PAC-WEST TELECOMM, INC.
Corporate Governance Standards
The Board of Directors (the “Board”) and the Nominating and Corporate Governance Committee of Pac-West Telecomm, Inc. (the “Company”) have established the following guidelines for the conduct and operation of meetings and the business of the Board. These guidelines will be reviewed periodically by the Board and the Nomination and Corporate Governance Committee and may be amended or modified from time to time.
1. Duty of Loyalty: Each director owes a duty of loyalty to the Company, is expected to act in the best interests of the Company and its stockholders as a whole, and to comply with the Pac-West Telecomm Code of Business Conduct and Ethics.
2. Conduct of Board Meetings: The conduct of meetings of the Board will be governed as follows:
a. Selection of Agenda Items for Board Meeting. The Chairman of the Board in consultation with the CEO will establish the agenda for each Board meeting. Each Board member shall be free to suggest the inclusion of item(s) on the agenda. The board will request from management of the Company, and review upon receipt, in detail the Company’s long-term strategic plans and the major challenges faced by the Company in executing on these plans during at least annually.
b. Board Materials Distributed in Advance. Information and data concerning the Company, its financial affairs and strategic plan is important to the Board’s understanding and decision making process. Accordingly, unless impracticable, appropriate written material relating to substantive agenda items there will be made available in advance of each meeting of the Board. Management will, unless impracticable, make every effort to make such written materials available at least three (3) full business days prior to each meeting of the Board.
c. Presentations. As a general rule, information on specific subjects should be made available to the Board members well in advance of each meeting so that the Board meeting time may be conserved, and discussion time focused on questions that the Board has about the material. On those occasions on which the subject matter is too sensitive to put in writing, the presentations will be discussed at the meeting.
d. Management Presentations. The Board encourages the Company’s management to, from time to time, bring managers into Board meetings who (a) can provide additional insight into the items being discussed because of personal involvement in these areas, and /or (b) represent managers with future potential that management believes should be given exposure to the Board.
e. Regular Attendance of Non-Directors at Board Meetings. The Board is comfortable with the regular attendance at each Board meeting of non-Board members who are members of the Company’s Executive Staff except during Executive Sessions of the Board.
3. Executive Sessions of Independent Directors: The Independent Directors of the Board will meet separately as a group at least once every quarter. Such meetings may be held in conjunction with regular or special meetings of the full Board. The Lead Independent Director will be selected by the Independent Directors and will assume the responsibility of chairing the regularly scheduled meetings of outside directors and bear such further responsibilities that the outside directors as a whole might designate from time to time.
4. Access to Senior Management: Each member of the Board shall have complete and open access to the Company’s management. Board members will use their judgment to be sure that contact with management is not distracting to the operation of the Company and that such contact be coordinated, to the extent reasonably practicable, with the Chief Executive Officer or the Chairman of the Board. The board and each committee shall have the authority to obtain advice, reports or opinions from internal and external counsel and expert advisors and shall have the power to hire independent legal, finance and other advisors as they may deem necessary, without consulting with, or obtaining approval from, any officer of the Company in advance.
5. Composition of the Board:
a. Size of the Board. The by-laws of the Company currently provide for that the Board shall consist of nine members.
b. Mix of Inside and Outside Directors. A majority of the Board shall consist of Independent Directors.
c. Board Definition of What Constitutes Independence for Outside Directors. As use in these Corporate Governance Standards, an “Independent Director” is one who is independent of management, who does not have any consulting, advisory or other compensatory relationship with the Company and who otherwise does not have any relationships with the Company or its subsidiaries that would disqualify such director as an Independent Director under the applicable rules of the NASDAQ and the SEC. Directors who are currently, or have been within the last year, employees of or regular consultants to the Company, or one of its subsidiaries, are not independent.
d. Former Chief Executive Officer’s Board Membership. When a Chief Executive Officer or any other employee director no longer holds such position, he or she should offer to resign from the board at the same time. Notwithstanding 5c, a former Chief Executive Officer serving on the Board will be considered a non-independent inside director for purposes of corporate governance.
e. Board Membership Criteria. The Nominating and Corporate Governance Committee is responsible for reviewing with the Board on a periodic basis, as necessary, the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board.
f. Selection of New Director Candidates. The Board itself should be responsible, in fact as well as procedure, for selecting its own members, and determining and reviewing their qualifications. The Board delegates the screening process involved to the Nominating and Corporate Governance Committee with the direct input from the Chairman of the Board and Chief executive Officer as more particularly described in Section 13, below.
6. Board Compensation Review: The Compensation Committee shall have the responsibility for recommending to the Board compensation for non-employee directors. The Board believes that the amount of director compensation should be fair and competitive in relation to director compensation at other companies with businesses similar in size and scope to the Company; the type and amount of compensation should align directors’ interest with the long-term interests of stockholders; and the structure of the compensation program should be simple, transparent and easy for stockholders to understand. The Compensation Committee shall review the annual retainer fee as well as committee attendance fees and other compensation for non-employee directors with the full Board every other year.
7. Assessing the Board’s Performance: The Nominating and Corporate Governance Committee is responsible to report annually to the Board an assessment of the Board’s performance, decision making process and procedures. The Nominating and Corporate Governance Committee’s purpose is to increase the effectiveness of the Board, not to review individual Board members. In addition, the Board shall conduct and annual independent self-evaluation to determine whether the Board and its committees are functioning effectively. The Nominating Committee and Corporate Governance report and the Board self-evaluation will be discussed by the full Board. These assessments should be of the Board’s and the various committees’ contributions as a whole and specifically review areas in which the Board and /or the management believes a better contribution could be made in the short-and long-term perspective. The purpose should be to increase the effectiveness of the Board and of each committee as a whole as well as their individual members.
8. Committees of the Board: The committee structure of the Board shall at least consist of an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and an Executive Committee. The Board shall convene other committees, as it deems appropriate, and shall delegate to such committees responsibilities and authority as deemed appropriate within legal limitations. No committee, including the Executive Committee, shall be empowered to take action or obligate the Company as matters beyond the express delegation of authority to it.
a. Assignment and Rotation of Committee Members. Consideration should be given to rotation of committee members periodically, but the Board does not feel that such a rotation should be mandated as a policy since there may be reasons to maintain an individual director’s committee membership for a longer period.
b. Frequency and Length of Committee Meeting. The committee chair, in consultation with the committee members, will determine the frequency and length of the meeting of the committee in adherence to the committee charter.
c. Committee Agenda. The chair of the committee, in consultation with the appropriate members of management and staff, will develop the committee’s agenda. Each committee will issue a schedule of agenda subjects to be discussed for the ensuing year at the beginning of each fiscal year (to the degree these can be foreseen). This forward agenda will also be shared with the full Board.
d. Committee Charter. Each committee, unless otherwise directed by the Board, shall develop a charter for approval by the full Board. The charter will set forth the principles, policies, objectives and responsibilities of the committees. The charters will provide that each committee will meet to review its performance at least once a year. The charters of all committees shall be subject to periodic review by the Board.
e. Committee Membership. The Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee shall each consist of three or more directors, each of whom shall satisfy the independence (and, in the case of the Audit Committee, the financial literacy and experience) requirements of Section 10A of the Securities Exchange Act of 1934, the NASDAQ and any other regulatory requirements. The members of these committees will also meet the other membership criteria specified in the respective charters for these committees. Committee members will be appointed by the Board upon recommendation by the Nominating and Governance Committee of the Board, in accordance with the charter and principles of the committee.
9. Selection of Lead Independent Director: The Lead Independent Director shall be elected annually by vote of the Independent Directors.
10. 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 the Company and its shareholders. In fulfilling that responsibility the directors should be able to rely on the honesty and integrity of the Company’s senior management and expert legal, accounting, financial and other advisors.
11. Term Limits: There is currently no limitation on the number of terms a director may serve. While term limits could help ensure 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. However, the Nominating and Corporate Governance Committee and the Chairman of the Board will review each director’s continuation on the Board annually. This will allow each director the opportunity to conveniently confirm his or her desire to continue as a member of the Board.
12. Board Nomination Process.
Recommendations of Candidates are welcome from holders of the Company’s common voting stock who beneficially own and have owned for one year prior to the date of the recommendation, individually or in the aggregate, more than five percent (5%) of the issued and outstanding voting common stock of the Company. Recommendations of Candidates are also welcome from existing and former independent board members; management of the Company; and employees of the Company. From time to time the Nominating Committee or the Board of Directors may engage the services of one or more search firms to assist the Company in locating potential Candidates. Recommendations of Candidates may be submitted at any time of year via e mail by accessing our Corporate Governance Page at to www.pacwest.com and clicking the appropriate hyperlink or via regular mail or overnight delivery service addressed to:
Pac-West Telecomm, Inc.
1776 W. March Lane, Suite 250
Stockton, CA 95207
Incumbent directors of the Company who express a willingness to serve another term shall be considered by the Committee for nomination without the requirement of a formal recommendation or Submittal.
In order to be considered by the Nominating Committee, a recommendation of a Candidate must be received by the company no earlier than 210 days and no later than 120 days prior to the anniversary date of the filing of the Company’s Proxy Statement for the preceding year (“Submittal Period”). Recommendations received after the Submittal Period will be retained for consideration in the event of a board vacancy occurring after the date of the annual meeting. Recommendations must be resubmitted during each subsequent Submittal Period.
In order to be formally considered, recommendations must include the following information (“the Submittal”):
· Legal names and contact information with respect to the person(s) making the recommendation.
· In the case of recommendations from common stock holders, information concerning share ownership sufficient to establish the ownership and required holding period of more than five percent (5%) of the voting common stock of the Company by the person(s) making the recommendation
· Legal name and contact information with respect to the Candidate
· A Resume or biographical description of the Candidate sufficient to evaluate his or her personal qualifications and experience in light of the criteria set forth in the Committee charter
· Legal names and contact information of three personal and business references with respect to the character and business background and experience of the Candidate
· A statement that the Candidate is aware that he or she has been recommended and has expressed willingness and ability to serve if nominated and elected
The Nominating Committee will review the Submittals and stack rank the Candidates. As part of this process the committee may, but is not required to, solicit missing, clarifying or additional information regarding any Candidate in order to amplify the Submittal.
After the Nominating Committee has stack ranked the Candidates, it will evaluate the pool of available Candidates against the number of directors to be elected and the number, identity, qualifications and experience of the incumbent directors who are willing to serve another term. Taking the forgoing into consideration, the Nominating Committee shall preliminarily determine which incumbent directors it intends to recommend that the Board nominate for reelection.
After making that determination, the Nominating Committee will interview a number of Candidates at the top of the stack ranking equal to twice the number of open seats on the board for which an incumbent director is not expected to be nominated. Candidate interviews will be conducted by one or more members of the Nominating Committee, together with the Chairman of the Board and/or the CEO. At the conclusion of the interviews, the Nominating Committee shall confer with the Chairman of the Board and the CEO regarding the merits of the Candidates versus all of the incumbent directors who expressed a willingness to serve another term and shall either proceed to recommend nominees to the board or conduct interviews with additional stack ranked candidates as it deems appropriate. When it is satisfied with the size and qualifications of the pool of potential nominees composed of incumbent directors and Candidates who have been interviewed, the Committee shall cause background checks and drug screenings to be conducted on those Candidates it intends to recommend for nomination and, subject to successful completion of the background check and drug screenings of the Candidates, shall recommend to the Board a slate of nominees equal to the number of directors to be elected at the annual meeting.
After due and appropriate consultation with the Nominating Committee concerning the Candidate pool, and the incumbent directors willing to continue to serve, the Board of Directors shall accept as submitted or modify and the slate of nominees; provided that the final slate shall not include any person who is not either an incumbent director or a Candidate and provided further that no Candidate may be approved by the Board who has not successfully completed a background check and drug screening.
13. Security Holder Communications. Any Security Holder may communicate with the Lead Independent Director of the board by accessing the Corporate Governance page at www.pacwest.com and clicking the appropriate hyperlink. After completing the form that will appear on the website, an e mail from the website will be sent to the Lead Independent Director, and a copy will be sent to the General Counsel of the Company. As the sender of an e mail from this link a Security Holder will not be identified and no reply can be sent unless the Security Holder types in his or her name and contact information. The General Counsel will retain any such messages for a reasonable period of time. The Lead Independent Director may discuss the matter with the General Counsel and other members of the management team as deemed appropriate, with independent advisors, non-management directors or may take other action or no action in his or her good faith judgment and discretion.
14. Succession Planning: There should be available, on a continuing basis, the Chief Executive Officer’s recommendation as to his successor should the Chief Executive Officer be unexpectedly disabled. There should be an annual report by the Chief Executive Officer to the Board on succession planning.
15. Leadership Development: In addition to the succession planning annual report, there should at the same time be a report on leadership development throughout the Management organization by the Chief Executive Officer.
16. Strategic Plan: Every year the Board will request from management and review and approve upon receipt and satisfaction with its contents a multi-year strategic plan and a one-year operating plan for the Company.
17. Board Interaction with Institutional Investors, the Press, Etc.: The Board believes that management speaks for the Company. Individual Board members may, from time to time, meet or to otherwise communicate with various constituencies that are involved with the Company. It is expected that Board members will do so only with the knowledge of management, and in most instances, at the request of management. In particular, any discussions with the media (e.g., press, TV, etc.) concerning the Company should be first channeled through the CEO, whenever practicable. The Company’s directors should not accept any gift of value which indicates an intent to influence improperly the normal business relationship between the Company and nay supplier, customer or competitor. Any discrepancy of the foregoing policies should be reviewed by the Board via the Nominating Committee.
18. Formal Evaluation of the Chief Executive Officer: The Compensation Committee should submit to the independent directors annually at the close of the fiscal year an evaluation of the Chief Executive Officer. After review, amendment and agreement by the Independent Directors, the evaluation should be communicated to the Chief Executive Officer by the Independent Directors. The evaluation should be based on objective criteria including performance of the business, accomplishment of long-term objectives, development of management, etc. The Independent Directors’ final evaluation shall be used by the Compensation Committee when establishing the compensation of the Chief Executive Officer.
19. Orientation and Continuing Education: The Company shall provide directors with access to appropriate internal and external orientation programs and continuing education programs to ensure that they have sufficient information about the Company and their duties.