine members. A majority
of all Board members will be “independent directors” as that term is defined
by NYSE listing standards (the “Standards”).
The Governance Committee of the Board has the responsibility for nominating
individuals qualified to become Board members and, in so doing, the
committee’s objective will be to select individuals with skills, diversity
and experience which can be of assistance to management in operating the Company's
business. As far as possible, the Board members’ experience sets and skills
should be largely complementary with one another.
New Board members are required to participate in an orientation program,
developed by the Company, within 12 months of joining the Board
No director may stand for reelection after reaching the age of 72. A director
is required to submit his or her resignation each time he or she changes
his/her principal occupation. The Governance Committee will recommend to the
Board the action, if any, to be taken with respect to this resignation.
of the Board.
The Board shall have at least three subcommittees: Governance, Audit and
Compensation. Additional committees may be formed and disbanded as required
by the whole Board. In consultation with the Chief Executive Officer, the
Board will determine the responsibilities and membership of its committees
and will annually appoint the chairman of each committee (keeping in mind the
need for diversification balanced against the need for continuity). At least
one member of the Audit Committee must have accounting and financial
management experience as defined by the Standards and applicable SEC
regulations. Each committee will consist solely of independent directors.
The committee chairman, in consultation with committee members, will
determine the frequency and length of the meetings of the committee, but each
committee will meet at least two times per year, except the Audit Committee,
which shall meet at least four times per year. Each committee shall have a
written charter, and set annual objectives for its work, all of which shall
be in compliance with the applicable rules and regulations of the SEC and the
Standards. Committee Chairs will serve for no more than three consecutive
years and the positions will be rotated among the Board members. These
committees will support the Board as a whole, and all major decisions reached
by the Board Committees will be reported to the Board at the following Board
on the Number of Boards a Director May Serve.
Members of the Company's Board shall be limited as to the number of other
Boards on which they may serve, as follows. In addition to serving as a
director of the Company, the CEO may serve as a director of no more than one
other Public Company (as defined below) and each of the other directors of
the Company may serve as a director of no more than two other Public
Companies. There is no limitation on the number of non-public company boards,
profit or non-profit, on which a Company director may serve. “Public Company”
shall mean any company whose securities are registered under the Securities
Act of 1933, as amended, or any company that is required to file reports
under the Securities Exchange Act of 1934, as amended.
Each director must acquire common stock of the Company with a fair market
value of $100,000 in accordance with the policy attached to these Guidelines
as Schedule 2.
Regular meetings of the Board are held six times per year; however, the Board
will meet as frequently as needed for directors to properly discharge their
responsibilities. During each Board meeting, time will be set aside for the
non-management directors to meet as a group. One member of the Board shall be
named each year to act as the “Lead Director” to facilitate and preside at
these sessions. A list of the Lead Director's duties and responsibilities is
attached to these Guidelines as Schedule 3.
Board meetings will be conducted in a manner which encourages open
communication, meaningful participation and timely resolution of issues. Each
Director must prepare for each Board or Committee meeting sufficiently in
advance so as to enable him/her to make significant contributions to each
such meeting. Directors will receive materials concerning matters to be acted
upon in advance of the applicable meeting, in time reasonably sufficient to
allow them to devote substantive attention to these materials.
Access to Senior Management.
Board members have complete access to the Company's senior management. Board
members will use prudent judgment to be sure that contact with management is
not distracting to the company’s business operations and that the Chief
Executive Officer is appropriately informed.
5. Adherence to the Company's Statement of Principles.
The Company's Statement of Principles will guide the Board in
its actions and deliberations and the overall direction of the Company. Only
the Board, or its Audit Committee, may waive a provision of the Statement of
Principles for a Director or Executive Officer of the Company. Neither the
Board, nor its Audit Committee, will waive any provision of the Statement of
Principles, nor create any exceptions, except in compliance with applicable
laws and rules and regulations, including those of the Standards.
The Company’s Ethics and Compliance Committee Chairman will
report annually to the Board on the Company’s compliance actions and other
relevant matters relating to the Statement of Principles.
SCHEDULE 1: DIRECTOR EDUCATION EXPENSE POLICY
The Company provides membership in the National Association of
Corporate Directors (NACD) for all Board members and encourages them to
participate in the NACD’s director education programs. Board members are
expected to complete at least 32 hours of education every two years through
completion of programs offered by NACD or programs that offer CLE or CPE
credits and each Board member may receive reimbursement for up to $4,000
every two years for such programs.
SCHEDULE 2: POLICY REQUIRING DIRECTORS TO BECOME SHAREHOLDERS OF
Accordingly, it is the policy of the Company to require that
every director purchase not less than $100,000 of the Company's common stock
(based on cost basis) during his or her initial three-year term. Shares
received as part of director’s fees count in the calculation of shares
“purchased” since they are received in exchange for services and constitute
ordinary income to the director on which he/she is responsible for income
When a director has purchased shares of common stock with a cost
basis of $100,000, there shall be no further obligation to acquire additional
shares and the director shall be deemed to have made a meaningful investment
in the Company’s common stock. However, directors are encouraged to continue
to purchase the Company’s common stock to clearly align their interests to
those of the shareholders in a material way.
SCHEDULE 3: DUTIES AND RESPONSIBILITIES OF THE LEAD DIRECTOR
consultation with the independent directors review and provide the Chief
Executive Officer with input regarding the agendas for the Board meetings;
at all meetings of the Board at which the Chief Executive Officer is unable
to perform those duties;
at Executive Sessions of the independent directors and apprise the Chief
Executive Officer of the issues considered
effective communications between the Board and the Chief Executive Officer;
with the Committee Chairs to ensure the Committees of the Board are running
smoothly and have the appropriate liaison from company’s management;
with management to ensure that the Board receives the appropriate quality,
quantity and timeliness of the information it needs;
available, when appropriate, for consultation and direct communication with
the Company’s shareholders;
meetings of the independent directors when necessary and appropriate;
with the Chief Executive Officer on matters relating to corporate governance
and Board performance; and
such other duties as the Board may from time to time delegate.