SIZE OF THE BOARD
The By-laws provide that the Board of Directors may determine the size of the Board from time to time, and that the Nominating and Governance Committee may recommend to the Board changes in the size of the Board.
In determining whether to change the size of the Board, the Nominating and Governance Committee and Board will be guided by the following principles:
- The Board should generally have no fewer than 10 nor more than 14 directors.
- The number of directors at any time will depend upon several factors, including (a) resignations, retirements, and the availability of appropriate, qualified candidates; (b) assuring that the Board has a small enough number to facilitate active discussions and decision-making; and (c) assuring that the Board has a sufficient number of directors to fulfill committee assignments and to provide the appropriate mix of continuity, experience, skills and diversity of viewpoints and backgrounds for the Board and its committees to perform their responsibilities in light of regulatory requirements and current business needs.
MIX OF INSIDE AND INDEPENDENT DIRECTORS
Under the Corporation's By-laws, a majority of directors must be independent. It is the Board's objective, however, that a substantial majority of the directors shall be independent.
On at least an annual basis (and whenever an individual is considered by the Nominating and Governance Committee for election as a director), management will collect information from the Company's records and, as appropriate, from the individual directors, to conduct an analysis of each current or prospective director's eligibility to be classified as "independent" under the Corporation's By-laws, Corporate Governance Policy, and applicable statutes and regulations (including applicable listing standards set forth by the New York Stock Exchange and rules and regulations issued by the Securities and Exchange Commission and Internal Revenue Service). This analysis shall address each individual's eligibility to be classified as "independent" for purposes of serving on the Board and on each of the Board's committees. This analysis shall be submitted to the Nominating and Governance Committee, which shall make a recommendation regarding each individual's independence to the full Board of Directors, which in turn shall make the final determination of each individual's independence.
As set forth in the Corporation's By-laws, the Board may establish categorical standards to guide it in determining whether an individual has a "material relationship" with the Company. The Board has adopted the following categorical standards, in addition to the standards for independence established under applicable statutes and regulations, which it may amend or supplement from time to time:
- Transactions (such as advertising, the purchase of goods and services, financing, and the purchase or sale of assets) between the Company and another entity with which a director or a member of a director's family is affiliated shall generally be deemed not to create a material relationship (i) if they occurred more than three years prior to the determination of materiality or (ii) if they occurred in the ordinary course of business and are consistent with other transactions in which the Company has engaged with third parties, unless (a) the director serves as an executive officer, employee, or substantial owner, or an immediate family member (as defined in the New York Stock Exchange's rules) is an executive officer, of the other entity and (b) such transactions represent more than 5% of the Company's consolidated gross revenues for the prior fiscal year or more than $250,000 and 2% of the other entity's gross revenues for the prior fiscal year.
- Discretionary charitable contributions by the Company to established non-profit entities with which a director or a member of the director's family is affiliated shall generally be deemed not to create a material relationship (i) if they occurred more than three years prior to the determination of materiality or (ii) if they are consistent with the Company's philanthropic practices, unless (a) the director or spouse is an executive officer or director of the organization and (b) the Company's contributions represent, for the most recent fiscal year, more than the greater of $100,000 or 10% of any individual organization's annual gross revenues (for organizations with gross revenues up to $10 million per year), or the greater of $1 million or 2% of any individual organization's annual gross revenues (for organizations with gross revenues of more than $10 million per year), or the greater of $ 1 million or 2% of all such organizations' annual gross revenues in the aggregate.
- The employment by the Company of a member of a director's family shall generally be deemed not to create a material relationship, other than employment at an annual salary of more than $120,000 per year of a director's current spouse, domestic partner, or child.
- The service by an employee of the Company as a director of an entity where one of the Corporation's directors or a member of the director's family serves as a non-employee director shall generally be deemed not to create a material relationship. The service by an employee of the Company as a director of an entity where one of the Corporation's directors or director's family members serves as an executive officer shall generally be deemed not to create a material relationship, unless the employee is an executive officer of the Corporation, or reports directly to the Board or a Committee of the Board, or has annual compensation approved by the Board's Compensation & Human Development Committee.
- Attendance by an employee of the Company at an educational institution affiliated with one of the Corporation's directors or a member of the director's family, or membership by an employee of the Company in a professional association, social, fraternal or religious organization, club or institution affiliated with one of the Corporation's directors or a member of the director's family, shall generally be deemed not to create a material relationship.
- The ownership by an employee of the Company of the securities of an entity where one of the Corporation's directors or a member of the director's family serves as a director or employee shall generally be deemed not to create a material relationship, unless (i) the Company employee (a) is an executive officer of the Corporation, or reports directly to the Board or a Committee of the Board, or has annual compensation approved by the Board's Compensation and Human Development Committee and (b) beneficially owns more than 5% of any class of the other entity's voting securities; and (ii) the Corporation's director or family member is a director or executive officer of the other entity.
- Vested and non-forfeitable equity-based benefits and retirement benefits under qualified plans as a result of prior employment with the Company shall generally be deemed not to create a material relationship.
To supplement the annual process described above, it shall be the responsibility of each director to inform promptly the General Counsel and Corporate Secretary of any development that may affect the director's independence.
SELECTION AND ELECTION OF DIRECTORS
The Nominating and Governance Committee shall identify, review and recommend candidates for the Board. The Committee and the Board shall take the following factors into consideration, including such other factors as the Board may determine:
- Regulatory Requirements. They will assure that the Board has directors who meet the applicable criteria for committee or Board membership established by regulatory entities including the New York Stock Exchange, the Securities and Exchange Commission, and the Internal Revenue Service.
- Independence. They shall assure that at least a majority of the Board will be independent under the Corporation's By-laws and New York Stock Exchange regulations. (See item B.2 above.)
- Overall Board Composition. They will consider the Board's overall composition, including whether the Board has an appropriate combination of professional experience, skills, knowledge, and variety of viewpoints and backgrounds, in light of the Company's current and expected future needs.
- Performance. In regard to incumbent directors, they will consider past performance. Directors are expected: (a) to have regular attendance at Board and committee meetings; (b) to stay informed about the Company and its business; (c) to participate in the discussions of the Board and its committees; (d) to take an interest in the Company's business and provide advice and counsel to the Chairman and CEO; and (e) to comply with, as applicable, the Corporation's Corporate Governance Policy, Guidelines for Non-Employee Directors or Standards of Business Conduct, the Policy and Procedures Governing Related Person Transactions, and any other Company policies or guidelines applicable to directors.
- Other Criteria. Particularly with regard to new directors, they will also assess whether the candidates have the qualities expected of all directors, including integrity, judgment, acumen, and the time and ability to make a constructive contribution to the Board. While it is not possible to establish a single standard regarding the number of boards on which each director may sit, in order to help assure that directors have sufficient time to devote to their responsibilities, non-employee directors should generally serve on no more than a total of five other public company boards. Directors are required to offer a resignation upon a significant change in their primary professional responsibilities, and the Nominating and Governance Committee shall make a recommendation to the Board as to whether to accept such offer of resignation.
- Notice. In order to assure that the Board has ample notice of potential recommended changes in the Board, the Nominating and Governance Committee will inform the Board of Directors of the criteria used by the Committee in evaluating director nominations in advance of, and at the time of, submitting such nominations to the Board.
The Nominating and Governance Committee and Board should review the Board's leadership structure in accordance with the Policy on Determining the Leadership structure of the Board of Directors.
If the Board determines to have a Lead Independent Director, the Lead Independent Director shall be elected by the independent members of the Board. Unless the independent Directors determine otherwise, the Chairman of the Nominating and Governance Committee shall be the Lead Independent Director. The Lead Independent Director has responsibilities including: presiding at executive sessions of the Board and serving as the liaison between the Chairman of the Board and the other Directors (unless the matter under consideration is within the jurisdiction of one of the Board's committees); advising the Chairman of the Board with respect to the schedule, agenda, and information for Board meetings (including possessing the authority to approve the agenda and specific items of information for Board meetings); advising the Chairman of the Board with respect to consultants who may report directly to the Board; serving as interim Chairman of the Board in the event of the death or incapacitation of the Chairman; and being available, as appropriate, for communication with the Corporation's stockholders.
As set forth in the Corporation's By-laws, directors shall hold office until the next annual stockholders meeting and their successors have been duly elected and qualified. Thus, directors will generally have terms of one year.
In regard to retirement, individuals will not be eligible for nomination or re-nomination to the Board after they reach the age of 72.
The Nominating and Governance Committee will review, at least every two years, the compensation for non-employee directors and will make recommendations to the Board for its approval. As part of its review, the Committee will receive information on compensation provided to non-employee directors at a peer group or groups of companies.
It is the view of the Board that a substantial percentage of non-employee directors' compensation should be equity-based.
All directors are encouraged to own the Corporation's stock (whether as a result of exercising stock options, the vesting of restricted stock units, or the purchase of shares). It is expected that, within five years of joining the Board, a Director shall own at least 10,000 shares of the Corporation's stock.