Corporate Governance Guidelines
CORPORATE GOVERNANCE GUIDELINES OF STAGE STORES, INC.
Feb 1, 2012
- Director Selection
- Board Leadership
- Board Composition and Performance
- Size of the Board
- Percentage of Independent Directors on the Board; Matters of Corporate Governance
- Board Definition of Independent Director
- Duties of the Chairman
- Directors Who Change Their Present Job Responsibility
- Term Limits
- Retirement Age
- Board Compensation
- Executive Sessions of Independent Directors
- Evaluation of Guidelines and Charters and of Board, Committees and Director Performance
- Board Interaction with Third Parties
- Attendance at Board, Committee and Annual Meetings
- Board’s Role in Risk Oversight
- Board Relationship to Senior Management
- Board Meeting Procedures
- Committee Matter
- Compensation Objectives and Principles
- Leadership Development
- Related Party Transactions, Other Material Transactions and Loan
- Communications Between Shareholders and the Board
- Website Posting and Disclosure
CORPORATE GOVERNANCE GUIDELINES
OF
STAGE STORES, INC.
February 1, 2012
DESCRIPTION AND PURPOSE
The following Corporate Governance Guidelines (the “Guidelines”) have been adopted by the Board of Directors (the “Board”) of Stage Stores, Inc. (the “Company”) to assist the Board in the exercise of its corporate governance responsibilities. The purpose of these Guidelines is to provide a structure within which directors and the Company’s management can monitor the effectiveness of policy and decision making both at the Board and management level, with a view to enhancing shareholder value over the long term. The Guidelines are intended to be a work in progress subject to annual review and modification from time to time by the Board.
I. DIRECTOR SELECTION
A. Directorship Qualifications
Nominees for director shall be selected on the basis of broad experience, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity), wisdom, integrity, the ability to make independent analytical inquiries, an understanding of the Company’s business environment, and a willingness to devote adequate time to Board duties.
The Corporate Governance and Nominating Committee shall be responsible for assessing the appropriate balance of skills and qualifications required of directors.
B. Director and Executive Officer Questionnaire
Each candidate for director shall complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board prior to his or her nomination to the Board. Each director shall no less than annually complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board. In the event any information contained on a director’s most recent Director and Executive Officer Questionnaire becomes incomplete or inaccurate, it shall be the responsibility of the director to provide complete and accurate information to the Corporate Governance and Nominating Committee within thirty days.
C. Selection of Directors
The Board shall be responsible for nominating individuals for election to the Board and for filling vacancies on the Board that may occur between annual meetings of the shareholders. The Corporate Governance and Nominating Committee shall be responsible for identifying, recruiting, and recommending potential candidates to the Board for directorship. When formulating its director recommendations, the Corporate Governance and Nominating Committee shall also consider any advice and recommendations offered by the Chief Executive Officer and any non-committee members of the Board as well as any written recommendations received from the shareholders of the Company.
D. Extending the Invitation to a Potential Director
The invitation to join the Board should be extended by the Board via the Chairman of the Board and the Chief Executive Officer of the Company.
E. Director Orientation
An orientation program should be conducted for new directors which includes comprehensive information about the Company’s business and operations, general information about the Board and its committees, including a summary of director compensation and benefits, and a review of director duties and responsibilities by the Company’s counsel.
F. Stock Ownership by Directors
In General. The Board believes that directors should be shareholders and have a financial stake in the Company. Each director must develop and maintain a stock position in the Company with an original investment of at least four times the Annual Retainer or such other amount as the Board deems appropriate (the “Original Investment”). In determining whether the director has achieved the Original Investment, the director can include (i) a director’s tax basis in any stock acquired by the director in open market purchases, and (ii) the amount of any director fees which the director has designated to be used for the acquisition of restricted stock or deferred stock units under the Company’s Non-Employee Director Equity Compensation Plan. Directors shall have three years from the date of their initial election to the Board to achieve the Original Investment.
Notice and Compliance. Each director shall promptly and fully (i) comply with the Company’s then current Insider Trading Policy for Reporting Persons (the “Trading Policy”), (ii) report all purchases, sales, pledges and other transactions in the Company’s securities to one of the Company’s Compliance Officers identified in the Trading Policy, and (iii) comply with any and all reporting requirements imposed upon directors under the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and any and all regulations promulgated by the SEC thereunder.
G. Director Participation on Other Boards
Independent Directors are encouraged to limit the number of other boards (excluding non%u2011profit) on which they serve, taking into account potential board attendance, participation and effectiveness on those boards. Directors should also advise the Chairman of the Corporate Governance and Nominating Committee prior to accepting an invitation to serve on another board, including a non-profit board.
H. Director Education
The Board supports and encourages Directors to expand their knowledge in appropriate areas by attending director education programs or through relevant publications.
II. BOARD LEADERSHIP
A. Board Leadership Structure
The Board should be free to choose its Chairman in any way that it deems best for the Company at any given point in time. However, it is the policy of the Board that the Chairman of the Board (hereinafter, the “Chairman”) shall be an Independent Director, as defined below, and shall be appointed by the remaining Independent Directors.
B. Chairman of the Corporate Governance and Nominating Committee
The Chairman of the Corporate Governance and Nominating Committee shall be an Independent Director, shall be appointed by the Independent Directors, and shall be responsible for chairing meetings of the Corporate Governance and Nominating Committee. The Chairman of the Corporate Governance and Nominating Committee, together with the members of that Committee, will develop the agendas for the regular meetings of the Corporate Governance and Nominating Committee and periodically evaluate these Guidelines and any other Company corporate governance procedures.
III. BOARD COMPOSITION AND PERFORMANCE
A. Size of the Board
The Board believes that it should generally have no fewer than seven and no more than eleven directors absent a resolution adopted by either the shareholders or the directors or as otherwise provided in the Company’s Bylaws. The Board believes that this range permits diversity of experience without hindering effective discussion or diminishing individual accountability.
B. Percentage of Independent Directors on the Board; Matters of Corporate Governance
Independent Directors shall constitute a majority of the Board; provided, that the Company shall maintain a minimum of three (3) Independent Directors on the Board. Furthermore, no more than two of the Company’s executive officers may serve on the Board at the same time.
On matters of corporate governance, the Board assumes decisions will be made by the Independent Directors with the advice of the Chief Executive Officer.
C. Board Definition of Independent Director
As used in these Guidelines, "Independent Director" means a member of the Board who does not have a material relationship with the Company, including any of its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). A director is not independent if:
1. 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;
2. 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);
3. (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;
4. 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 served on that company’s compensation committee; or
5. 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. In applying this test, both the payments and the consolidated gross revenues to be measured shall be those reported in the last completed fiscal year of such other Company. The look-back provision for this test applies solely to the financial relationship between the Company and the director or Immediate Family Member’s current employer; the Company need not consider former employment of the director or Immediate Family Member.
For purposes of independence, any three year look back periods commence on the date the relationship ceases.
An “Executive Officer” means the Company’s president, chief operating officer, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice president of the Company in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function, or any other person who performs similar policy-making functions for the Company, in all cases including officers of the Company’s subsidiaries if they perform policy making functions for the Company.
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 certain functions, such as membership on the Board’s Audit or Compensation Committees, more specific independence standards may be used in order to comply with applicable rules and regulations, such as SEC and NYSE or other exchange rules in the case of the Audit Committee and Section 162(m) of the Internal Revenue Code in the case of the Compensation Committee. In those cases, the definition of Independent Director shall be set forth in the respective committee’s charter.
D. Duties of the Chairman
The Chairman shall perform the following duties:
- Coordinate the activities of the Independent Directors;
- Provide the Board with input on agendas for the Board and Board committee meetings;
- Coordinate, develop the agenda for, and chair regularly scheduled executive sessions and other meetings of the Independent Directors;
- Facilitate communications between the Chairman and the other members of the Board, including communicating other members’ requests to call special meetings of the Board;
- Discuss the results of the Chief Executive Officer’s performance evaluation with the Chairman of the Compensation Committee;
- Convey to the Chief Executive Officer, together with the Chairman of the Compensation Committee, the results of the Chief Executive Officer’s performance evaluation; and
- Be available to the Chief Executive Officer.
In performing the duties describe above, the Chairman is expected to consult with the Chairman of the Corporate Governance and Nominating Committee and the chairmen of other appropriate Board committees and solicit their participation in order to avoid diluting the authority or responsibilities of those committee chairmen. Nothing in this Section or elsewhere in these Guidelines is intended to restrict any director from direct access to the Chief Executive Officer.
E. Directors Who Change Their Present Job Responsibility
It is expected that when a director who is also an employee of the Company resigns or otherwise relinquishes his or her corporate officer title, he or she will submit his or her resignation from the Board at the same time. Whether the individual continues to serve on the Board will be a matter for discussion by the Board at that time. A former employee serving on the Board will not be considered an Independent Director for purposes of voting on matters of corporate governance until he or she meets the definition of Independent Director set forth in these Guidelines.
It is the sense of the Board that when a non-employee director’s principal occupation or business association changes substantially from the position he or she held when originally invited to join the Board or when he or she no longer meets the definition of “Independent Director” in these Guidelines, the director should tender a letter of resignation to the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee will review whether the new occupation, or retirement, of the director is consistent with the specific rationale for originally selecting that individual and the guidelines for directorship and/or, if applicable, whether the director continues to meet the definition of Independent Director. The Board does not believe that Independent Directors who retire or change the position they held when they became a member of the Board or who no longer meet the definition of Independent Director should necessarily leave the Board. The Corporate Governance and Nominating Committee will recommend to the Board action to be taken regarding the resignation based on the circumstances of retirement, if that is the case, or in the case of a new position, the responsibility and type of position and industry involved, or in the case a director no longer meets the definition of Independent Director, the impact that fact may have on the Board’s corporate governance.
F. Term Limits
The Board does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of 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.
As an alternative to term limits, the Corporate Governance and Nominating Committee, in conjunction with the Chief Executive Officer, will formally review each director’s continuation on the Board near the conclusion of that director’s term. This will also allow each director the opportunity to conveniently confirm his or her desire to continue as a member of the Board. An individual director’s re-nomination will be dependent upon that director’s performance evaluation, as well as the suitability review conducted by the Corporate Governance and Nominating Committee.
G. Retirement Age
It is the sense of the Board that a retirement age of 75 is appropriate. Therefore, no director who has reached the age of 75 years shall be nominated for re%u2011election to the Board.
H. Board Compensation
Directors who are full-time employees of the Company shall not receive any additional compensation for serving on the Board.
Directors who are not full-time employees of the Company shall receive compensation plus expense reimbursement for services rendered as a director as set forth in Appendix A to these Guidelines, which may be amended by the Board from time to time.
As part of a director’s total compensation and to create a direct linkage with the Company’s performance, the Board believes that a meaningful portion of a director’s compensation should be provided and held in common stock or options to purchase common stock. To that end it shall be the responsibility of the Corporate Governance and Nominating Committee to recommend to the Board alternative forms of director compensation which include a stock purchase (e.g., restricted and/or free trading), deferred stock units, stock grant or stock option component in lieu of cash compensation, with purchase, grant, exercise prices, restrictions, if any, and other terms and conditions to be determined by the Board and set forth either in Appendix A to these Guidelines or in such other document as may be approved by the Board.
It is appropriate for management of the Company to report at least once a year to the Corporate Governance and Nominating Committee on the status of the Company’s Board compensation in relation to the compensation of directors of the Company’s peer companies.
Changes in Board compensation, if any, should come at the recommendation of the Corporate Governance and Nominating Committee, but with full discussion and approval by the Board.
I. Executive Sessions of Independent Directors
The Independent Directors of the Board will have the opportunity to meet in Executive Session in conjunction with each Board Meeting, but shall meet no fewer than two times each year. Executive Sessions will be chaired by the Chairman. The format of these meetings will ordinarily include a discussion with the Chief Executive Officer on each occasion, as appropriate.
J. Evaluation of Guidelines and Charters and of Board, Committees and Director Performance
With input from the other directors, the Corporate Governance and Nominating Committee shall report annually to the Board on (i) its evaluation of these Guidelines, the Charters of the committees of the Board, and any other corporate governance policies, (ii) the overall performance of the Board, each committee of the Board and each director, and (iii) any and all related party transactions (transactions involving the Company and any officer, director, employee or their affiliates and immediate families). Its evaluations will be discussed with the full Board. With respect to the Board and a committee of the Board, the evaluation should be of the Board’s and the committee’s overall performance as a whole and should specifically review areas in which the Board and/or management believes a better contribution could be made. The purpose of the evaluation of the Board and the committees of the Board is to increase the corporate governance effectiveness of the Board and the committees, not to target individual directors. The Corporate Governance and Nominating Committee shall be responsible for establishing the evaluation criteria and implementing the process for the annual evaluation of the Board, the committees of the Board and the directors.
K. Board Interaction with Third Parties
The Board believes that the Chief Executive Officer should generally speak for the Company. While the Board suggests that each director refer all inquiries from institutional investors, analysts, the press, customers of the Company and other third parties to the Chief Executive Officer, individual directors may, from time to time and at the request of the Chief Executive Officer, meet or otherwise communicate with various constituencies that are involved with the Company. If comments from the Board are appropriate, they should, in most circumstances, come from the Chairman.
L. Attendance at Board, Committee and Annual Meetings
It is expected that directors will attend a minimum of 75% of the aggregate of (a) the total number of meetings of the Board (held during the period for which he or she has been a director) and (b) the total number of meetings held by all committees of the Board on which he or she served (during the periods that he or she served). It is the Board’s policy that directors should attend the Company’s annual meeting of shareholders absent exceptional cause.
M. Board’s Role in Risk Oversight
Unless otherwise established by the Board, the Board’s role in the risk oversight of the Company shall be administered directly and through its standing committees as follows:
- The Audit Committee has primary responsibility for financial oversight. In that regard, the Audit Committee’s purpose is to assist in the Board’s oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditor’s qualifications, independence and work, and (iv) the performance of the Company’s internal audit function and independent auditors. The Audit Committee acts independently as authorized and assists the Board in fulfilling its oversight responsibilities by reviewing certain financial information that is provided to the Board and others, the internal control structure, the audit process, and the adherence to applicable laws and regulations. Considering the size and complexity of the Company, the Audit Committee must apply reasonable materiality standards to all of its activities. In addition, the Audit Committee has certain responsibilities with respect to the Company’s compliance program.
- The Compensation Committee considers the risks associated with the Company’s compensation policies and practices for all employees, including non-executive officers, to ensure that they do not create risks that are reasonably likely to have a material adverse affect on the Company.
- The Corporate Governance and Nominating Committee assists the Board in fulfilling its corporate governance and oversight responsibilities by reviewing corporate governance issues that may be brought before the Board, by exercising oversight over these Guidelines, by recommending qualified individuals for nomination as directors and reviewing their performance, and by reviewing applicable laws and regulations related to corporate governance matters.
- The Board shall be kept abreast of its Committees' risk oversight and other activities via reports of each Committee Chairman to the full Board. These reports are to be presented at every regular Board meeting and are to include discussions of Committee agenda topics, including matters involving risk oversight.
- Members of management who supervise the day-to-day risk management responsibilities shall periodically provide reports to the Board as a whole and to the Committees if requested.
The Board will consider specific risk topics, including risks associated with the Company’s strategic plan, its capital structure and its development activities. In addition, the Board shall receive detailed regular reports from the members of the Company’s senior management team, which consists of the heads of the Company’s principal business and corporate functions, that include discussions of the risks and exposures involved in their respective areas of responsibility. These reports are to be provided in connection with regular Board meetings and will be discussed, as necessary, at Board meetings. Further, the Board shall be routinely informed of developments affecting the Company that could affect the Company’s risk profile or other aspects of the Company’s business.
IV. BOARD RELATIONSHIP TO SENIOR MANAGEMENT
A. Regular Attendance of Non-Directors at Board Meetings
The Board welcomes the regular attendance at each Board meeting of non%u2011directors who are in the most senior management positions of the Company. Should the Chairman or the Chief Executive Officer want to add additional people as attendees on a regular basis, it is expected that this suggestion would be made to the Board for its concurrence.
B. Board Access to Senior Management
Directors shall have complete access to the Company’s senior management. It is assumed that directors will use sound business judgment to be sure that any contact is not distracting to the business operation of the Company and that any contact, if in writing, be copied to the Chairman or Chief Executive Officer, as appropriate.
Furthermore, the Board encourages management to, from time to time, bring individuals into Board meetings who: (a) can provide additional insight into the items being discussed because of personal involvement in these areas, and/or (b) have future potential that the senior management believes should be given exposure to the Board.
V. BOARD MEETING PROCEDURES
A. Frequency of Meetings
There shall be not less than four regularly scheduled meetings of the Board each year. A substantial portion of one of these meetings shall be devoted to the discussion of long%u2011term strategic planning and other issues, which may cause one or more Board meetings to be more than one day in length.
B. Agenda and Master Calendar for Board Meetings
The Chairman of the Board, in consultation with the Chief Executive Officer, shall establish the agenda for each Board meeting and provide a written copy to the entire Board prior to the meeting. At the beginning of each fiscal year, they shall also establish a Master Calendar. The Master Calendar shall set forth a general agenda of items to be considered by the Board at each of its specified meetings (to the degree these can be foreseen). Upon completion, a copy of the Master Calendar shall be provided to each director. Each director shall be free to suggest inclusion of items on the Master Calendar and any other Board agenda as well as be free to raise at any Board meeting subjects that are not specifically on the agenda for that meeting.
C. Board Materials Distributed in Advance
Information and data that is important to the Board’s understanding of the Company’s business will be distributed or made available in writing to the Board sufficiently in advance of the Board meeting to allow for meaningful review before the meeting. Information submitted to the directors should be relevant, concise (but complete and timely), well organized, supported by any background or historical data necessary to place information in context, and designed to inform directors of material aspects of the Company’s business, performance and prospects.
D. Board Presentations
As a general rule, presentations on specific subjects should be sent to the directors in advance so that Board meeting time may be conserved and discussion time focused on questions that the Board has about the material. On those occasions in which the subject matter is too sensitive to put on paper, the presentation will be made and discussed at the meeting.
E. Keeping Minutes
Minutes shall be taken for each Board meeting and shall be approved at the next meeting of the Board.
VI. COMMITTEE MATTERS
A. Number, Structure and Independence of Committees
From time to time, the Board may want to form a new committee or disband a current committee depending upon the circumstances. However, at a minimum, the Company shall have an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee, each of which shall be composed entirely of Independent Directors. The duties of each committee shall be outlined in the committee’s charter.
B. Appointment and Rotation of Committee Members
The Corporate Governance and Nominating Committee shall be responsible, after consultation with the Chief Executive Officer and the Chairman of the Board and with consideration of the desires of individual directors, for recommending to the Board the appointment of (i) directors to various Board committees and (ii) chairmen of the various Board committees. After reviewing the recommendations of the Corporate Governance and Nominating Committee, the Board shall be responsible for appointing directors to the Board committees and the chairmen of the Board committees.
The Corporate Governance and Nominating Committee shall annually review the committee assignments and shall consider the rotation of chairmen and members with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors.
C. Frequency and Length of Committee Meetings
The Chairman of each committee, in consultation with committee members, shall determine the frequency and length of the committee meetings.
D. Committee Agenda and Master Calendar
The Chairman of each committee, in consultation with the appropriate members of the committee and management, shall establish an agenda for each committee meeting and provide a copy to each committee member prior to the meeting. At the beginning of each fiscal year, each committee shall also establish a Master Calendar. The Master Calendar shall set forth a general agenda of items to be considered by the committee at each of its specified meetings for the ensuing year (to the degree these can be foreseen). Upon completion, a copy of each committee’s Master Calendar shall also be provided to each director. Each committee member shall be free to suggest the inclusion of items on the committee’s Master Calendar and any other committee agenda as well as be free to raise at any committee meetings subjects that are not specifically on the agenda for that meeting.
VII. COMPENSATION OBJECTIVES AND PRINCIPLES
The objectives of the Company’s compensation program are as follows:
- to enable us to recruit, motivate and retain the executive talent required to successfully manage and grow our business and to achieve our short and long-term business objectives;
- to maximize the long-term commitment of our Executive Officers to our success by providing compensation elements that align their interests with those of our shareholders in that the compensation elements are directly related to our stock performance and other financial metrics that the Compensation Committee believes influence the creation of long-term shareholder value; and
- to reward our Executive Officers upon the achievement of short-term and long-term business objectives and enhanced shareholder value.
The principles of the Company’s compensation program are as follows:
- Compensation arrangements shall emphasize pay-for-performance and encourage retention of those Executive Officers who enhance the Company’s performance;
- Compensation arrangements shall maintain an appropriate balance between base salary and annual and long-term incentive compensation;
- Cash incentive compensation plans for Executive Officers shall link pay to achievement of goals set in advance by the Compensation Committee;
- The Compensation Committee shall set annual and long-term performance goals for the Chief Executive Officer and evaluate his or her performance against those goals on an absolute basis as well as related to the performance of the Company’s Peer Group and the Company’s Performance Group, as the case may be;
- Compensation arrangements shall align the interests of the Company’s with those of shareholders;
- In the event minimum thresholds for annual and long-term performance goals are not met, incentive compensation related to those goals shall not be paid;
- It is the policy of the Board that the Company should not reprice or swap stock options granted to Executive Officers, directors and employees without shareholder approval;
- The Compensation Committee shall meet at least once each year in executive session, without the Chief Executive Officer;
- The Chief Executive Officer is not permitted to be present during deliberations and voting regarding his or her compensation. While the Chief Executive Officer may be present during deliberations and voting on the other Executive Officers’ compensation, the Chief Executive Officer makes recommendations, but does not vote on their compensation;
- The compensation of the Chief Executive Officer and other Executive Officers shall be recommended to the Board for final approval by the Compensation Committee comprised solely of Independent Directors;
- In approving compensation, the recent compensation history of the Executive Officer, including special or unusual compensation payments, and all forms of compensation to which the Executive Officer may be entitled, shall be taken into consideration using tally sheets or other comparable tools the Compensation Committee deems appropriate.
VIII. LEADERSHIP DEVELOPMENT
A. Formal Performance Evaluation of the Chief Executive Officer
It is the responsibility of the Compensation Committee to oversee the Board’s annual performance evaluation of the Chief Executive Officer. While subject to modification by the Compensation Committee and the Board, the formal performance evaluation process shall be substantially as follows:
- The performance evaluation of the Chief Executive Officer shall include review and evaluation by the Compensation Committee and the Board of the Chief Executive Officer’s performance of each of the responsibilities outlined in the Chief Executive Officer’s position description and any other performance criteria established by the Board.
- Each director should be asked to prepare comments and ratings using a CEO Evaluation Form (the “Evaluation Form”) that is annually reviewed and approved by the Compensation Committee and the Board, and to transmit the completed Evaluation Form to the Chairman of the Compensation Committee.
- Upon receipt of the completed Evaluation Forms, the Chairman of the Compensation Committee will cause all responses to be combined into a CEO Composite Evaluation Form (the “Composite Evaluation”), without attributing any evaluation or comment to any specific Director.
- Prior to the March Board meeting, the Composite Evaluation will be delivered to all Independent Directors.
- Prior to the March Board meeting, the Chief Executive Officer shall make a presentation to the Board or furnish a written report to the Board indicating his or her progress against the established position description and performance criteria.
- With the Chief Executive Officer absent, the Board shall meet in executive session, which may be by conference call, to review and evaluate the Chief Executive Officer’s performance.
- The Composite Evaluation shall be delivered, and any other results of the review and performance evaluation shall be communicated, to the Chief Executive Officer by the Chairman of the Board and the Chairman of the Compensation Committee.
B. Succession Planning
The Corporate Governance and Nominating Committee shall make an annual report to the Board on emergency as well as expected Chief Executive Officer succession planning. The entire Board shall work with the Corporate Governance and Nominating Committee to evaluate potential successors to the Chief Executive Officer. The Chief Executive Officer shall provide the Corporate Governance and Nominating Committee with his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
The Chief Executive Officer shall prepare and distribute to the Board an annual report on succession planning for all other Executive Officers and an organizational chart. In addition, the Chief Executive Officer shall prepare, on a continuing basis, a short%u2011term succession plan which delineates a temporary delegation of authority to certain officers of the Company, if all or a portion of the Executive Officers should unexpectedly become unable to perform their duties. The short%u2011term succession plan shall be in effect until the Board has the opportunity to consider the situation and take action, when necessary.
C. Management Development
There should be an annual report to the Board by the Chief Executive Officer on the Company’s program for management development. This report should be given to the Board at the same time as the succession planning report noted previously. The Board shall determine that a satisfactory system is in effect for education, development, and orderly succession of management throughout the Company.
IX. RELATED PARTY, OTHER MATERIAL TRANSACTIONS AND LOANS
A. Related Party Transactions
No officer, director, or employee of the Company or any of its affiliate or subsidiary companies (collectively, the “Companies”) shall enter into any agreement, arrangement or contract with any person or entity pursuant to which any of the Companies may be obligated to:
(i) pay any money to a “Related Party,” or
(ii) assign or lease any property belonging to any of the Companies to a Related Party, or
(iii) allow any Related Party to use any property belonging to any of the Companies
if the aggregate fair market value of any monies paid to the Related Party and the property assigned or leased to or used by the Related Party exceeds Five Thousand Dollars ($5,000), without the express, prior, written approval of the Board. As used in these Guidelines, “Related Party” includes:
(i) any person who is an officer, director or employee of any of the Companies (each, an “Insider”); and
(ii) any person who is a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father%u2011in%u2011law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of a director, executive officer for nominee for director, and any person (other than a tenant or employee) sharing the household of such director, executive officer or nominee for director (each, a “Related Party Immediate Family Member”); and
(iii) any entity for which an Insider or Related Party Immediate Family Member is an attorney, broker, commissioned sales agent, director, manager, officer, partner or profits participant; and
(iv) any entity in which an Insider or Related Party Immediate Family Member has beneficial ownership of five percent (5%) or more of the voting securities of the entity.
Notwithstanding anything to the contrary in this Section, if required by the SEC, NYSE, or other regulatory authority, any transaction between the Company and a Related Party, regardless of the amount involved, shall be approved by the Audit Committee.
B. Other Material Transactions
No officer, director, or employee of the Companies shall enter into any agreement, arrangement or contract with any person or entity or authorize any transaction which the Company may be required to disclose to the SEC unless the agreement, arrangement, contract or transaction previously has been approved by the Board.
C. Loans to Directors, Executive Officers and Their Immediate Family Members
The Company shall not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for or guarantee the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any director, Executive Officer, or Immediate Family Member of any director or Executive Officer.
D. Loans to Employees Other Than Directors, Executive Officers and Their Immediate Family Members
Loans to employees who are not directors, Executive Officers, or Immediate Family Members of directors and Executive Officers shall be made in strict compliance with the Company’s Loan Policy, as it may be amended from time to time by the Board.
X. COMMUNICATIONS BETWEEN SHAREHOLDERS AND THE BOARD
Shareholders and other interested parties may send written communications to the Board and, if applicable, to specified individual directors, by mail, facsimile or courier to the Company’s principal executive offices. All correspondence received by the Company will be relayed to the Board or, if applicable, to the individual director.
XI. WEBSITE POSTING AND DISCLOSURE
The Company shall make these Guidelines available on or through its website. The Company shall disclose in its annual proxy statement or, if it does not file an annual proxy statement, in its annual report on Form 10-K filed with the SEC, that these Guidelines are available on or through its website and provide the website address.
APPENDIX A
DIRECTOR COMPENSATION
(As of February 1, 2012)
Directors of the Company who are not full-time employees of the Company shall receive the following compensation:
1. Annual Retainer. Directors shall receive a $50,000 Annual Retainer, which shall be earned and paid pro rata over their term at the beginning of each month. The Annual Retainer is intended to compensate the Director for attendance at regularly scheduled quarterly Board meetings (may be by teleconference) as well as consultation and participation in teleconference meetings held for periodic Board updates.
2. Chairman Retainer. In addition to the Annual Retainer to which all Directors are entitled, the Chairman shall also receive a $100,000 Retainer (the “Chairman Retainer”), which shall be earned and paid pro rata over his or her term at the beginning of each month. The Chairman Retainer is intended to compensate the Chairman for the additional duties set forth in these Guidelines.
3. Special Board Meeting Fee. Directors shall receive a Special Board Meeting Fee of $1,500 per meeting for their preparation and attendance at special meetings of the Board (may be by teleconference) called for the purpose of specific actions by the Board (consents, resolutions, etc.) and held at times other than in conjunction with regular quarterly meetings of the Board. No additional meeting fee is to be paid for attendance at regular quarterly board meetings.
4. Committee Meeting Fees. Directors shall receive (a) a Regular Committee Meeting Fee of $1,000 per meeting for their preparation and attendance at regular quarterly meetings of the Committees on which they serve (may be by teleconference), and (b) a Special Committee Meeting Fee of $1,000 per meeting for (i) their preparation and attendance at Committee meetings (may be by teleconference) called for the purpose of specific actions by their Committees (consents, resolutions, etc.) and held at times other than in conjunction with regular quarterly meetings of their Committees, and (ii) their preparation and attendance at “ad hoc” Board Committee assignments held at times other than in conjunction with regular quarterly meetings of their Committees or the Board.
5. Committee Chairman Fees. The Chairman of the Audit Committee shall receive a Committee Chairman Fee of $17,500 per year; the Chairman of the Compensation Committee shall receive a Committee Chairman Fee of $15,000 per year; and the Chairman of the Corporate Governance and Nominating Committees shall receive a Committee Chairman Fee of $12,500 per year. The Committee Chairman Fee shall be earned and paid pro rata over the Chairman’s term at the beginning of each month.
6. Stock Options and Restricted Stock Grants
Initial Grant. Upon a director’s initial election to the Board, the director will be granted, at the director’s election, either (a) stock options to purchase the Company’s common stock, or (b) restricted shares of the Company’s common stock, in either case valued at $50,000 based on a Net Present Value (the “Initial Grant”). The exercise price and the share price used in granting stock options and the share price used in granting restricted shares shall be equal to the closing price of the Company’s common stock on the date the director is elected to the Board. The Initial Grant will vest 25% per year over four years from the date of grant and if stock options are granted, they will expire if not exercised within seven years from the date of grant.
Reelection Grant. Upon a director’s reelection to the Board, the director will be granted restricted shares of the Company’s common stock valued at $100,000 based on a Net Present Value (the “Reelection Grant”). The share price used in granting the restricted shares shall be equal to the closing price of the Company’s common stock on the date the director is reelected to the Board. The Reelection Grant will vest, on a cliff basis, on the earliest of (i) one year from the date of grant or (ii) the date of the first Annual Meeting of the Company’s shareholders following the date of grant.
Forfeiture of Grants. A director will forfeit any unvested Initial Grant and Reelection Grants if the director ceases to be a director at any time prior to their vesting date other than due to (i) the fact that the director’s age prohibits the director from serving as a director, (ii) death, (iii) permanent disability (as determined by the Board), or (iv) a Change in Control (as defined in the applicable equity incentive plan), at which time the unvested Initial Grant and Reelection Grants will fully vest.
7. Reimbursement of Expenses. Directors shall be reimbursed for actual expenses they incur while attending, or otherwise participating in, Board meetings, Board committee meetings and “ad hoc” committee assignments.
8. Election Concerning Receipt of Certain Compensation. Under the Company’s 2003 Non-Employee Director Equity Compensation Plan (the “Plan”), a director may elect to receive the Annual Retainer, the Chairman Retainer, Special Board Meeting Fees, Committee Meeting Fees, Committee Chairman Fees, and such other compensation as the Board may deem appropriate, as the case may be, either (a) in restricted stock, deferred stock units, cash, or a combination of restricted stock, deferred stock units and cash at the time that such compensation is earned, or (b) in cash or restricted stock at a later date. Any issuance of restricted stock in lieu of cash will be made by the Company on such terms and conditions as the Board may establish. In any event, in order to receive restricted stock, a director must, at a minimum, (a) notify the Company of his or her current election to receive restricted stock by executing an applicable Election Form, and (b) execute a Shareholder Agreement by which the director agrees not to sell any of the restricted stock until the director leaves the Board. Any restricted stock certificate issued to a director in lieu of cash shall bear restrictive legends consistent with the terms and conditions established by the Board for the issuance of the restricted stock as well as such other restrictive legends as may be required by law or SEC regulation and shall be in a form substantially as follows:
The Shares represented by this Certificate have not been registered under the United States Securities Act of 1933 (the “Act”) and are “restricted securities” as that term is defined in Rule 144 under the Act. The Shares may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Company. In addition, the rights and obligations of the holder of this Certificate, and the ability of the holder to transfer the Shares represented by this Certificate, are subject to the terms and conditions of a Shareholder Agreement, a copy of which can be obtained from the Company upon written request.
The amount of any director fees which the director has designated to be used for the acquisition of restricted stock or deferred stock units under the Plan shall be credited toward the director’s obligation to develop and maintain a stock position in the Company with an original investment of at least four times the Annual Retainer within three years of the date of the director’s initial election to the Board.