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1. Role of the Board
The day-to-day management of the Company, including the preparation of financial statements and short and long-term strategic planning, is the responsibility of the Company’s management. The primary responsibilities of the Board are to select, compensate (through the Human Resources Committee) and evaluate the performance (through the Nominating/Governance Committee) of the Chief Executive Officer review management’s performance, and engage in strategic planning.
2. Board Composition and Director Qualifications
A majority of the directors on the Board shall be determined by the Board to be “independent” under the listing standards of the New York Stock Exchange and/or any other applicable rules or regulations. The Board has adopted categorical standards, set forth in Annex A to these Guidelines, to assist it in determining director independence. The Nominating/Governance Committee shall make recommendations to the Board regarding nominees for directors, other than Employee Directors, as provided in its charter. The Employee Directors shall be nominated as specified in the Restated Certificate.
The Board seeks independent directors 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 selected based upon contributions they can make to the Board, and upon their willingness to devote adequate time and effort to Board responsibilities.
No person shall be eligible for election or reelection as a director if at the time of such election such person is 70 or more years of age.
3. Extending the Invitation to Join to a Potential Director
The invitation to join the Board, other than with respect to any directors who are elected to the Board by the holders of any class of preferred stock of the Company under the terms of such preferred stock, should be extended by the entire Board through the Chairman of the Board or the Chairman of the Nominating/Governance Committee.
4. Board Size
The Board presently has twelve members (including three Employee Directors), as determined in the Restated Certificate.
5. Change in Business or Professional Affiliations or Responsibilities
Individual directors whose business or professional affiliations or responsibilities change from the time they were first elected to the Board (due to retirement, resignation or otherwise) shall volunteer to resign from the Board. Although it is not appropriate for such resignation to be accepted in all instances, the Board, through the Nominating/Governance Committee, shall have the opportunity to review the continued appropriateness of Board membership under each particular set of circumstances.
6. Service on Other Boards
No inside director of the Company shall serve on the board of directors of a company of which an outside director of the Company is Chairman, Chief Executive Officer or President. Directors should advise the Chairman of the Board and the Chairman of the Nominating/Governance Committee in advance of accepting an invitation to serve on another public company board or an appointment to serve on an audit committee or a compensation committee of another public company board.
The Board shall affirmatively determine that any member of the Audit Committee who serves on more than three audit committees of public companies, including the Audit Committee, is still capable of effectively serving on the Audit Committee. Such determination shall be disclosed in the Company’s annual proxy statement or as otherwise required by the Securities and Exchange Commission, the New YorkStock Exchange rules or other applicable rules and regulations. In the event that the Board determines that such director is not capable of effectively serving on the Audit Committee, such director shall resign therefrom.
7. Term Limits
The Board does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of limiting 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. As an alternative to term limits, the Nominating/Governance Committee will review the continuation of each director nominated by such Committee on the Board every year. This will allow each director the opportunity to conveniently confirm his or her desire to continue as a member of the Board.
8. Selection of the Chairman of the Board
The Chairman of the Board shall be selected by the Board from among its members. The Board has no established policy with respect to combining or separating the offices of Chairman and CEO. This decision will be made by the Board depending on what is in the Company’s best interests at any given point in time.
9. Director Responsibilities
The basic responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its stockholders. 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; nevertheless, the Board must recognize that it has an active, not a passive, responsibility. The directors shall also be entitled to have the Company purchase reasonable directors’ and officers’ liability insurance on their behalf, and to be indemnified by the Company to the maximum extent permitted by law, the Restated Certificate, the Bylaws and any indemnification agreements.
10. Candor and Avoidance of Conflicts
The directors realize that candor and the avoidance of conflicts are hallmarks of the accountability owed to the Company’s stockholders. Directors have a personal obligation to disclose a potential conflict of interest to the Chairman of the Board before any decision related to the matter and, if the Chairman in consultation with legal counsel determines a conflict exists or the perception of a conflict is likely to be significant, to recuse themselves from any discussion or vote related to the matter.
11. Meeting Frequency and Attendance at Meetings
The Board shall meet at least seven times a year. Directors are expected to attend, and prepare for, Board meetings and meetings of committees on which they serve, to review relevant materials, and to spend the necessary time to properly discharge their duties diligently and responsibly.
12. Advance Distribution of Board Materials
As a general rule, the Board should receive written materials that are important to the Board’s understanding of the issues to be discussed at meetings, including board presentation materials, sufficiently in advance of the Board meetings in order to facilitate an informed decision at the meetings. Directors are expected to review and become familiar with such materials prior to such meetings.
13. Lead Director and Executive Sessions
The non-management directors shall meet regularly outside the presence of the management directors, but no less frequently than semiannually. The non-management directors annually shall designate a Lead Director who shall be a non-management director to preside at these executive sessions. The Lead Director shall have the responsibilities as determined by the Board from time to time. The Company shall disclose in the annual proxy statement (a) either (i) the name of the Lead Director or (ii) the method by which such director will be chosen as well as (b) the means by which stockholders and employees can communicate with the Lead Director or the non-management directors as a group. The non-management directors shall consider limiting the service of any one director serving as Lead Director to a maximum of three years.
At least once each year, the directors that the Board has determined to be “independent” under applicable listing standards and rules and regulations shall meet outside the presence of management and the other directors.
14. Board Committees
The Board shall have at all times an Audit Committee, an Executive Committee, a Human Resources Committee, a Nominating/Governance Committee and a Public Responsibility Committee. The composition of the Human Resources Committee and the Nominating/Governance Committee shall meet the applicable independence requirements imposed by the listing standards of the New York Stock Exchange. The members of the Audit Committee shall be independent directors and shall meet the additional independence requirements for Audit Committee members, in each case under the criteria established by the New York Stock Exchange and/or any other applicable rules or regulations. In addition, the Board may establish such additional committees as it shall from time to time designate in accordance with the requirements of the Restated Certificate. Committee members will be appointed by the Board, unless otherwise specified in the Restated Certificate, with consideration given to the desires of individual directors. Committee assignments should be rotated periodically as a general rule, but with due regard for the need for continuity and committee expertise and the requirements of the Restated Certificate regarding the different kinds and numbers of directors who are to serve on the different Board committees.
15. Retention and Compensation of Outside Advisors
The Board has the authority to engage independent legal, financial or other advisors as it may deem advisable in fulfilling its obligations and responsibilities, without consulting, or obtaining the approval of, any officer of the Company, and the Company shall cause sufficient funds to be available to compensate such advisors as is determined by the Board. Each committee of the Board shall also have such power, unless otherwise provided in its charter.
16. Director Access to Officers and Employees
Directors shall have access to officers and employees of the Company as necessary to carry out their duties. It is expected that directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Company and that, to the extent appropriate, the CEO is given advance courtesy notice of any such contact. The Chairman of the Audit Committee need not advise the CEO of his or her contact with the Company’s internal audit department.
17. Attendance by Management at Board Meetings
At the CEO’s discretion, senior officers and other personnel of the Company may attend Board meetings. The Board also welcomes informal consultation of the CEO and senior management with its members between Board meetings.
18. Communications with Public
The Board shall look to management to speak for the Company. Absent unusual circumstances or as contemplated by committee charters, Board members should refer all inquiries from and communications with the press, institutional investors, analysts, customers/clients or other constituencies regarding the Company to the Senior Vice President – Corporate and Government Affairs. It is expected that communications between Board members or retired Board members and constituencies outside the Company would be done only at the request of management.
19. Director Compensation
The form and amount of director compensation will be determined by the Nominating/Governance Committee in accordance with its charter and the Nominating/Governance Committee will conduct an annual review of director compensation. In particular, no member of the Audit Committee may receive, directly or indirectly, any compensation from the Company other than (a) fees paid to directors for service on the Board, (b) fees paid to directors for service on a committee of the Board (including the Audit Committee) and (c) to the extent permitted by applicable law or regulations, a pension or other deferred compensation for prior service that is not contingent on future service on the Board.
20. Director Orientation and Continuing Education
All new directors must participate in the Company’s Orientation Program. This program will include background materials and 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, these Guidelines, its principal officers, and its internal and independent auditors. In addition, the Company’s Orientation Program will include visits to the Company’s headquarters and, to the extent practical, certain of the Company’s significant facilities. All directors are expected to participate in any additional continuing education programs offered by the Company to help directors maintain the level of knowledge and expertise necessary to perform their duties as directors of a public company.
21. CEO and Management Evaluation
The Nominating/Governance Committee annually shall coordinate the performance evaluation of the CEO, and the Human Resources Committee annually shall coordinate the performance evaluation of the other members of senior management. The Board shall review the Nominating/Governance Committee’s evaluation of the CEO in order to ensure that the CEO is providing the best leadership for the Company and will promptly communicate the results of such evaluation to the CEO through the Lead Director.
22. Succession Planning
The Nominating/Governance Committee shall review corporate succession planning with the CEO on a periodic basis, with respect to emergency situations in which the CEO becomes unavailable to serve, a retirement of the CEO and the identification, cultivation and promotion of talented individuals within the senior levels of the organization as part of the normal succession process. The CEO shall at least annually provide to the Nominating/Governance Committee his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
The Chairman of the Nominating/Governance Committee should report to the full Board, in executive session and in the absence of management directors, a summary of this discussion and should receive input on the issue of succession.
23. Promoting Proper Business Environment
All directors, members of management and other employees of the Company are expected to adhere to the spirit as well as the letter of laws and regulations and to uphold the ethical standards of the Company in carrying out their responsibilities to and on behalf of the Company.
The Audit Committee shall review the Company’s policies relating to business conduct and review management’s monitoring of compliance with the Company’s Code of Business Conduct. Only the Board or the Audit Committee may waive compliance by a director or executive officer with any such policies.
24. Annual Performance Evaluation of the Board
The Nominating/Governance Committee shall develop, recommend to the Board and coordinate an annual evaluation of the Board and its committees, as required by applicable law, the New York Stock Exchange and/or any other applicable rules or regulations, to determine whether they are functioning effectively and meeting their objectives and goals. The Nominating/Governance Committee shall solicit comments from all directors, executive officers and any other persons it deems appropriate and shall annually prepare a report to the Board containing an assessment of the Board’s organization, policies, performance, effectiveness and contribution to the Company and indicating specific areas in which the Board could improve. This report shall be reviewed and discussed with the full Board following the end of each fiscal year.
25. Performance Review of the Company
Management should review the financial and competitive performance of the Company with the Board on a regular basis. The Board should also periodically (but not less than once each year) review, and be briefed on, the Company’s long-term strategic plans, including their development, execution and ongoing implementation, including performance relative to goals, and the principal issues that the Company will face in the future.
26. Waivers of Corporate Governance Guidelines
The Nominating/Governance Committee shall review and, if appropriate, approve any requests for waivers of these guidelines (except for requests for waivers with respect to members of the Nominating/Governance Committee, which shall be reviewed and, if appropriate, approved by the Audit Committee).
27. Public Disclosure of Corporate Governance Policies
The Company shall post on its website copies of the current version of these Guidelines, the Company’s Code of Business Conduct and the charters of the Audit Committee, the Executive Committee, the Human Resources Committee, the Nominating/Governance Committee, the Public Responsibility Committee and other key committees of the Board.
Annex A
CATEGORICAL STANDARDS
The Board has established these categorical standards to assist it in determining whether a director has any direct or indirect material relationship with the Company. A director is independent if, within the three years preceding the determination:
- the director was not an employee of the Company and none of the director’s immediate family members was an executive officer of the Company;
- the director, and each immediate family member of the director, did not receive any compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
- the director, and each immediate family member of the director, was not affiliated with or employed by a current internal or external auditor of the Company or a former internal or external auditor of the Company that ceased providing services to the Company less than three years preceding the determination;
- the director, and each immediate family member of the director, was not employed as an executive officer of another company where any of the Company’s executive officers served on the other company’s compensation committee;
- the director was not an affiliate, executive officer or employee of, and each immediate family member of the director was not an affiliate or executive officer of, another company that makes payments to, or receives payments from, the Company for property or services in an amount that, in any of the three fiscal years preceding the determination, accounted for at least two percent (2%) or $1 million, whichever is greater, of such other company’s consolidated gross revenues;
- the director, and each immediate family member of the director, was not an affiliate or executive officer of another company which was indebted to the Company, or to which the Company was indebted, where the total amount of indebtedness (to and of the Company) exceeded two percent (2%) of the total consolidated assets of such other company or the Company;
- the director, and each immediate family member of the director, was not an officer, director or trustee of a charitable organization where the Company’s (or an affiliated charitable foundation’s) annual charitable contributions to such charitable organization exceeded the greater of $1 million or two percent (2%) of that organization’s consolidated gross revenues; and
- the director has not been a party to a personal services contract with the Company, the Chairman any executive officer of the Company or any affiliate of the Company.
For purposes of these categorical standards, (i) an “immediate family member” of a director 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 and (ii) an “affiliate” includes a general partner of a partnership, a managing member of a limited liability company or a shareholder of a corporation controlling more than 10% of the voting power of the corporation’s outstanding common stock.
The Board will annually review all relationships between the Company and its outside directors and publicly disclose whether its outside directors meet the foregoing categorical independence standards.
Transition Rule: During the year immediately following [insert date of SEC approval of NYSE corporate governance proposals], each three-year “look back” period referenced in the foregoing categorical standards shall instead be a one year “look back” period.
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