EXHIBIT 10.1
The Black & Decker
Corporation
Corporate Governance
Policies and Procedures
Statement
A. Introductory Statement
This
Statement is adopted by the Board of Directors of The Black & Decker Corporation to
set out the policies and procedures by which the Board performs its duties to direct the
management of the Corporation as provided in the laws of Maryland, to assure compliance
with state and federal laws and regulations and applicable rules of the New York Stock
Exchange (NYSE), and to assure that the Corporation acts effectively and efficiently in
the best interests of its stockholders and other constituencies.
B. Board of Directors
1.
Membership
| a. |
Number. As provided in the Bylaws, there shall be not more that 14
Directors and not less than 8 as the Board may provide by resolution from time
to time. |
| b. |
Independent Directors. Not less than three-quarters of the Directors
shall be “independent Directors” as defined in this section. |
| (1) |
A Director is not independent unless the Board affirmatively determines that
the Director has no material relationship with the Corporation, either directly
or as a partner, shareholder, or officer of an organization that has a
relationship with the Corporation. The Corporation will identify in its annual
meeting proxy statement which Directors are independent and disclose the basis
for the determination. |
| (2) |
A Director is not independent if the Director is, or within the last three
years has been, an employee of the Corporation or an immediate family member is,
or within the last three years has been, an “executive officer” (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of the
Corporation. A Director who serves as an interim Chairman, Chief Executive
Officer (CEO) or other executive officer, however, may be deemed independent
immediately following that employment. |
| (3) |
A Director is not independent if the Director or an immediate family member has
received from the Corporation, during any twelve-month period within the last
three years, more than $100,000 in direct compensation other than Director and
committee fees and pension or other forms of deferred compensation for prior
service that is not contingent on |
|
continued service. Compensation received by
the Director for former service as an interim Chairman, CEO, or other executive
officer and compensation received by an immediate family member for service as
an employee (other than an executive officer) is excluded when determining
independence under this subsection. |
| (4) |
A Director is not independent if (a) the Director or an immediate family member
is a current partner of the Corporation’s internal or external auditor, (b)
the Director is a current employee of the Corporation’s internal or
external auditor, (c) an immediate family member is a current employee of the
internal or external auditor and participates in the auditor’s audit,
assurance, or tax compliance (but not tax planning) practice, or (d) the
Director or an immediate family member was within the last three years (but is
not currently) a partner or employee of the internal or external auditor and
personally worked on the Corporation’s audit within that time. |
| (5) |
A Director is not independent if the Director or an immediate family member is,
or within the last three years has been, employed as an executive officer of
another company where any of the Corporation’s current executive officers
at the same time serves or served on that company’s compensation committee. |
| (6) |
A Director is not independent if 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 Corporation for property or
services in an amount that, in any of the last three fiscal years, exceeds the
greater of $1 million or 2% of the company’s consolidated gross revenues. |
| (7) |
The term “immediate family member” includes a Director’s spouse,
parents, children, siblings, mothers and fathers-in-law, brothers and
sisters-in-law, sons and daughters-in-law, and anyone (other than domestic
employees) who shares the Director’s home. |
| (1) |
A Director shall not stand for re-election as a Director after attaining the
age of 72 years. |
| (2) |
Unless requested by the Corporate Governance Committee to do so, a Director
shall not stand for re-election if there is a change in the Director’s
employment or principal business association. |
| (3) |
A Director who is a full-time employee of the Corporation may not serve on the
board of directors of more than two other publicly held for-profit corporations
unless approved by the Board. |
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| (1) |
Each newly elected Director who has not served previously on the board of
directors of a for-profit corporation listed on the NYSE will be afforded an
opportunity to attend, at the Corporation’s expense, an orientation course
provided by the NYSE when it becomes available. |
| (2) |
Each newly elected Director shall be provided with a copy of the
Corporation’s Directors Handbook, which includes this Statement, financial
information, and other written materials appropriate to inform the Director
about the duties and responsibilities of being a Director and the nature of the
Corporation’s operations and businesses. |
| (3) |
Each newly elected Director shall also be afforded an opportunity (a) to meet
with the CEO, the Chief Financial Officer (CFO), and the president of each major
business group to discuss the Corporation’s structure and operations and
(b) to visit the Corporation’s major facilities. |
| e. |
Stock Ownership. Within the later of three years of joining the Board or
three years of the adoption of this Statement by the Board, a Director is
expected to own shares of the Corporation’s common stock having a market
value of at least $195,000. |
2.
Selection of Directors.
| a. |
Qualifications and Standards. Although there are no specific minimum
qualifications that must be met by a candidate to be recommended to the Board
nor any specific qualities or skills that the candidate must possess, the
following are desirable. |
| (1) |
Integrity. A Director candidate should have proven integrity and a
record of substantial achievement. |
| (2) |
Age. A Director candidate should be old enough to exercise mature
judgment, but young enough to serve for several years. Ordinarily, the candidate
should be between 45 and 60 years of age. |
| (3) |
Experience. Preferably, a candidate should be the active or retired
chief executive officer of a corporation that is publicly held and of
comparable size. Presidents, chief operating officers, chief financial
officers, and other qualified and prominent individuals who have business
acumen and whose relevant background, training, and experience can be expected
to benefit the Corporation should also be considered. |
| (4) |
Judgment. A candidate should have a reputation for sound business
judgment. It is important that a candidate understands the role of the Board and
the workings of the Corporation in the current business |
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environment. A candidate
should be able objectively to appraise management’s plans, programs,
achievements, and shortcomings. |
| (5) |
Character. Candidates must inspire trust and confidence in other
Directors so that the Board can discharge its duties smoothly and efficiently. |
| (6) |
Prestige. A candidate should add to the prestige of the Board. This will
enhance the Corporation’s reputation and make future recruiting easier. |
| (7) |
Commitment. A candidate should be able and willing to devote the
required amount of time to the Corporation’s affairs, including preparing
for and attending meetings of the Board and its committees and attending annual
meetings of stockholders. |
| (8) |
No Conflicts. A candidate may not have a conflict of interest with the
Corporation. For this purpose, a candidate has a conflict of interest if the
candidate has a business relationship that would be required to be disclosed in
the Corporation’s proxy statement. In addition, it is preferable that the
candidate qualify as an independent Director as defined in section B.1.b of this
Statement. |
| (9) |
Representation. A candidate must be committed to representing the
interests of stockholders generally and not the interests of a particular
stockholder or group of stockholders nor the interests of a particular group
whose interests are primarily non-economic or involve a social agenda. |
| (1) |
When a vacancy occurs on the Board or when the Board increases the number of
Directors, the Corporate Governance Committee will identify potential candidates
to fill the vacancy. |
| (2) |
Background information on each candidate will be distributed to the members of
the Corporate Governance Committee. |
| (3) |
The Corporate Governance Committee will screen recommended candidates, and, if
appropriate, make discreet inquiry to determine the candidate’s interest
and availability. |
| (4) |
Unless eliminated by the screening, the candidate’s name will be reported
to the Board and the Board members will be asked for comments. |
| (5) |
One or more members of the Committee will meet with the candidate and determine
the candidate’s suitability for the Board. |
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| (6) |
The approved candidate’s name and biographical information will be
distributed to the other Directors at or in advance of the meeting preceding the
meeting at which the candidate will be proposed for election. |
| (7) |
The full Board will act on the nomination. |
| (8) |
The Committee will consider candidates proposed by one or more substantial,
long-term stockholders. Generally, stockholders who individually or as a group
have held 5% of the Corporation’s common stock for over one year will be
considered substantial, long-term stockholders. |
| (9) |
In considering candidates proposed by stockholders, the Committee will apply
the qualifications and standards stated in section B.2.a. |
3.
Duties and Responsibilities.
| (1) |
Within limits defined by statute and the charter and bylaws of the Corporation,
the Board of Directors shall exercise general powers as the governing body of
the Corporation. The Board is the final authority with respect to the overall
policies of the Corporation and with respect to the approval of objectives and
goals for the Corporation and the evaluation of management’s performance in
relation to those policies, objectives, and goals. |
| (2) |
The day-to-day management of the business is delegated to the CEO of the
Corporation. |
| (3) |
As trustees of the business, the Directors have a fiduciary responsibility to
the Corporation’s stockholders. The Directors may also consider the
interests of the Corporation’s other constituencies such as its employees,
customers, and the communities in which the Corporation operates, provided there
are rationally related benefits accruing to the Corporation’s stockholders. |
| (4) |
Management has the responsibility to provide to the Directors all information
necessary or appropriate to enable the Directors to discharge their duties and
responsibilities. Directors must be aware, at all times, that the information
that is presented to them is confidential pending its release to the public. |
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| (1) |
A Director shall perform his or her duties as a Director, including duties as a
member of a committee of the Board, (a) in good faith, (b) in a manner that the
Director reasonably believes to be in the best interests of the Corporation, and
(c) with the care that an ordinarily prudent person in a like position would use
under similar circumstances. |
| (2) |
In performing his or her duties, a Director is entitled to rely on any
information, opinion, report, or statement, including any financial statement or
other financial data, prepared or presented by (a) an officer or employee of the
Corporation whom the Director reasonably believes to be reliable and competent
in the matters presented, (b) a lawyer, certified public accountant, or other
person, as to a matter that the Director reasonably believes to be within the
person’s professional or expert competence, or (c) a committee of the Board
on which the Director does not serve, as to a matter within its designated
authority, if the Director reasonably believes the committee merits confidence.
A Director is not acting in good faith if the Director has any knowledge
concerning the matter in question that would cause the reliance to be
unwarranted. |
| c. |
Specific Duties.
Specific duties include: |
| (1) |
Acquisitions and Mergers. With the advice of the Finance Committee,
authorize significant acquisitions and mergers, subject to approval by the
stockholders when necessary. |
| (2) |
Budgets. With the advice of the Finance Committee, review and approve
annual capital expenditure and charitable contributions budgets. |
| (3) |
Bylaws. With the advice of the Corporate Governance Committee, review
and approve changes in the Corporation’s Bylaws. |
| (4) |
Committees. With the advice of the Corporate Governance Committee, elect
or appoint, define the powers of, and dissolve committees of the Board. |
| (5) |
Dividends. With the advice of the Finance Committee, determine dividend
policy and authorize the payment of dividends. |
| (6) |
Employee Benefits. With the advice of the Compensation Committee,
approve major compensation plans, including stock option plans and other
equity-based plans, and any significant changes to any of these, and, in the
case of equity-based plans, submit them to the stockholders for approval if
required by the rules of the NYSE. |
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| (7) |
Ethical and Professional Standards. With the advice of the Corporate
Governance Committee, adopt ethical and professional standards for the
Corporation and assure, through continuing review, that Directors, officers, and
employees act in accordance with established and accepted ethical and business
standards, including compliance with the Corporation’s Code of Ethics and
Standards of Conduct, a copy of which as amended from time to time is attached
to this Statement as Appendix 1, and, with the advice of the Audit Committee,
the Code of Ethics for Senior Financial Officers, a copy of which as amended
from time to time is attached to this Statement as Appendix 2. |
| (8) |
Financial Transactions. With the advice of the Finance Committee, review
and approve financial transactions as provided in the Board’s standing
resolution on Approval of Financial Transactions and the Corporation’s
Short-Term Investment Policy and review and approve registration statements and
other documents relating to the public sale of the Corporation’s
securities. |
| (9) |
Officers. With the advice of the Compensation Committee, elect and, when
appropriate, remove the CEO and other principal officers of the Corporation,
delegate management responsibility and authority to them, and, through the
Compensation Committee, monitor their performance and establish their
compensation. |
| (10) |
Stockholders. With the advice of the Corporate Governance Committee, fix
the date, time and place of all meetings of stockholders, fix the record date
for stockholders entitled to vote at each meeting of stockholders, appoint
management proxies and proxy solicitors, and call special meetings as required. |
| (11) |
Audit Committee Funding. Cause the Corporation to provide appropriate
funding, as determined by the Audit Committee, for payment of compensation to
the Corporation’s independent auditor, compensation to any advisors
employed by the Audit Committee, and the administrative expenses of the Audit
Committee that are necessary or appropriate in carrying out its duties. |
4.
Organization.
| a. |
Chairman. At the first Board meeting following a meeting of stockholders
at which Directors were elected, the Board will elect a Chairman from among its
members who shall preside at all meetings of the Board and the stockholders. |
| b. |
Secretary. The Secretary or an assistant secretary of the Corporation
will record the proceedings at all meetings of the Board except that, during
executive sessions of the Board from which the Secretary is excluded, another
person |
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present shall be designated by the Chairman or Presiding Director to act
as secretary of the meeting. |
| c. |
Presiding Director. Each chairman of a standing committee who is a
non-management Director shall serve in rotation as Presiding Director for a
period of one year beginning with the annual meeting of stockholders in the
following order: Corporate Governance, Compensation, Audit, and Finance. |
5.
Meetings.
| a. |
Attendance. Each Director has a duty to attend, whenever possible, all
meetings of the Board and of each committee of which the Director is a member. |
| b. |
Regular Meetings. The Board will meet, without notice, immediately after
each annual meeting of stockholders, and, subject to the notice provisions of
the Bylaws, in the months of February, July, October, and December on a day and
at a time designated by the CEO. |
| c. |
Special Meetings.Special meetings may be called, subject to the notice
provisions of the Bylaws, at any time by the CEO or any two Directors. |
| d. |
Executive Sessions. To allow full and candid discussion among
non-management Board members of matters important to the Corporation, the
non-management Directors (i.e., Directors who are not officers) shall
meet in executive session without management following the regular Board
meetings in February, July, and December. (If there are one or more
non-management directors who are not also independent directors, the independent
directors shall meet in executive session at least once each year.) The
Presiding Director shall preside, and, in the absence of the Presiding Director,
the non-management Directors present will choose a Presiding Director pro tem to
preside over the executive session. Directions as to how interested parties may
make their concerns known to the non-management Directors as a group will be
included in the Corporation’s annual meeting proxy statement. |
| e. |
Meeting Materials. Agendas and meeting materials will be distributed in
advance of Board and committee meetings, and each Director has a duty to review
the materials prior to the meetings. |
6.
Committees.
| (1) |
The Board, at its discretion, may appoint or elect from among its members
committees of one or more Directors to deal with particular areas of the
Corporation’s activities and interests. All members of committees serve at
the pleasure of the Board and may be removed by the Board at any time. |
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| (2) |
To the extent practicable, any matter requiring action by the Board shall first
be presented to the appropriate committee for consideration and recommendation. |
| (3) |
To the extent practicable, the CEO shall attend each committee meeting unless
the committee is meeting in executive session. |
| (4) |
The CEO shall designate an officer, employee, or agent of the Corporation to
provide staff support to each committee. |
| (5) |
Charters of the standing committees will be published from time to time as
required by rules of the Securities and Exchange Commission (SEC) or the NYSE. |
| b. |
Standing Committees. There are five standing committees of the Board: |
| (3) |
Compensation Committee, |
| (4) |
Corporate Governance Committee, and |
| c. |
Special Committees. Special committees may be appointed from time to
time by the Board to act upon such matters as the Board may commit to them. |
| (1) |
The members of each standing committee are appointed (or, in the case of the
Executive Committee, elected) annually by the Board at its first meeting
following the annual meeting of stockholders. |
| (2) |
A majority of each standing committee (and all of the members of the Audit
Committee, the Compensation Committee, and the Corporate Governance Committee)
shall be independent Directors as defined in section B.1.b of this Statement. |
| (3) |
The chairman of each committee is designated by the Board at the time the
committee is elected or appointed. |
| (4) |
Special committees may be created by resolution of the Board or appointed by
the Chairman of the Board. They shall consist of the number of Directors that
the resolution creating the committee or the Chairman of the Board in creating
the committee shall provide. |
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| (5) |
Under normal circumstances, each Director shall serve on at least one standing
committee, and no Director shall serve as Chairman of more than one standing
committee. |
| (6) |
Consideration should be given to rotating committee assignments at
approximately five-year intervals, but the Board recognizes that there may be
reasons to retain a particular Director on a particular committee for a longer
period. |
| e. |
Committee Service Compensation. In addition to the annual retainer for
serving as a Director, each Director who is not a full-time employee of the
Corporation receives: |
| (1) |
An annual retainer of $10,000 for service on the Audit Committee, $20,000 for
service as chairman of the Compensation Committee or the Audit Committee, and
$10,000 for service as chairman of the Finance Committee or the Corporate
Governance Committee, prorated as of the date of appointment if the appointment
is made at other than an annual meeting of the Board; and |
| (2) |
Reimbursement for reasonable expenses incurred in attending committee meetings. |
| f. |
Operation. Each Committee: |
| (1) |
Shall appoint a secretary who may, but need not, be a member of the Committee; |
| (2) |
Shall keep minutes of its proceedings; |
| (3) |
May determine its own procedures; |
| (4) |
May call upon the Corporation’s officers, employees, counsel, auditors,
and consultants and may retain at the Corporation’s expense other
professional advisers and consultants as it may choose; |
| (5) |
May appoint subcommittees of its members to perform particular functions on
behalf of the Committee; and |
| (6) |
May meet by telephone conference call or similar communications equipment if
all persons participating in the meeting can hear each other at the same time. |
7.
Director Compensation.
| a. |
General. Compensation of Directors is authorized from time to time by
resolution of the Board with the advice of the Corporate Governance Committee. |
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Directors who are full-time employees serve without additional compensation.
Compensation, including compensation for service on a committee, may be deferred
as provided in The Black & Decker Non-Employee Directors Stock Plan. |
| b. |
Annual Retainer. Directors who are not full-time employees of the
Corporation receive, as of the date of election or re-election to the Board, an
annual retainer of $195,000 payable one-half in shares of stock under the
Non-Employee Directors Stock Plan and the balance in cash. A Director may elect
to receive all or any part of the cash portion in shares of stock. A Director
who elects to receive all or any part of the cash portion in shares of stock and
defer receiving the shares under The Black & Decker Corporation Deferred
Compensation Plan for Non-Employee Directors shall be credited with shares
having a Fair Market Value (as defined in The Black & Decker Non-Employee
Directors Stock Plan) equal to 120% of the amount of cash deferred. If a person
is elected a Director other than at an annual meeting of stockholders, the
compensation will be prorated as of the date when the Director was elected. |
| c. |
Expenses. The Corporation will reimburse Directors for travel on behalf
of the Corporation, including travel to attend meetings of the Board or Board
committees, and travel-related expenses. |
| d. |
Insurance. The Corporation provides $100,000 of term life insurance for
each non-employee Director. The Corporation also provides $200,000 of accident
insurance coverage during each day that a non-employee Director is traveling in
connection with Corporate business. |
| 8. |
Access to Management and Independent Advisors. The Board and each
Director shall have direct access at all times to members of management and,
preferably through the Audit Committee, to the Corporation’s independent
auditor. The Board may retain at the Corporation’s expense such independent
consultants and advisors as it may choose. |
| 9. |
Annual Performance Assessment. Under the oversight of the Corporate
Governance Committee, the Board shall conduct annually a self-evaluation to
determine whether it and its committees are functioning effectively and take any
action that it deems appropriate to improve its ability to oversee and guide the
Corporation. |
| 10. |
Communications from Stockholders. In addition to the procedures provided
for any interested party to communicate with the Presiding Director (section
B.4.c) and the non-management Directors as a group (section B.5.d), stockholders
also may communicate with individual Directors or the whole Board by sending
communications, marked to show that they are stockholder communications, in care
of the Corporate Secretary. If addressed to individual Directors, the
communications will be forwarded, unopened, to those Directors, and if addressed
to the whole Board, will be forwarded, unopened, to the Chairman of the
Corporate Governance Committee for review and appropriate dissemination. |
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C. Charters of Standing
Committees.
1.
Executive Committee Charter.
| a. |
Members. The Executive Committee is composed of not less than five
members elected annually by the Board of whom the Chairman shall be one. A
majority of the members shall be independent Directors as defined in section
B.1.b of this Statement. Normally, the chairman of each of the other standing
committees will be elected a member of the Executive Committee. The Bylaws
provide that in the absence of any member of the Executive Committee, the
members who are present at any meeting, whether or not they constitute a quorum,
may appoint a Director who is present to act in the place of the absent member. |
| b. |
Functions. During the intervals between the meetings of the Board, the
Executive Committee may exercise all of the powers of the Board in the
management and direction of the affairs of the Corporation subject to (1)
specific directions of the Board and (2) the Maryland General Corporation Law,
which provides that such a committee may not (a) declare dividends or other
distributions on stock, (b) issue stock other than pursuant to general authority
granted by resolution of the Board, (c) recommend to the stockholders any action
requiring stockholders’ approval, (d) amend the Bylaws, or (e) approve any
merger or share exchange that does not require stockholder approval. The
Executive Committee will also act in a general and advisory capacity to
management. |
| c. |
Staff Support. General Counsel; Corporate Secretary. |
2.
Audit Committee Charter.
| a. |
Members. The Audit Committee is composed of not less than three members,
appointed annually by the Board, each of whom (1) is an independent Director as
defined in section B.1.b of this Statement, (2) meets the requirements of
Section 303A(2) of the NYSE Listed Company Manual and Rule 10A-3(b)(1) of the
SEC, (3) except fees for service as a Director or as a member of a committee of
the Board, accepts no other consulting, advisory, or other compensatory fee from
the Corporation, and (4) is not an affiliated person of the Corporation or any
subsidiary of the Corporation. All members shall be able to read and understand
fundamental financial statements, including the Corporation’s balance
sheet, income statement, and cash flow statement. In addition, at least one
member shall qualify as an “audit committee financial expert” as
defined by the SEC. A member may not serve simultaneously on the audit
committee of more than three public companies unless the Board determines that
the additional service will not impair the member’s ability to serve
effectively on the Corporation’s Audit Committee and discloses the
determination in the Corporation’s annual meeting proxy statement. |
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| b. |
Purpose. The Audit Committee, among other things, assists the Board in
overseeing the integrity of the Corporation’s financial statements, the
Corporation’s compliance with legal and regulatory requirements, the
independent auditor’s qualifications and independence, and the performance
of the Corporation’s internal auditors and independent auditor. The
Committee is directly responsible for the appointment, compensation,
retention, and oversight of the work of the independent auditor, who
shall report directly to the Committee. The Committee also prepares a report to
be included in the Corporation’s annual meeting proxy statement as required
by the rules of the SEC. |
| c. |
Functions. The Audit Committee will: |
| (1) |
Retain and terminate, on its sole authority, the Corporation’s independent
auditor and approve all audit engagements and the scope, fees, and terms of each
engagement. |
| (2) |
Approve in advance any non-audit engagements of the independent auditor
permitted by Section 201 of the Sarbanes-Oxley Act of 2002 and assure that the
approval is disclosed in the Corporation’s periodic reports as required by
law. |
| (3) |
At least annually, obtain and review a report by the independent auditor
describing the auditor’s internal quality-control procedures, any material
issues raised by the most recent internal quality-control review or peer review
of the auditor or by any inquiry or investigation by governmental or
professional authorities within the preceding five years with respect to one or
more independent audits carried out by the auditor, and any steps taken to deal
with any such issues, and (to assess the auditor’s independence) all
relationships between the independent auditor and the Corporation. |
| (4) |
Require the independent auditor to provide a written statement of all
relationships between the auditors and the Corporation consistent with
Independence Standards Board Standard No. 1. |
| (5) |
Evaluate the independent auditor’s qualifications, performance, and
independence, including review and evaluation of the lead partner of the
independent auditor, taking into account the opinions of management and the
Corporation’s internal auditors, and assure the rotation of the lead audit
partner, the reviewing audit partner, and other audit personnel as required by
law. |
| (6) |
Receive and review reports of the independent auditor regarding critical
accounting policies and practices to be used, all material alternative
treatments of financial information within GAAP that have |
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been discussed with
management, the ramifications of using the alternative disclosures and
treatments and the treatment preferred by the independent auditor, and other
material written communications between the independent auditor and management,
including any management representation letter, report on observations and
recommendations on internal controls, schedule of unadjusted differences, and a
listing of adjustments and reclassifications not recorded. |
| (7) |
Present to the Board the Audit Committee’s conclusions with respect to the
independent auditor. |
| (8) |
Meet to review and discuss the Corporation’s annual audited financial
statements and quarterly financial statements, including reviewing the
Corporation’s specific disclosures under “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” with
management and the independent auditor. |
| (9) |
Review and discuss with management the financial statements in the
Corporation’s Annual Report on Form 10-K, discuss with the independent
auditor the matters required to be discussed by Statement on Auditing Standards
No. 61, and based on the review and discussion, recommend to the Board that the
audited financial statements be included in the Annual Report on Form 10-K. |
| (10) |
Discuss earnings press releases and the general types of information to be
provided to securities analysts and rating agencies. The discussion of earnings
press releases may be conducted without a meeting of the Committee by the
Chairman or the Chairman’s designee and any available members. |
| (11) |
Discuss policies with respect to risk assessment and risk management, including
guidelines and policies that govern the process by which risk assessment and
risk management is undertaken and the steps management has taken to monitor and
control the exposures. |
| (12) |
Periodically, meet separately with the CFO, the General Counsel, the
Controller, the General Auditor, and the independent auditor. |
| (13) |
Review regularly with the independent auditor any audit problems or
difficulties, including any restrictions on the scope of the independent
auditor’s activities or access to requested information, any significant
disagreements with management and management’s response. |
| (14) |
Set clear hiring policies for employees and former employees of the independent
auditor. |
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| (15) |
Establish procedures for (a) receiving, retaining, and handling complaints
received by the Corporation regarding accounting, internal accounting controls,
or auditing matters, and (b) the confidential, anonymous submission by employees
of the Corporation of concerns regarding questionable accounting or auditing
matters. |
| (16) |
Serve as a channel of communication between the Board and the independent
auditor. |
| (17) |
At least annually, meet with the General Auditor to review the internal audit
organization, the adequacy of resources committed to the function, the adequacy
of the system of internal controls, procedures, and programs, the results of
activities, and the responsibilities, budget, and staffing of the
Corporation’s internal audit function. |
| (18) |
Review significant accounting principles and financial statement presentations,
including any material changes in the Corporation’s selection or
application of accounting principles. Review significant judgments made in
connection with the preparation of the financial statements, including any
material exposures and related reserves and any off-balance sheet structures. |
| (19) |
Assess compliance of the Corporation’s CEO, CFO and Controller with the
Code of Ethics for Senior Financial Officers set out in Appendix 2 to this
Statement, report material violations to the Board, and recommend to the Board
appropriate action. |
| (20) |
Review the expenses of the executive officers. |
| (21) |
Report the Audit Committee’s charter, charter amendments, and activities
in the Corporation’s annual meeting proxy statement as required by the
rules of the SEC. |
| (22) |
Review the certificates of the CEO and the CFO relating to the annual and
quarterly reports and monitor the establishment, maintenance, and evaluation by
the CEO and the CFO of the disclosure controls and procedures and internal
control over financial reporting required by the SEC. |
| (23) |
Quarterly, receive a report from the General Auditor regarding any transactions
that are out of the ordinary course of business between Directors or executive
officers and the Corporation. |
| (24) |
Annually, adopt a schedule for discharge of the Committee’s duties and
responsibilities. |
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| (25) |
Review compliance with the provisions of the Corporation’s Code of Ethics
and Standards of Conduct (Appendix 1) dealing with conflicts of interest,
improper payments, and secret accounts. |
| (26) |
As appropriate and at the expense of the Corporation, retain and obtain advice
and assistance from outside legal, accounting, or other advisors without seeking
Board approval. |
| (27) |
Annually, review and reassess the adequacy of the charter of the Audit
Committee. |
| (28) |
Annually, conduct an evaluation of the Audit Committee’s performance. |
| (29) |
Report regularly to the Board. |
| d. |
Staff Support. CFO; Controller; General Counsel; General Auditor. |
3.
Compensation Committee Charter
| a. |
|
Members. The Compensation Committee is composed of not less than three
members appointed annually by the Board. All members shall be independent
directors as defined in section B.1.b of this Statement. |
| b. |
|
Purpose. The Compensation Committee, among other things, assists the
Board in matters relating to executive compensation, establishes goals for the
award of incentive or performance-based compensation, administers the
Corporation’s stock option and similar plans, and monitors the performance
of the executive officers. |
| (1) |
Annually, review and approve goals and objectives relevant to compensation of
the CEO, evaluate the CEO’s performance in light of those goals and
objectives, and recommend to the independent members of the Board the CEO’s
compensation level based on that evaluation. |
| (2) |
On a continuing basis, review the Corporation’s organizational structure. |
| (3) |
On a continuing basis, maintain plans for succession in the officer ranks to
cover losses both by normal attrition and by premature death, incapacity, or
retirement. |
| (4) |
Review and recommend to the Board the election and removal of elected corporate
officers. |
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| (5) |
Review annually the job objectives and job performance of the executive
officers. |
| (6) |
In addition to (1) above, review and recommend to the Board salaries and
benefits for the executive officers. |
| (7) |
Review and make recommendations to the Board with respect to incentive
compensation plans and equity-based compensation plans. |
| (8) |
Administer all short-term and long-term incentive compensation plans and all
equity-based plans, including acting as the stock option committee under all of
the Corporation’s stock option plans. |
| (9) |
Monitor compliance with the Corporation’s policy regarding stock ownership
by executives. |
| (10) |
If a compensation consultant is to assist in the evaluation of CEO or other
senior executive compensation, retain and terminate the consulting firm and
approve the firm’s fees and other retention terms, all on the Compensation
Committee’s sole authority. |
| (11) |
Produce a report on executive officer compensation for inclusion in the
Corporation’s annual meeting proxy statement in accordance with applicable
rules and regulations. |
| (12) |
Annually, conduct an evaluation of the Compensation Committee’s
performance. |
| (13) |
Report all significant actions to the Board at the next regular Board meeting. |
| d. |
Staff Support. Senior Vice President — Human Resources; General Counsel. |
4.
Corporate Governance Committee Charter.
| a. |
Members. The Corporate Governance Committee is composed of not less than
three members appointed annually by the Board. All members shall be independent
directors as defined in section B.1.b of this Statement. |
| b. |
Purpose. The Corporate Governance Committee, among other things,
identifies individuals qualified to become Directors, recommends to the Board a
slate of Director-nominees for the next annual meeting of stockholders,
recommends members of the standing committees, and develops and recommends to
the Board corporate governance principles. |
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| (1) |
Develop and recommend to the Board a set of corporate governance principles to
be set forth in this Statement, review this Statement on a continuing basis, and
recommend to the Board appropriate changes in this Statement. |
| (2) |
Propose to the Board at its December meeting a slate of Directors for
submission to the stockholders at their annual meeting. |
| (3) |
Monitor Directors for independence as defined in section B.1.b. of this
Statement and report to the Board at its February meeting any relationships that
require a determination by the Board of materiality for reporting purposes. |
| (4) |
Handle problems regarding Directors who because of physical or mental condition
or for other reasons become unfit to serve. |
| (5) |
Review and recommend to the Board any appropriate changes in the
Corporation’s criteria for selecting new directors. |
| (6) |
Consistent with the Qualifications and Standards stated in section B.2.a,
recommend candidates for election to the Board to fill vacancies and participate
in interviewing prospective candidates. The Committee shall have sole authority
to retain, terminate, and approve the compensation of search firms to assist it
in performing this function. |
| (7) |
Review for compliance with Section 3 of Article II of the Bylaws the
nominations of director candidates made by stockholders and determine the
eligibility of each proposed nominee. |
| (8) |
Nominate annually members of the standing committees for presentation to the
Board at its annual meeting and, on a continuing basis, recommend changes as
appropriate. |
| (9) |
Annually, review the Corporation’s Code of Ethics and Standards of Conduct
and compliance with the Code. |
| (10) |
Review and recommend changes in compensation and benefits for service on the
Board and committees of the Board. |
| (11) |
Monitor compliance with the Corporation’s policy regarding stock ownership
by Directors. |
| (12) |
Oversee the annual self-evaluation of the Board and the evaluation of
management. |
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| (13) |
Conduct an annual evaluation of the Corporate Governance Committee’s
performance. |
| (14) |
Report all significant actions to the Board at the next regular Board meeting. |
| d. |
Staff Support. General Counsel; Corporate Secretary. |
5.
Finance Committee Charter.
| a. |
Members. The Finance Committee is composed of not less than three
members, appointed annually by the Board. A majority of the members shall be
independent Directors as defined in section B.1.b of this Statement. |
| b. |
Purpose. The Finance Committee, among other things, monitors generally
the financial performance of the Corporation, recommends dividends, reviews and
recommends offerings of the Corporation’s securities, and reviews the
Corporation’s investments. |
| (1) |
Review the Corporation’s financial policies and procedures. |
| (2) |
Review operating and financial results. |
| (3) |
Give financial advice to management. |
| (4) |
Consider and make recommendations to the Board regarding corporate financing
and the issuance and sale of the Corporation’s securities. |
| (5) |
Review annual operating budgets and review and recommend to the Board annual
capital expenditure budgets and charitable contributions budgets. |
| (6) |
Review purchases of fixed assets (including capital leases) and sales of fixed
assets (including land and buildings) and act upon them in accordance with the
Board’s standing resolution on Approval of Financial Transactions. |
| (7) |
Consider and make recommendations to the Board on dividends. |
| (8) |
Review and act upon borrowings and prepayment of borrowings in accordance with
the Board’s standing resolution on Approval of Financial Transactions. |
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| (9) |
Review mergers, acquisitions, divestitures, and similar transactions in
accordance with the Board’s standing resolution on Approval of Financial
Transactions. |
| (10) |
Annually review and ratify all investments (defined as total assets less
inter-company accounts receivable and non-guaranteed third party accounts
payable) in “high risk” countries, and review and recommend to the
Board investments in “high risk” countries in accordance with the
Board’s standing resolution on Approval of Financial Transactions. |
| (11) |
Oversee generally the provisions of and operations of the various pension plans
and similar benefit programs and operating pension committees of the Corporation
and its subsidiaries. Specifically: |
| (a) |
Periodically review the investment policies and management of major pension
funds. |
| (b) |
Annually, review funding levels of non-insured defined benefit plans. |
| d. |
Staff Support. CFO; Treasurer. |
D. Officers.
| 1. |
Evaluation of the CEO. With the advice of the Compensation Committee,
the Board will conduct annually, in executive session, a formal evaluation of
the CEO. The review will be based on the accomplishment of goals and objectives
established by the Compensation Committee. The evaluation will be communicated
to the CEO by the Chairman of the Compensation Committee. |
| 2. |
Management Development and Succession Planning. With the advice of the
Compensation Committee, the Board will review annually the Corporation’s
plans for management development and succession planning for key executive
positions. |
| 3. |
Communications with Media and Others. The CEO is responsible for all
communications with the media, the financial community, and similar external
entities pertaining to the affairs of the Corporation. Directors should refer
all inquiries from such entities to the CEO. |
| 4. |
Stock Ownership by Executives. |
| a. |
Policy. The Corporation encourages stock ownership by its principal
elected corporate officers to more closely align their interests with those of
the Corporation’s stockholders. |
20
| b. |
Goal. Each of the following officers is expected to own stock of the
Corporation having a market value equal to the multiple of his or her annual
salary as follows: |
| (2) |
|
Executive, Senior, and Group Vice Presidents: 3 |
| c. |
Intermediate Goal. Until the applicable goal is achieved, each officer
is expected to retain 50% of the “net shares” received under the
Corporation’s stock-based compensation plans. “Net shares” are
the shares remaining after deducting shares for the payment of taxes and the
exercise price of stock options. |
| d. |
Exception. This policy does not apply to officers who have attained 60
years of age. |
E. Business Practices.
| 1. |
Code of Ethics and Standards of Conduct. The Board has adopted a Code of
Ethics and Standards of Conduct, a copy of which, as amended from time to time,
is attached as Appendix 1. |
| 2. |
Code of Ethics for Senior Financial Officers. The Board has adopted a
Code of Ethics for Senior Financial Officers, a copy of which, as amended from
time to time, is attached as Appendix 2. |
Adopted by the Board of
Directors February 13, 2003
Amended February 12, 2004.
Amended October 21, 2004.
Amended December 9, 2004.
Amended February 10, 2005.
Amended April 20, 2006.
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