Corporate Governance Policy
Corporate Governance Policy
A. Board of Directors' Responsibilities
The Company's Board of Directors represents the shareholders' interest in perpetuating a successful business and optimizing long-term financial returns consistent with legal requirements and ethical standards. The Board is responsible for general oversight of the Company, including identifying and taking reasonable actions so that the Company is managed in a way designed to achieve this result. Consistent with the importance of the Board's responsibilities, each director is expected to be familiar with the Company's business and public disclosures, to review in advance of Board meetings related materials distributed to the Board and to attend and participate in meetings of the Board and meetings of committees of which such director is a member.
1. Selection, Evaluation and Retention of Chief Executive Officer and Oversight of
Selection and Performance of Other Executive Officers
The Board, with assistance from the Nominating and Corporate Governance Committee (the "NCG Committee") has the responsibility to select, to evaluate the performance of the Chief Executive Officer, to oversee the selection and evaluation of the performance of other executive officers, to oversee plans for management succession, and to monitor on a regular basis the effectiveness and execution of management strategies and decisions in optimizing the Company's long-term total return. The NCG Committee periodically conducts a discussion of director and management succession with the Chief Executive Officer, and develops such plans as needed.
2. Understanding, Reviewing and Monitoring Implementation of Strategic Plans and Annual Operating Plans and Budgets
The Board is responsible for overseeing and understanding the Company's strategic plans and
execution and should regularly monitor implementation of such plans to determine whether they are being implemented effectively and whether changes are needed. The Board also is responsible for overseeing and understanding the Company's annual operating plans and annual budgets and for regularly monitoring whether these plans are being implemented effectively and within budgetary limits.
3. Selection and Oversight of Independent Auditors; Oversight of Financial Statements
The Audit Committee of the Board has the responsibility to recommend to the Board the
appointment of and compensation of the Company's independent accounting firm that audits the
Company's financial statements and to pre-approve the engagement terms and the provision of nonaudit services performed by such accounting firm for the Company. The Audit Committee will have direct responsibility, and the Board will have a corresponding oversight responsibility, for monitoring the performance of such accounting firm and its independence, and overseeing the financial statements prepared by management, with the goal of assuring that they fairly present the Company's financial condition, results of operations, cash flows and related risks.
4. Advising Management on Significant Issues
The Board is responsible for utilizing the experiences and perspective of Directors to advise and
counsel management, both in meetings and in informal consultations, on significant issues facing the Company.
5. Review and Approval of Significant Company Actions and Certain Other Matters
The Board is required by state corporate law to review and approve significant actions by the
Company, including declaration of dividends and major transactions. In addition, the Board is
responsible for approving certain actions by the Company as set forth in this policy, and other
policies that may be adopted from time to time by the Board, such as those required by applicable
national securities exchanges on which the Company's securities are traded.
6. Nominating Directors and Committee Members and Overseeing Effective Corporate Governance
The Board with the assistance of the NCG Committee is responsible for (i) evaluating and nominating directors and members of Board committees, (ii) overseeing the structure and practices of the Board and the committees and (iii) overseeing other corporate governance matters, as more fully set forth in this policy and the charter of the NCG Committee.
B. Composition of the Board
1. Size of the Board
Consistent with the Company's bylaws, the size of the Board generally should be within a range of 5 to 9. A somewhat larger size may be appropriate from time to time in order to accommodate the availability of one or more outstanding candidates.
2. Board Membership Criteria
The NCG Committee is responsible for recommending criteria for Board membership to supplement the more general criteria set forth in its charter and in this policy regarding such matters as integrity, independence, and diligence. The NCG Committee is responsible for evaluating Directors and director candidates, and for seeking to assure that talents, skills and other characteristics that are needed for the Board's effectiveness are possessed by the combination of directors. Additionally, each Director or director candidate should have the capacity and desire to represent the balanced, best interests of the shareholders as a whole and not a special interest group or constituency.
3. Proportion and Determination of Independent Directors
The Board believes that as a matter of policy, Independent Directors should comprise at least a majority of the Company's Board. This will not, however, prevent the Board from taking valid actions if, due to a temporary vacancy or vacancies on the Board, there are fewer than the intended proportion of Independent Directors. Any such vacancies should be filled as soon as reasonably practicable, subject to applicable regulatory requirements.
A Director of the Company shall be considered independent if, in accordance with the New York Stock Exchange listing standards, the Director is not an "interested person" of the Company, as defined in Section 2(a)(19) of the Investment Company Act of 1940.
In addition to being an Independent Director, each member of the Company's Audit Committee
must not accept, directly or indirectly consulting, advisory or other compensatory fees from the
Company, except in his or her capacity as a member of the Audit Committee, the Board or any other Board committee of the Company or any of its consolidated subsidiaries.
4. Selection of Directors
The Board is responsible for selecting candidates for the Board and in recommending them for
election by the shareholders. The Board has delegated the initial evaluation and recommendation of potential directors to the NCG Committee with the direct input from the Chairman of the Board and the Chief Executive Officer.
The Board is responsible for determining the qualification of one or more individuals to serve on the Audit Committee as a designated "audit committee financial expert," as required by Item 401(h) of Regulation S-K. The NCG Committee shall report to the Board in recommending new candidates or existing directors who may serve in this capacity.
The invitation to join the Board should be extended by the Board itself, through its Chairman of the Board and/or the Chairman of the NCG Committee, together, in each case, with the Chief Executive Officer of the Company.
5. Directors Who Change Their Corporate Affiliations
Any director who changes his or her employer or otherwise has a significant change in job
responsibilities, or who accepts or intends to accept a directorship with another company that he or she did not hold when such director was most recently elected to the Board, shall give written notice to the Board as soon as feasible. The Board may then consider the appropriateness of such director's membership on the Board and each applicable Board committee under these circumstances, considering relevant factors.
6. Outside Directorships
The members of the Board acknowledge that significant commitment is required to be a participating and effective member of the Board. Accordingly, members of the Board: (A) who are fully employed should not be a member of more than three other public company boards; (B) who are retired from full employment should not be a member of more than five other public company boards, unless otherwise approved by the Board; and (C) should restrict their membership to no more than two public company audit committees.
7. Term Limits
In lieu of pre-determined term limits for directors, the NCG Committee will evaluate each director's continued services on the Board in connection with whether such directors should be re-nominated to the Board and at such other times as may be appropriate in particular circumstances. In connection with each decision regarding re-nominations, each director should be given an opportunity to confirm his or her desire to continue as a member of the Board.
8. Ownership by Directors
Since an ownership stake leads to a stronger alignment of interests between Directors and stockholders, each Director is required to purchase at least $100,000 in company stock (excluding stock options) within five years of joining the Board. The Board may make exceptions to this requirement based on particular circumstances.
C. Board Leadership
1. Selection of Chairman and Chief Executive Officer
The Board is responsible for electing a Chairman and appointing a Chief Executive Officer. The role of Chairman of the Board and Chief Executive Officer may be combined at the Board's discretion.
2. Presiding Independent Director
Whenever the Chairman of the Board is not an Independent Director, the Chairman of the
NCG Committee shall act as the Presiding Independent Director and shall preside at meetings of the "Non-Management Directors" (which will include the Independent Directors and other Directors who are not officers of the Company even though they may have another relationship to the Company or its management that prevents them from being Independent Directors) held pursuant to Section G.3 of this policy. In the absence of the Chairman of the NCG Committee, the Audit Committee Chairman shall serve in this capacity. The Presiding Independent Director shall be identified as such in the Company's annual proxy statement.
D. Board Compensation and Performance
1. Board Compensation Review
It is appropriate for management to report to the Board as a whole regarding the status of the Company's Board compensation in relation to other comparable U.S. companies. Changes in Board compensation should be made based upon the approval of a vote of the Board as a whole.
2. Assessing the Performance of the Board
The Board will conduct an annual assessment of its performance in order to help assure the effectiveness of the Board as a whole. This assessment should review any areas in which the Board and/or management believes a better contribution could be made and may include consideration of individuals' contributions to the Board.
E. Management's Responsibilities
Management is responsible for operating the Company in an effective, ethical and legal manner
designed to produce value for the Company's shareholders consistent with the Company's policies and standards. Management is responsible for understanding the Company's income-producing activities and the material risks. Management is responsible for enforcing and complying with provisions of the Company's policies and standards, and also is responsible for avoiding conflicts of interest with the Company and its shareholders.
1. Financial Statements and Disclosures
Management is responsible for producing, with the oversight of the Board and the Audit Committee, financial statements that fairly present the Company's financial condition, results of operations, cash flows and related risks, for making timely and clear disclosures to investors, and for keeping the Board and the appropriate committees of the Board well-informed on a timely basis as to matters of significance to the Company.
2. Strategic Planning
The Chief Executive Officer is responsible for developing and presenting to the Board the
Company's strategic plans and for implementing those plans as approved by the Board.
3. Annual Operating Plans and Budgets
Management is responsible for developing and presenting to the Board the Company's annual
operating plans and annual budgets and for implementing those plans and budgets as approved by
4. Effective Management and Organizational Structure
The Chief Executive Officer and senior management are responsible for selecting qualified members of management and for implementing an effective organizational structure appropriate for the Company's circumstances.
5. Setting a Strong Ethical "Tone at the Top"
The Chief Executive Officer and senior management are responsible for setting a "tone at the top" of integrity, ethics and compliance with applicable legal requirements and with the Company's policies and standards.
6. Internal Controls and Procedures
Management is responsible for developing, implementing and monitoring an effective system of
internal controls and procedures to provide reasonable assurance that the Company's transactions are properly authorized; the Company's assets are safeguarded against unauthorized or improper use; and the Company's transactions are properly recorded and reported. Such internal controls and procedures shall be designed to permit preparation of financial statements for the Company in
conformity with generally accepted accounting principles or other criteria applicable to such
7. Disclosure Controls and Procedures
Management is responsible for establishing, maintaining and evaluating the Company's "disclosure controls and procedures." The term "disclosure controls and procedures" means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. "Disclosure controls and procedures" include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files under the Securities Exchange Act of 1934 is accumulated and
communicated to the Company's management, including its principal executive and financial officers, to allow timely decisions regarding required disclosure.
F. Board Relationship to Senior Management
1. Board Access to Senior Management and Attendance by Management
The Board (meeting as a whole, as well as the Non-Management Directors meeting separately) and each Board committee will have complete access to the Company's management. Directors provide direction to members of management only as part of Board or committee responsibility and accountability.
Members of management may attend meetings of the Board at the invitation of the Chairman or
Board Committee meetings at the invitation of the Committee Chairmen.
2. Board's Interaction with Institutional Investors, Press and Customers
The Board believes that management speaks for the Company. In accordance with this philosophy, Directors should defer to the Chairman or the Company's designated spokespersons when requested to make any comments regarding the Company or its business.
G. Meeting Procedures
1. Selection of Agenda Items for Board Meetings
The Chairman of the Board and the Chief Executive Officer (if the Chairman is not the Chief
Executive Officer) will establish the agenda for each Board meeting. Each Board member may
suggest the inclusion of item(s) on the agenda or raise issues for discussion at any Board meeting.
2. Board Materials Distributed in Advance
Management shall be responsible for assuring that, as a general rule, matters expected to be
considered and acted upon by the Board should be distributed in writing to the Board sufficiently in advance of each Board meeting and each action to be taken by written consent to provide the
directors time to review and evaluate such information and data. Management will provide
information to permit the Board to be appropriately informed of material matters to be considered at each Board meeting or other Board action.
It is recognized that circumstances exist when it is not feasible to provide information relating to
certain agenda items in advance of a Board meeting or an action to be taken by written consent. In such event, reasonable steps shall be taken (which may include extending the length of the Board meeting to allow more discussion, adjourning the meeting for a brief period to allow directors time to review such information, deferring a vote until a follow-up telephonic meeting, or other measures as appropriate) to permit the directors to become reasonably informed as to the matter before voting on it.
As a general rule, presentations on specific subjects also should be sent to the Board members in
advance so that Board meeting time may be conserved and discussion time focused on questions that the Board has about the material. With respect to matters involving sensitive subjects not
appropriate to distribute in written form, there will be an opportunity for full discussion of the
presentation at the meeting.
3. Separate "Executive Session" Meetings of Non-Management Directors
The Non-Management Directors (as defined in Section C.2 herein) shall meet separately from the
other directors, without the presence of management directors or executive officers of the Company (except to the extent the Non-Management Directors request the attendance of any executive officers). Such executive sessions shall be held at the close of a regularly scheduled meeting of the Board and the chairman of the Audit Committee or his designee shall preside over such executive sessions.
H. Committee Matters
1. Number and Structure of Committees
The Board shall have as standing committees an Audit Committee, a Valuation Committee, and a NCG Committee, which shall have the respective responsibilities described in each respective committee's charter, which shall be approved by the Board, and shall consist solely of Independent Directors. Should the Board appoint an additional committee, the Board shall, by resolution or otherwise, define in writing the responsibilities of such committee.
2. Assignment of Committee Members
The NCG Committee is responsible, after consultation with the Chief Executive Officer and with consideration of the desires of individual Board members, to make recommendations for the nomination of Board members to various committees. The Board is solely responsible for appointing committee members and committee chairmen.
3. Frequency of Committee Meetings
Subject to the requirements in the applicable committee charter regarding the frequency of
committee meetings, each committee chairman, in consultation with committee members, will
determine the frequency and length of the meetings of the committee.
4. Committee Agenda, Background Materials and Reports
The chairman of each Board committee, in consultation with the Chief Executive Officer and
appropriate members of management, will develop the committee's agenda. Management will be
responsible for assuring that, as a general rule, information and data that are important to the
committee's understanding of the matters within the committee's authority and the matters to be
considered and acted upon by a committee are distributed to each member of such committee
sufficiently in advance of each such meeting or action taken by written consent to provide a
reasonable time for review and evaluation of such information and data. The other provisions
applicable under Section G.2 of this policy regarding distribution of Board materials in advance shall apply equally to distribution of committee materials in advance.
At each Board meeting, the chairman of each committee or his or her delegate shall report the
matters considered and acted upon by such committee at each meeting or by written consent since
the preceding Board meeting, and shall be available to answer questions the other directors may have regarding the matters considered and actions taken by such committee.
The Board (and Board committees to the extent so provided in the applicable committee charters or otherwise authorized by the Board) may use reasonable amounts of time of the Company's internal and independent accountants, internal and outside lawyers and other internal staff and also shall have the authority to hire independent accounting experts, lawyers and other consultants to assist and advise the Board (and any of its committees that are authorized to seek such advice and assistance) in connection with its responsibilities. The Board (and any such committees) shall keep the Company's Chief Financial Officer advised as to the general range of anticipated expenses for outside consultants hired by the Board (or such committees).
2. Director Orientation and Continuing Education
Each new Director will receive orientation with respect to his or her duties as a Director, including (a) background material with respect to the Company, its business and issues of particular significance to the Company and meetings with senior management (except to the extent unnecessary for any Director who is an executive officer of the Company); (b) copies of this policy and the American Bar Association's Corporate Directors Guidebook or other appropriate materials; and (c) meetings with the NCG Committee and the Company's outside counsel, as appropriate. New Directors and new members of Board committees may receive such additional orientation they may request or may be recommended by the NCG Committee. To help assure that Directors have the necessary information to perform their responsibilities, the NGC Committee or any Director may recommend further presentations, meetings or seminars on topics of relevance to the business of the Company and the duties of the Board.
3. Disclosure of this Policy
This policy, the committee charters, code of business conduct and code of ethics will be posted on
the Company's website and also will be available in print to shareholders requesting them. Such
availability on the Company's website and in print will be noted in the Company's annual report to shareholders.
4. Code of Business Conduct
The Company will maintain, and the Audit Committee will oversee compliance with, a code
of business conduct and ethics. Such code may be modified and replaced from time to time
by the Board of Directors.