1. Director Qualifications
The Board will have a majority of directors who meet the criteria for independence required by the New York Stock Exchange (NYSE), with a preference that no more than three members of the Board be employees of the Company. The Board has adopted categorical standards, set forth in Annex A to these guidelines, to assist it in determining director independence under the NYSE independence criteria. The Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the organizations with which they are affiliated, be selected based upon contributions they can make to the Board and management and be free from relationships or conflicts of interest that could interfere with the director’s duties to the Company and its shareholders.
2. Size of Board
The number of directors shall not exceed a number that can function efficiently as a body. The Nominating & Governance Committee, in consultation with the Chairman and CEO (if the Chairman is not the CEO), considers and makes recommendations concerning the appropriate size and membership needs of the Board. Normally, the number of directors will be approximately 12-13; however the availability of uniquely qualified candidates or succession planning considerations may justify size increases.
3. Selection of New Directors
The Nominating & Governance Committee will be responsible for identifying and making recommendations regarding new director candidates. The Board expects the Nominating & Governance Committee to consider the views of the Chairman and CEO (if the Chairman is not the CEO) in making appointments, but it is the Nominating & Governance Committee’s responsibility to make director recommendations to the full Board for approval. The Nominating & Governance Committee will consider director candidates recommended by shareholders who, in the sole discretion of the Nominating & Governance Committee, satisfy the director qualifications set forth above and are otherwise determined to be suitable director candidates. Shareholders who choose to submit director nominees to the Nominating & Governance Committee shall provide the information, and follow the procedures, outlined in the Company’s By-Laws.
4. Retirement Policy
Mandatory retirement for non-employee directors is required at the Annual Meeting of Shareholders immediately following their 72nd birthday. An officer of the Company shall retire promptly following (i) such officer’s resignation as an officer of the Company or (ii) at the Annual Meeting of Shareholders immediately following such officer’s retirement as an officer of the Company.
5. Term Limits
The Board does not believe it should establish term limits. Term limits have 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.
6. Classified Board
The Board believes that electing directors for three-year terms on a classified basis with one class coming up for election each year is beneficial, as it promotes consistency in governance. The Board also believes it is important for the Company to control its own destiny and supports maintaining structural protections that will allow the Company to deal with potential suitors on its own terms and in the best interests of its shareholders.
7. Directors Changing Their Present Job Responsibility
The Board expects directors who change the responsibility they held when they were elected to the Board to promptly advise the Nominating & Governance Committee for review and recommendation to the Board. It is not the sense of the Board that in every instance the directors who retire or change from the position they held when they came on the Board should necessarily leave the Board. There should, however, be an opportunity for the Board through the Nominating & Governance Committee to review the continued appropriateness of Board membership under the circumstances.
8. Director Responsibilities
The basic responsibility of Directors is to exercise their business judgment and 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, by-laws 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. Directors are also expected to attend annual meetings of shareholders.
Directors are expected to act ethically at all times and to adhere to the policies comprising the Company’s Code of Business Conduct.
9. Board Committees
The Board will have at all times an Audit Committee, a Nominating & Governance Committee and a Compensation & Organization Committee. All of the members of these committees will be independent directors under the criteria established by the New York Stock Exchange and the Securities and Exchange Commission. The Board may also have an Executive Committee, which may contain one or more management directors. There will, from time to time, be occasions in which the Board may want to form a new committee depending upon the circumstances. Members of the committees are recommended to the Board by the Nominating & Governance Committee in consultation with the Chairman and CEO (if the Chairman is not the CEO). Committee members shall possess such skill and experience as is appropriate for the committee or committees on which they serve.
Each of the Audit Committee, the Nominating & Governance Committee and the Compensation & Organization Committee will have its own charter. The charters will set forth the purposes, goals and responsibilities of these 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 responsibilities of these and any other Board committees are also provided in the Company’s by-laws.
The Nominating & Governance Committee shall recommend the chair of each committee to the Board, in consultation with the Chairman and CEO (if the Chairman is not the CEO). The committee chair, in consultation with committee members, shall determine committee agendas and the length and frequency of committee meetings, consistent with any requirements set forth in the committee’s charter, if applicable. The meeting schedule for each committee will be furnished to all Directors.
10. Rotation of Committee Assignments
The Board believes that committee assignments should be based on the director’s knowledge, interests and areas of expertise. The Board believes experience and continuity are more important than rotation and that Board members should only be rotated if rotation is likely to improve committee performance or facilitate committee work.
11. Agendas of Board Meetings
The Chairman, in consultation with members of the Board when appropriate, will establish the agenda for Board meetings.
12. Distribution of Materials for Board Meetings
The Board believes it is critical for members to have materials on topics to be discussed sufficiently in advance of the meeting date and for Board members to be kept abreast of developments between Board meetings. The Company regularly informs Board members of Company and competitive developments and, except in the case of special meetings, distributes, generally a week in advance, written materials for use at Board and Board committee meetings.
13. Executive Sessions of Directors
Executive sessions are those sessions that include only non-employee directors and those members of management or legal, financial or other advisors whose participation is requested. Executive sessions should occur on a regular basis at the discretion of the directors. If, at any time, the group of non-employee directors includes one or more directors who do not satisfy the then current independence criteria of the NYSE, the Company shall, at least one time per year, schedule an executive session including only those non-employee directors who satisfy the then current NYSE independence criteria. The Board of Directors, by resolution of a majority of the non-employee directors, shall designate one non-employee director to preside at these sessions and his or her name will be disclosed in the annual proxy statement. Potential topics for executive sessions shall be provided to the incumbent presiding director, who shall schedule such sessions as needed.
14. Attendance of Management at Board Meetings
The Board believes it is important for directors to know the Company’s key senior officers well and believes that their regular attendance at and participation in Board and Board committee meetings is helpful.
15. Board Access to Senior Management and Independent Advisors
Board members have complete access to the Company’s management and its auditors. It is assumed that Board members will use judgment to be sure that such contact is not distracting to the business operation of the Company and that the Chairman and CEO (if the Chairman is not the CEO) is appropriately advised of any such contact.
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.
16. Director Compensation
The Compensation & Organization Committee will determine the form and amount of director compensation in accordance with policies and principles established by the Committee from time to time. The Compensation & Organization 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 a director is affiliated.
It is appropriate for Company management to report once a year to the Compensation & Organization Committee regarding the status of director compensation in relation to comparable U.S. companies. In addition, the Compensation & Organization Committee will conduct periodic reviews of director compensation. Changes in director compensation, if any, should come as a recommendation of the Compensation & Organization Committee following discussion and concurrence by the Board.
17. Annual Performance Evaluations
Board Effectiveness Review. The Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating & Governance Committee, in conjunction with the presiding non-management director, will review comments from all directors and report to the Board with an assessment of the Board’s performance and any recommendations following each such review. All directors are free to make suggestions on improvement of the Board’s practices at any time and are encouraged to do so.
Director Evaluation. The Nominating & Governance Committee shall be responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics of prospective Board members as well as the composition of the Board as a whole. This assessment will include members’ qualification as independent, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board. The Board expects that the Nominating & Governance Committee will take action to effect changes in incumbent directors if, in the opinion of the Committee after discussion with the Chairman and CEO (if the Chairman is not the CEO), such changes are deemed to be appropriate.
18. Succession Planning and Management Development
The CEO will make an annual report to the Board on succession planning. There should also be available, on a continuing basis, the CEO’s recommendation as a successor should he/she be unexpectedly disabled.
The CEO will make an annual report to the Board on the Company’s program for management development. This report should be given to the Board at the same time as the succession planning report.
19. Formal Evaluation of Chairman/CEO
The Compensation & Organization Committee conducts the Chairman and CEO (if the Chairman is not the CEO) evaluations in the context of its review of the Company’s performance for purposes of awarding compensation. The Compensation & Organization Committee Chairman reports to the Board on the evaluation in an Executive Session.
20. Separate Positions of Chairman and CEO
The Board has no policy with respect to the separation of the offices of Chairman and CEO. The Board believes that this issue is part of the succession planning process and that it is in the best interest of the Company for the Board to make a determination each time it elects a new Chairman or CEO.
21. Former CEO Status on Board
When the Chairman is also the CEO of the Company, the Board expects the Chairman to resign upon retirement as CEO. There may be circumstances where the Board’s policy to accept the resignation would not apply, including to accommodate the transition for the new Chairman or where the current Chairman cedes the title of CEO to another individual.
22. Board Interaction with Media, Institutional Investors, Peers, Customers, etc.
The Board believes that under ordinary circumstances, management speaks for the Company and the Chairman speaks for the Board. It is expected that communication between Board members or retired Board members and constituencies outside the Company would be done with the knowledge of management and, except as approved by the Nominating & Governance Committee, only at the request of management.
23. Director Orientation and Continuing Education
All new non-management directors must participate in the Company’s orientation program, which should be conducted within two months of the meeting at which they are elected. This orientation will include presentations by 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 Conduct, its principal officers and its internal and independent auditors. The orientation program will include visits to the Company’s headquarters and, to the extent practical, certain of the Company’s significant facilities. All other directors will be invited to attend the orientation program.
24. Review and Amendment
& Governance Committee shall periodically review and reassess the
adequacy of these guidelines and recommend changes to the Board for approval.
The Board reserves the right to amend these Guidelines from time to time as
it determines to be desirable or appropriate.
To be considered independent under the rules of the New York Stock Exchange, the Board must determine that a director has no direct or indirect material relationship with the Company. The Board has established the following categorical standards to assist it in making this determination. A director is not independent under these categorical standards if:
Direct or indirect ownership of even a significant amount of Company stock by a director who is otherwise independent as a result of the application of the foregoing standards will not, by itself, bar an independence finding as to such director.
For purposes of these categorical standards, "immediate family member" includes a director’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 share such director’s home. When applying the three-year look back provision to the foregoing categorical standards, the Company need not consider individuals who are no longer immediate family members as a result of legal separation or divorce, or those who have died or become incapacitated.
For purposes of these categorical standards, "executive officer" means a company’s president, principal financial officer, principal accounting officer (or controller), any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), or other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the company. Officers of a company’s subsidiaries shall be deemed officers of the company if they perform such policy-making functions for the company.
The Board will annually review all relationships between the Company and its outside directors and publicly disclose whether its outside directors are independent.