Statement of Corporate Governance
The role of the Board of Directors is to effectively govern the affairs of the Company for the benefit of its shareholders and other constituencies, which include the Company’s employees, customers and the communities in which it does business. The Board will strive to ensure the success and continuity of the Company’s business through the election of qualified management and through on-going oversight to assure the Company’s activities are conducted in a legal, responsible and ethical manner.
1) Director Qualifications and Selection of New Director Candidates
The Board has delegated to the Corporate Governance and Nominating Committee the responsibility of identifying, reviewing the qualifications of and recommending to the Board nominees for membership on the Board and reviewing and recommending with respect to any shareholder nominees. In discharging this responsibility, the Committee receives input from other Board members. In its review, the Committee considers such criteria and factors as:
- Whether the director/potential director possesses personal and professional integrity, sound judgment, forthrightness and has sufficient time and energy to devote to the affairs of the Company;
- Whether the director/potential director possesses a willingness to challenge and stimulate management and the ability to work as part of a team in an environment of trust;
- The extent of the director’s/potential director’s business, educational, governmental, non-profit or professional acumen and experience;
- Whether the director/potential director assists in achieving a mix of Board members that represents a diversity of background, perspective and experience, including with respect to age, gender, race, place of residence and specialized experience;
- Whether the director/potential director meets the independence requirements of the New York Stock Exchange Listing Standards (where independence is desired);
- Whether the director/potential director has the financial acumen or other professional or business experience relevant to an understanding of the Company’s business;
- Whether the director/potential director, by virtue of particular technical expertise, experience or specialized skill relevant to the Company’s current or future business, will add specific value as a Board member;
- The extent of the director’s /potential director’s ownership of shares of the Company or willingness to become an owner of shares consistent with the Company’s Director Stock Ownership Guidelines;
- Whether the director/potential director is free from conflicts of interest with the Company; and
- Any factors related to the ability and willingness of a new director to serve, or an existing director to continue his/her service.
2) Board Independence
A majority of the Board of Directors will be independent directors who meet the criteria for independence required by the NYSE. The Corporate Governance and Nominating Committee will make recommendations to the Board annually as to the independence of directors as defined by the NYSE. To be considered independent under the NYSE Listing Standards, the Board must determine that a director does not have any direct or indirect material relationship with the Company. The Board has established the following guidelines to assist it in determining director independence. A director is not independent if:
- The director is, or has been within the last three years, an employee of the Company or an immediate family member is, or has been within the last three years, an executive officer of the Company.
- The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct 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). (Compensation received by an immediate family member for service as an employee of the Company (other than an executive officer) is not taken into consideration under this independence standard).
- (A) The director is a current partner or employee of a firm that is the Company’s internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the Company’s audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time.
- The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee.
- The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.
The following relationships will not be considered to be material relationships that would impair a director’s independence:
- The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services (including financial services) in an amount which, in the prior fiscal year, is less than the greater of $1 million, or 2% of such other company’s consolidated gross revenues. (In the event this threshold is exceeded, and where applicable in the standards set forth below, the three year “look back” period referenced above will apply to future independence determinations).
- The director or an immediate family member of the director is a partner of a law firm that provides legal services to the Company and the fees paid to such law firm by the Company in the prior fiscal year were less than the greater of $1 million, or 2% of the law firm’s total revenues.
- The director or an immediate family member of the director is an executive officer of a tax exempt organization and the Company’s contributions to the organization in the prior fiscal year were less than the greater of $1 million, or 2% of the organization's consolidated gross revenues.
- The director received less than $120,000 in direct compensation from the Company during the prior twelve month period, 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’s immediate family member received in his or her capacity as an employee of the Company (other than as an executive officer of the Company), less than $300,000 in direct compensation from the Company in the prior fiscal year, 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).
- A relationship arising solely from a director's ownership of an equity or limited partnership interest in a party that engages in a transaction with the Company so long as the director's ownership interest does not exceed 10% of the total equity or partnership interests of the other party. For purposes of this independence guideline, a person owns an equity interest in a corporation or limited liability company if he or she has or shares voting or investment control over the equity interest. Equity or limited partnership interests owned by an immediate family member of a director are considered to be held by the director.
For relationships not described above or otherwise not covered in the above examples, a majority of the Company’s independent directors, after considering all of the relevant circumstances, may make a determination whether or not such relationship is material and whether the director may therefore be considered independent under the NYSE Listing Standards. The Company will explain the basis of any such determinations of independence in the next proxy statement.
For purposes of these independence guidelines an “immediate family member” includes a person’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 shares such person’s home.
For purposes of these independence guidelines “Company” includes any parent or subsidiary in a consolidated group with the Company.
3) Size of Board
The Board presently has 13 members. It is the sense of the Board that this is the appropriate size for the Board at the present time. However, the Board will consider increasing or decreasing the number of Board seats if appropriate in the future.
4) Voting for Directors
In accordance with the Company’s bylaws, if none of the shareholders provides the Company notice of an intention to nominate one or more candidates to compete with the Board’s nominees in a director election, or if the Company’s shareholders have withdrawn all such nominations by the record date for the meeting, a nominee must receive more votes cast for than against his or her election or re-election in order to be elected or re-elected to the Board. A director who fails to receive the required number of votes for election or re-election in accordance with the Company’s bylaws is expected to tender, promptly following certification of the shareholder vote, his or her resignation from the Board, which resignation may be conditioned upon Board acceptance of the resignation. The Board shall nominate for election or re-election as directors only candidates who agree to tender, promptly following the failure to receive the required vote for election or re-election as a director, an irrevocable resignation that will be effective upon Board acceptance of such resignation. The Board shall fill director vacancies and new directorships only with candidates who agree to comply with the foregoing resignation procedure.
The Corporate Governance and Nominating Committee will promptly consider the tendered resignation of a director who fails to receive the required number of votes for election or re-election and recommend to the Board whether to accept or reject it. In considering whether to accept the resignation, the Corporate Governance and Nominating Committee will consider all factors deemed relevant by members of the Corporate Governance and Nominating Committee.
The Board will act on the Corporate Governance and Nominating Committee’s recommendation no later than 90 days following certification of the shareholder vote. In considering the Corporate Governance and Nominating Committee’s recommendation, the Board will consider the factors considered by the Corporate Governance and Nominating Committee and such additional information and factors the Board believes to be relevant. Any director who tenders his or her resignation pursuant to this provision will not participate in the Corporate Governance and Nominating Committee recommendation or Board action regarding whether to accept the resignation.
The Company will promptly disclose the Board’s decision whether to accept the director’s tendered resignation in a Form 8-K filed with the Securities and Exchange Commission.
To the extent that one or more Directors’ resignations are accepted by the Board, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
If a majority of the members of the Corporate Governance and Nominating Committee did not receive the required vote for election or re-election at the same election, then the independent directors who did receive the required vote will appoint a committee amongst themselves to consider the tendered resignations and recommend to the Board whether to accept or reject them.
5) Directors Who Change Their Job Responsibilities; Other Board Relationships
It is the sense of the Board that individual directors who change the job responsibility they held when they were elected to the Board should submit a letter of resignation for consideration by 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 were elected to the Board should necessarily leave the Board. There should, however, be an opportunity for the Board, via the Corporate Governance and Nominating Committee, to review the continued appropriateness of Board membership under these circumstances. Directors should not serve on more than four other boards of publicly traded companies in addition to the Company’s Board. Directors should also advise the Chairman of the Board and Chairman of the Corporate Governance and Nominating Committee in advance of accepting an invitation to serve on the board of another publicly traded company.
6) 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 a 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.
7) Retirement Age
The Board believes that 75 is an appropriate retirement age for directors. Directors will not be renominated for reelection at any annual meeting of shareholders following a director’s 75th birthday.
8) Selection of Chairman and Chief Executive Officer
The Board does not have a policy, one way or the other, on whether or not the role of the Chairman and Chief Executive Officer should be separate and, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. The Corporate Governance and Nominating Committee is responsible for reviewing the leadership structure of the Board on a periodic basis including whether to separate or combine the roles of the Chairman and Chief Executive Officer and making recommendations to the Board with respect thereto, as appropriate.
9) Lead Director
In the event the Chairman of the Board is not an independent director, as defined under the NYSE Listing Standards, the Corporate Governance and Nominating Committee will nominate an independent director to serve as a Lead Director, who shall be approved by a majority of the independent directors. The responsibilities of the Lead Director include:
- Providing leadership to ensure the Board works in an independent, cohesive fashion, which includes evaluating the CEO’s and Board’s performance on an ongoing and annual basis;
- Serving as a liaison with the Company’s shareholders;
- Developing the agenda for Board meetings with the Chairman of the Board, Board and Corporate Secretary;
- Having the authority to call meetings of the independent and non-management directors, as needed;
- Ensuring Board leadership in times of crisis;
- Developing the agenda for and chairing executive sessions of the independent directors and executive sessions of the non-management directors and acting as liaison between the independent directors and the Chairman of the Board on matters raised in such sessions;
- Chairing Board meetings when the Chairman of the Board is not in attendance;
- Working with the Chairman of the Board regarding meeting schedules to ensure the conduct of the Board meeting provides adequate time for serious discussion of appropriate issues and that appropriate information is made available to Board members on a timely basis;
- Attending meetings of the committees of the Board, as necessary or at his/her discretion, and communicating regularly with the Chairs of the principal standing committees of the Board;
- Performing such other duties as may be requested from time-to-time by the Board, the independent directors or the Chairman of the Board; and
- Availability, upon request, for consultation and direct communication with major shareholders.
10) Executive Sessions of Directors
The Board will meet in executive session four times a year in conjunction with each regularly scheduled Board meeting, from which all employees of the Company, other than employees who also serve as directors or members of the General Counsel’s Office, will be excluded. The session will be presided over by the Chairman of the Board.
11) Executive Sessions of Non-Management Directors
Non-management directors of the Board will meet in executive session four times a year after each regularly scheduled Board meeting and at such other times as may be requested by any non-management director. Matters relating to CEO compensation, management development and succession planning and other more sensitive areas are discussed at these sessions. The session will be presided over by the Lead Director, or in the event the Chairman of the Board is independent, by the Chairman of the Board.
12) Executive Sessions of Independent Directors
In the event that one or more of the non-management directors is not independent, the independent directors of the Board will meet in executive session at least once a year. The session will be presided over by the Lead Director, or in the event the Chairman of the Board is independent, by the Chairman of the Board.
13) Number and Independence of Committees; Availability of Committee Charters
The current committee structure of the Company seems appropriate. There will, from time to time, be occasions on which the Board may want to form a new committee or disband a current committee depending upon the circumstances. The current principal five committees are: (1) Audit; (2) Compensation; (3) Corporate Governance and Nominating; (4) Executive; and (5) Technology. All committee charters are available on the Company’s website. Except for the Executive Committee, committee membership will consist of only independent directors.
14) Assignment and Removal of Committee Members; Reports of Committees
The Board is responsible, after taking into consideration the recommendation of the Corporate Governance and Nominating Committee and with consideration of the desires of individual Board members, for the assignment of Board members to various committees and removing Board members from committees. The Committee Chairs report the highlights of their meetings to the full Board following each meeting of the respective committees.
15) Management and Director Responsibilities
The Company’s business is conducted by its employees and officers, under the direction of the Chief Executive Officer and the oversight of the Board, to enhance the long-term value of the Company for its shareholders. The Board of Directors is elected by the shareholders to oversee management and to assure that the long-term interests of the shareholders are being served. In addition to its general oversight of management, the Board also performs a number of specific functions, including, but not limited to:
- Providing counsel and oversight on the selection, evaluation, development and compensation of the Chief Executive Officer and executive management and overseeing Chief Executive Officer succession planning;
- Reviewing, approving and monitoring fundamental financial and business strategies and major corporate actions;
- Providing oversight of the Company’s risk management processes, including the assessment of major risks facing the Company and reviewing options for their mitigation; and
- Providing oversight to ensure that processes are in place for maintaining the integrity of the Company, including the integrity of the financial statements, the integrity of compliance with law and ethics and the integrity of relationships with customers and shareholders.
16) Board Meetings
The Board has at least four scheduled Board meetings a year. Additional meetings are held if circumstances create the need for a special meeting. Directors are expected to attend all scheduled Board and Committee meetings. The Chairman of the Board and Lead Director develop the agenda for each Board meeting with the assistance of the Corporate Secretary. Each Board member is free to suggest the inclusion of item(s) on the agenda.
17) Board Materials Distribution and Review
The Board is provided with materials in advance of each meeting that Board members are expected to review and study. Members of management, depending upon items to be considered at the meeting, compile most material. Additional information from other sources can be requested at the discretion of management or the Board. Sensitive subject matters may be discussed at the meeting without written materials being distributed in advance or at the meeting.
18) Board Access to Management
Directors shall have access to members of the Company’s management. Selected members of management of the Company may attend all or a portion of each Board meeting at the invitation of the Board.
19) Director Compensation
The Corporate Governance and Nominating Committee will be responsible for recommending to the Board compensation and benefit programs for directors and for periodically reviewing the appropriateness of such programs. In making this recommendation, the Committee will take into consideration compensation paid to directors at corporations that are comparable to the Company. Director compensation may be in the form of fees paid for attendance at Board and Committee meetings, cash retainers or equity, or any combination thereof. Directors will be permitted to defer the receipt of their cash compensation. The structure of the compensation of directors should be transparent and easy for shareholders to understand.
20) Assessing Board Performance
The Corporate Governance and Nominating Committee is responsible for overseeing the process of conducting an annual evaluation of the performance of the Board, including an evaluation of the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Technology Committee. Each Committee will conduct its own evaluation and each Committee Chair will report the performance evaluation results to the Board. The Chair of the Corporate Governance and Nominating Committee will report the performance evaluation results of the Board to the Board.
21) CEO Performance Review
The Corporate Governance and Nominating Committee has the responsibility of ensuring that the Compensation Committee has in place performance measures and objectives to be used to evaluate Chief Executive Officer performance. The Compensation Committee has the responsibility of performing the annual evaluation of Chief Executive Officer performance and reporting it to an executive session of non-management directors. The Compensation Committee uses its evaluation results in the course of its deliberations when considering the compensation of the Chief Executive Officer.
22) Succession Planning and Management Development
The Chief Executive Officer will review with the non-management directors in executive session, no less frequently than on an annual basis, the Company’s management development and executive succession activities, as well as long-term and short-term succession plans for the Chief Executive Officer and other senior executives, including in the event of unanticipated vacancies in those offices.
23) Access to Outside Advisors
The Board and its Committees shall have the right to retain independent outside financial, legal or other advisors at the expense of the Company.
24) Stock Ownership Guidelines
Each director should have a substantial investment in the Company. A holding of a number of shares of Company stock equal in value to three times the amount of a director’s annual retainer is recommended for each director. Directors will have five years to attain their total share ownership threshold and should attain a share ownership threshold of one times the amount of a director’s annual retainer within three years.
25) Director Orientation and Continuing Education
All new directors will be provided with an orientation process to enable them to become familiar with the Company’s vision, strategic direction, core values, financial matters, corporate governance practices and other key policies and practices through a review of background material, meetings with senior management and visits to the Company’s facilities. The Board also recognizes the importance of continuing education for its directors and is committed to providing such education through continuing educational programs including reviewing the Company’s strategic plans, its key policies and practices, its financial statements and other materials on subjects that would assist directors in discharging their duties.
26) Ethics and Conflicts of Interest
The Board expects the Company’s directors as well as officers and employees to act ethically at all times and to adhere to the Company’s Code of Business Conduct and Ethics. If an actual or potential conflict of interest arises for a director, the director shall promptly notify the General Counsel’s Office. If a significant conflict exists and cannot be resolved the director should resign. All directors shall recuse themselves from discussion or decisions affecting their business or personal interests.
27) Reporting of Concerns to Non-Management Directors or the Audit Committee
Anyone who has a concern about the Company’s conduct, or about the Company’s accounting, internal accounting controls or auditing matters, may communicate that concern to the non-management directors through the Lead Director, or in the event the Chairman of the Board is independent, through the Chairman of the Board, or to the Audit Committee through the Committee Chair. Such communications may be confidential or anonymous, and may be submitted in writing or reported by phone to a special address and a toll-free phone number that are published on the Company’s website. Concerns relating to accounting, internal accounting controls or auditing matters will be forwarded to the Chair of the Audit Committee. Other concerns will be forwarded to the Lead Director, or in the event the Chairman of the Board is independent, to the Chairman of the Board. The Company’s Code of Business Conduct and Ethics prohibits the Company and any of its employees from retaliating against employees and officers for raising a concern.