VISX Governance Principles
The following principles have been approved by the Board of Directors
("the Board") and, along with the charters of the various Board
committees, provide the framework for the governance of VISX. This
structure is designed to be a working structure for principled actions,
effective decision-making and appropriate monitoring of both compliance
and performance. The Board recognizes that there is an on-going and
energetic debate about corporate governance, and will review these
principles and other aspects of governance annually, or more often if
- Role of Board and Management. VISX's business is
conducted by its employees, managers and officers, under the direction
of the chief executive officer (CEO) and the oversight of the Board. The
primary focus of these groups is the enhancement of the long-term value
of the company for its stockholders.
The Board is elected by the stockholders to oversee management and to
assure that the long-term interests of the stockholders are served.
VISX's Board and management are committed to achieving business
success through maintenance of the highest standards of responsibility
- Functions of the Board. The Board has five scheduled
meetings a year at which it reviews and discusses reports by management
on the performance of the company, its plans and prospects, as well as
immediate issues facing the company.
In addition to its general oversight of management, the Board
performs a number of specific functions, including:
- a. selecting, evaluating and compensating the CEO and overseeing
CEO succession planning;
- b. evaluating and compensating the executive officers of the
- c. reviewing, approving and monitoring fundamental financial and
business strategies and major corporate actions;
- d. assessing major risks facing the company - and reviewing
options for their mitigation; and
- e. ensuring processes are in place for maintaining the integrity
of the company - including but not limited to the integrity of the
financial statements, the integrity of compliance with law and ethics,
the integrity of relationships with customers and suppliers, and the
integrity of relationships with stockholders.
- Director Responsibilities. The fundamental role of the
directors is to exercise their business judgment to act in what they
reasonably believe to be the best interests of VISX. To satisfy this
duty, the directors will take an active, focused approach to their
The directors' job requires them to ask probing questions of
management and to obtain accurate and honest answers. Directors rely on
the advice, reports and opinions of management, counsel and expert
advisors. They shall have the benefit of directors' and officers'
insurance, paid by VISX, will receive indemnification to the fullest
extent allowed under VISX's charter and Delaware law, and will receive
exculpation as provided by VISX's charter and Delaware law.
Directors are expected to rigorously prepare for, attend and
participate in all Board meetings, and to spend the time needed and meet
as often as necessary to properly discharge their obligations.
Information that is important to the understanding of the business to be
conducted at such meetings should generally be distributed in writing to
the directors prior to the meeting, although sensitive subjects may be
discussed without advance distribution of written materials.
- Director Qualifications. Directors should possess high
personal and professional ethics, integrity and values, and be committed
to representing the long-term interests of the stockholders. They must
also have an inquisitive and objective perspective, practical wisdom and
Directors must be willing to devote sufficient time to carrying out
their duties and responsibilities effectively, and should be committed
to serve on the Board for an extended period of time. Directors should
offer their resignation in the event of any significant change in their
personal circumstances that could affect their ability to act in the
best interests of the Company, including a change in their principal job
responsibilities, so the Board may review the continued appropriateness
of their Board membership under the circumstances.
The Board does not believe that arbitrary term limits on directors'
service are appropriate, nor does it believe that directors should
expect to be renominated annually until they reach the mandatory
retirement age. The Governance Committee shall be responsible for
reviewing with the Board, on an annual basis, the appropriate skills and
characteristics required of directors and the composition of the Board.
This assessment will include an evaluation of directors' qualifications
as independent, as well as consideration of character, diversity,
skills, judgment and experience in such areas as operations, technology,
finance, marketing, manufacturing and the general needs of the Board.
This process will be an important determinant for Board tenure.
Directors will not be nominated for election to the Board after their
72nd birthday, although this limitation does not apply to non-employee
directors serving as of December 12, 2002. Directors shall not serve on
more than three other boards of public companies in addition to the VISX
- Independence of Directors. A majority of the directors
will be independent under the proposed criteria established by the New
York Stock Exchange (NYSE). To be considered independent under the
proposed NYSE rules, the Board must determine that a director does not
have any direct or indirect material relationship with VISX.
Independence determinations will be made each December in connection
with the Board's annual self-evaluation process.
The company will not make extensions of credit in the form of
personal loans to directors or executive officers.
- Selection Process and Size of Board. The directors are
elected each year by the stockholders at the annual meeting of
stockholders. Directors will be nominated by the Governance Committee of
the Board, in accordance with the charter of that committee. The Board
will review such nominations and will finalize the slate of nominees to
be presented to stockholders.
Between annual stockholder meetings, the Board may elect directors to
serve until the next annual meeting. The Board believes that, given the
size and breadth of VISX and the need for diversity of Board views, the
size of the Board should be up to seven directors. The Board may amend
the corporate by-laws to modify the size of the Board should it
determine such a change is appropriate.
- Board Committees. The Board has established the
following three committees to assist the Board in discharging its
responsibilities: (i) audit; (ii) compensation; and (iii) governance.
Committee members will be appointed by the Board following
recommendation by the Governance Committee, in accordance with the
charter of that committee. Committee chairs shall be appointed by the
Board, and shall be rotated, such that the chair of each committee shall
serve for no longer than three consecutive years at a time, commencing
December 12, 2002.
- a. Independence of Committee Members. All committee
members must meet the criteria for independence established by the
NYSE, the Securities and Exchange Commission, and applicable law.
- b. Committee Charters. Each committee shall have its
own charter. Each charter will set forth the purposes, policies and
responsibilities of the committee in addition to the qualifications
for committee membership, procedures for committee member nomination
and removal, committee organization and functioning and how the
committee will communicate with the Board. The charters will provide
that each committee will meet to review its performance once a year.
The current charters of each committee shall be published on the VISX
website, and will be mailed to stockholders on written request.
- c. Meeting Procedures. The chairman of each
committee will, in consultation with the appropriate committee members
and members of management, and in accordance with the committee's
charter, determine the frequency and length of committee meetings and
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 extent these can be foreseen). The schedule
for each committee will be furnished to the full Board.
- d.Committee Responsibilities. The committees shall
have the following general responsibilities:
- i. Audit Committee. The Audit Committee shall
oversee the company's financial reporting process. In discharging
its responsibilities, the Audit Committee shall, among other things,
monitor internal corporate controls, review and evaluate independent
auditors, including the independence of such auditors, hire or
replace such auditors, and report to the Board the results of such
auditor examinations and recommendations.
- ii. Compensation Committee. The Compensation
Committee shall, among other things, evaluate and approve
compensation and benefits for VISX's CEO and other executive
officers and make recommendations to the Board respecting incentive
compensation plans. In addition, the committee may grant equity
compensation to VISX's employees pursuant to VISX's equity
- iii. Governance Committee. The Governance
Committee shall, among other things, review, solicit and make
recommendations to the Board and stockholders respecting candidates
for election to the Board, administer the Board self-evaluation
process, evaluate the current organization, governance and
composition of the Board, and review and make recommendations to the
Board about director qualifications and Board committee
appointments. The committee shall also make recommendations to the
Board respecting compensation and benefits for non-employee
directors and succession planning for the CEO.
- Meetings of Non-Employee Directors. The Board will
conduct an independent Board session at each Board meeting without
management present. The chairman of the Governance Committee will
preside at such meetings, and will serve as the "Lead Director" in
performing such other functions as the Board may direct, including
advising on the selection of committee chairs and advising management on
the agenda for Board meetings. The Lead Director shall be identified in
the company's annual proxy materials.
The non-employee directors may meet without management present at
such other times as determined by the Lead Director.
- Self-Evaluation. The Board and each of the committees
will perform an annual self-evaluation. These evaluations will review
the conduct and contributions of the Board and the committees as a
whole, and will specifically review areas in which the Board and
management believe improvements can be made. The Governance Committee
will oversee the evaluation process, and will organize and summarize the
evaluations for discussion with the Board and the committees at the
December Board meeting.
- Setting Board Agenda. The Board shall be responsible
for its agenda. At the December Board meeting, the CEO will propose for
the Board's approval key issues of strategy, risk and integrity to be
scheduled and discussed during the course of the next calendar year.
Before that meeting, the Board may offer its suggestions. As a result of
this process, a schedule of major discussion items for the following
year will be established. Prior to each Board meeting, the CEO will
discuss the other specific agenda items for the meeting with the Lead
Director. The CEO and the Lead Director, or committee chair as
appropriate, shall determine the information that shall be provided
regularly to the directors before each scheduled Board or committee
meeting. Directors are urged to make suggestions for agenda items, or
additional pre-meeting materials, to the CEO, the Lead Director, or
appropriate committee chair at any time.
- Ethics and Conflict of Interest. The Board expects
directors, as well as officers and employees, to act ethically at all
times and to acknowledge their adherence to the policies comprising
VISX's code of ethics. If an actual or potential conflict of interest
arises for a director, the director shall promptly inform the CEO and
the Lead Director. If a significant conflict exists and cannot be
resolved, the director should resign. All directors will recuse
themselves from any discussion or decision affecting their personal,
business or professional interests. The Board shall resolve any conflict
of interest question involving the CEO or executive officers.
- Reporting of Concerns to Non-Employee Directors or the Audit
Committee. Beginning January 1, 2003, anyone who has a concern
about VISX's conduct, or about the company's accounting, internal
accounting controls or auditing matters, may communicate that concern
directly to the Lead Director, to the non-employee directors, or to the
Audit Committee. Such communications may be confidential or anonymous,
and may be e-mailed, submitted in writing, or reported by phone. All
such concerns will be forwarded to the appropriate directors for their
review, and will be reviewed and addressed in the same way that other
concerns are addressed by the company. The status of all outstanding
concerns addressed to the non-employee directors, the Lead Director, or
the Audit Committee will be reported to the directors on a quarterly
basis. The non-employee directors, the Lead Director, or the Audit
Committee may direct special treatment, including the retention of
outside advisors or counsel, for any concern addressed to them.
- Compensation of Board. The Governance Committee shall
review non-employee director compensation and benefits on an annual
basis. Changes in non-employee director compensation, if any, shall be
recommended by the committee and discussed and voted upon by the full
Board. Director compensation shall be guided by three goals: to
compensate directors fairly for work required in a company of VISX's
size and scope; to align directors' interests with the long-term
interests of stockholders; and to structure director compensation so it
is simple, transparent and easy to understand.
- Succession Plan. The Board shall approve and maintain
a succession plan for the CEO, based upon recommendations from the
- Annual Compensation Review of Senior Management. The
Compensation Committee shall annually approve the goals and objectives
for compensating the CEO. That committee shall evaluate the CEO's
performance in light of these goals before setting the CEO's salary,
bonus and other incentive and equity compensation. The committee shall
also annually approve the compensation structure for the company's
executive officers, and shall evaluate the performance of such officers
before approving their salary, bonus and other incentive and equity
- Access to Senior Management. Non-employee directors
have complete access to all VISX officers and employees. Any meetings or
contacts that a director desires to initiate may be arranged privately
by the director or through the CEO or other VISX officer.
- Access to Independent Advisors. The Board and its
committees shall have the right at any time to retain independent
outside financial, legal or other advisors at company expense.
- Director Orientation. The general counsel and the
chief financial officer shall be responsible for providing an
orientation for new directors, and for periodically providing materials
or briefing sessions for all directors on subjects that would assist
them in discharging their duties. Each new director shall, within six
months of election to the Board, attend a certified director education
course, selected from a list of such courses approved by the Governance
Committee. Incumbent directors will also attend certified director
education courses, selected from a list of such courses approved by the
Governance Committee, from time to time.