A. Board Responsibilities
The fundamental responsibility of the Board of Directors is to promote the best interests of the Company and its shareholders by overseeing the management of the Company's business and affairs. In doing so, directors have two basic obligations to the Company and its shareholders: (1) the duty of care, which generally requires that directors exercise appropriate diligence in making decisions and in overseeing management of the Company, and (2) the duty of loyalty, which generally requires that directors make decisions based on the best interests of the Company and its shareholders and without regard to any personal interest.
In addition to its general oversight of management, the Board also performs a number of specific functions, including selecting and recommending to shareholders appropriate candidates for election to the Board; reviewing and approving significant transactions; selecting, regularly evaluating the performance of, and approving compensation for, the CEO; overseeing the implementation of the Company's succession plans; reviewing the business plans, major strategies and financial objectives of the Company; evaluating Board processes and performance and the overall effectiveness of the Board; and, in conjunction with senior management, setting the appropriate standard ("tone at the top") and ensuring that processes are in place for maintaining the integrity of the Company - including the integrity of the financial statements and public disclosures and compliance with law and ethics. The Board of Directors also recognizes that the long-term interests of shareholders are advanced by responsibly addressing the concerns of other stakeholders and interested parties including customers, suppliers, employees and the communities in which the Company operates.
Additional details regarding how the Board of Directors addresses some of these specific functions follows:
The Board of Directors and its Committees (other than the Executive Committee) annually evaluates their performance to assess whether they are functioning effectively. The Nominating/Governance Committee is responsible for facilitating the annual review process as well as for reviewing with the Board the results of these assessments.
The Compensation Committee is responsible for leading the Board in conducting an annual assessment of the Chief Executive Officer. Input is solicited from each director, analyzed by the Compensation Committee and reported to the full Board. Results of the evaluation are communicated to the CEO and considered in establishing CEO compensation.
Management Succession Planning
The Board of Directors regularly reviews and discusses a management succession plan designed to provide for continuity in and development of senior management. This plan, on which the CEO reports at least annually, addresses (a) emergency CEO succession; (b) CEO succession in the ordinary course of business; and (c) succession for other members of senior management. The plan assesses senior management experience, performance, skills and planned career paths.
Strategic Planning Meetings
Each year the Board and the senior management team participate in a special meeting at which major long-term strategies, including direction, financial goals and other objectives and plans, are reviewed and discussed. The Board of Directors also reviews the annual operating plan and, on an ongoing basis, reviews the performance of the Company against the annual operating plan and long-term strategic plans.
B. Composition of the Board
- Board Size
- Director Qualifications
The Nominating/Governance Committee is responsible for developing and recommending Board membership criteria to the Board for approval and for reviewing with the Board from time to time the appropriate experience, skills and characteristics required of Board members. This assessment includes business experience, education and skills as well as character, judgment and issues of diversity in factors such as age, gender, race and culture. These factors, and others considered useful by the Board, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.
Directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the shareholders. Board members are expected to diligently prepare for, attend and participate in all Board and applicable Committee meetings. Each Board member is expected to ensure that other existing and future commitments do not materially interfere with the member's service as a director.
Board Membership Selection Process
Each class of the Board of Directors is elected every third year by the shareholders at the Annual Meeting of Shareholders. The Board of Directors proposes a slate of nominees to the shareholders for election each year. The Board is also responsible for electing directors to fill vacancies on the Board that occur due to retirement, resignation, expansion of the Board or other reasons between the Shareholders' annual meetings.
The Board of Directors has delegated responsibility to the Nominating/Governance Committee for identifying, screening and recommending candidates to the Board of Directors. The Committee places primary emphasis on the director qualification standards discussed above and is also responsible for initially assessing whether a candidate would be an Independent Director. The Committee considers nominations from shareholders, who may submit recommendations for director nominees to the Chair of the Committee, in care of the Corporate Secretary. Shareholders may also nominate directors for election at the Company's annual meeting of shareholders by following the provisions set forth in the Company's By-Laws.
Proportion of Independent Directors
It is the policy of the Company that at least a majority of the members of the Board of Directors be Independent Directors. A director shall be independent (an "Independent Director") if he or she meets the definition of independence in the New York Stock Exchange rules, and any other specific Director Independence Standards that may be recommended by the Nominating/Governance Committee from time to time and adopted by the Board.
Directors who Change Corporate Affiliation or Responsibilities
If a non-management director retires or changes the position he or she held when he or she first became a member of the Board, the director must notify both the Chairman of the Board and the Chairman of the Nominating/Governance Committee of his or her change in affiliation or responsibilities. This notice provides an opportunity for the Board, through the Nominating/Governance Committee, to review the continued appropriateness of Board membership under the changed circumstances.
Directors' Service on Other Boards
Directors are expected to devote sufficient time to fulfill their responsibilities as directors of the Company. Each director is responsible to ensure that his or her affiliations or service on a board of directors of another company or charitable organization does not create any actual or perceived conflict of interest with his or her service on the Company's Board.
D. Board Operations
Meetings and Agendas
The Board of Directors meets a minimum of four times per fiscal year.. Additional meetings, including telephonic meetings, are held from time to time as appropriate. The Chairman of the Board, with input from senior management, establishes the agenda for each Board meeting, although Board members are free to suggest items for inclusion on the agenda. Each director is free to raise at any Board meeting subjects that are not on the agenda for that meeting.
Distribution of Board Materials
Board packages, which include agendas and relevant background materials, are routinely distributed in advance of the regularly scheduled Board and Board committee meetings. Directors also routinely receive updates from the Chairman and CEO, press releases and other corporate communications, and other information designed to keep them informed about the Company's business.
Separate Executive Sessions
To ensure free and open discussion and communication among the non-management directors on the Board, executive sessions of the non-management directors are held at each regularly scheduled Board meeting.
Management Attendance at Board Meetings
The Board encourages senior management, from time to time, to bring managers into Board meetings who can provide additional insight concerning the items being discussed, or who have been identified as managers with future potential that the senior management believes should be given exposure to the Board.
Board Access to Senior Management
Directors will have open access to the Company's senior management.
Directors' Relationship to Advisors and Authority to Retain
In performing its functions, the Board is entitled to rely on the advice, reports and opinions of senior management, counsel, auditors, accountants and expert advisors. The Board, and each Board Committee, has the authority to retain and approve the fees and retention terms of external legal, financial or other advisors as it deems appropriate.
E. Committee Matters
Committee Types and Responsibilities
The Board of Directors will at all times have an Audit Committee, a Compensation Committee, and a Corporate Nominating/Governance Committee, each consisting of at least three members. The Board of Directors may, from time to time, establish or maintain additional committees as necessary or appropriate. Each of the standing committees named above have charters that set forth the purpose and responsibilities of the committee. The Board expects to accomplish a substantial amount of its work through the committees. Each Committee reports regularly to the Board summarizing the Committee's actions and any significant issues considered by the Committee and each Committee will annually evaluate its performance.
Assignment of Committee Members
The Board of Directors, upon the recommendation of the Nominating/Governance Committee, appoints committee members and names a Chair of each committee. The Nominating/Governance Committee believes that rotation of committee assignments is beneficial and in making its recommendation to the Board, considers several factors, such as (a) each Board member's interests, tenure and subject-matter expertise, (b) the need for both continuity and fresh ideas and perspectives, and (c) applicable independence and qualification requirements. A director may serve on more than one committee but may serve as Chair on only one committee at any time.
Independence and Qualification
Each member of the Audit Committee, Compensation Committee and Nominating/Governance Committee must meet applicable independence and qualification requirements of the New York Stock Exchange (the "NYSE"), the Securities Exchange Act of 1934 and any other applicable law.
Limit on Number of Outside Audit Committee Memberships
Given the significant time demands and responsibilities of serving on a public company audit committee, no member of the Audit Committee may serve on more than two other public company audit committees, without the prior determination by the Board that such simultaneous service would not impair the ability of such director to effectively serve on the audit committee of the Company.
Committee Meeting Frequency, Length and Agendas
Each Committee shall have the number of meetings provided for in its charter, with further meetings to occur, or action may be taken by unanimous written consent, when deemed necessary or appropriate by the Committee or its Chair. The Chair of each Board committee, in consultation with the committee members and appropriate members of management, will develop the agenda and determine the length of each committee meeting.
Unless a Committee expressly determines otherwise, the agenda, materials and minutes for each Committee meeting shall be available to all directors, and all directors shall be free to attend any Committee meeting. In addition, all directors, whether or not members of the Committee, are free to make suggestions to a Committee chair for additions to the agenda of his or her Committee or to request that an item from a Committee agenda be considered by the Board.
F. Director Orientation and Continuing Education
New Director Orientation
New directors meet with senior management and the Company’s independent auditors and have the opportunity to visit Company facilities. Sitting directors may also participate in any orientation programs.
Director Continuing Education
Each director is expected to maintain the necessary level of expertise to perform his or her responsibilities as a director. The Company may, from time to time, offer continuing education programs in conjunction with scheduled board meetings to assist the directors in maintaining such level of expertise and to continue to develop directors’ knowledge of the company and its operations. The Company encourages directors to attend continuing education programs, participate in professional associations and subscribe to appropriate publications.
G. Code of Business Conduct
The Company maintains, and the Audit Committee oversees compliance with, a code of business conduct and ethics for directors and all employees that addresses, at a minimum, conflicts of interest, corporate opportunities, confidentiality, proper use of Company assets, compliance with laws, rules and regulations, and reporting of any illegal or unethical behavior. In addition, the code of business conduct and ethics contains the specific requirements applicable to senior financial officers under the securities laws and other applicable regulations.
The Code of Conduct currently in effect shall be reviewed by the Audit Committee from time to time. Directors, as well as all employees, are subject to the Code of Conduct with respect to their director-related activities. The Company will continue to post the Code of Conduct on its intranet for use by employees and will also make it available to the public for review by posting the Code of Conduct on its website.