1. A PROJECT REPORT
ON
BUSINESS ETHICS AND CORPORATE
GOVERNANCE
ON “GENERAL ELECTRIC
COMPANY”
Submitted To:
Mrs.Bhavika Batra
Submitted By:
Archana Shahi B-42
Vandana Monani B-14
Shraddha Patel B-
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2. INTRODUCTION
Portland General Electric Company is an investor-owned utility engaged in the generation,
transmission and distribution of electricity to industrial, commercial and residential
customers.
Operating in 52 Oregon cities, Portland General Electric Company serves approximately
825,000 customers, including nearly 100,000 commercial customers.
PGE receives oversight from state and federal regulatory agencies, including the Oregon
Public Utility Commission and the Federal Energy Regulatory Commission.
As Oregon's largest utility, the PGE service territory attracts major employers in diverse
industries, such as high technology and health care. Economic growth in northwest Oregon
continues to fuel our customer growth rate.
PGE has a diverse mix of stable generating resources that includes hydropower, coal and gas
combustion, wind and solar, as well as key transmission resources. Our 13 power plants have
a total combined generating capacity of 2,766 megawatts.
By managing our own power plants in conjunction with the available power supplies on the
wholesale market, management believes our fully integrated power supply operations provide
the flexibility and efficiency necessary to effectively balance our power supply resources to
achieve the lowest possible cost for customers.
We began our business back in 1889, when a generator at Willamette Falls in Oregon City
produced power to light 55 street lamps 14 miles away in Portland - the first long-distance
transmission line in the nation.
Welcome to PGE’s Code of Business Ethics and Conduct (Code of Ethics). This Code of
Ethics, which has been approved by the PGE Board of Directors, expresses the principles,
policies and practices every board member, officer and employee of Portland General
Electric Comp any and its subsidiaries (PGE or the Company) are expected to use when
conducting the Company’s business. It is not intended as an exhaustive list of the activities or
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3. practices that guide the behavior of employees or that could affect the reputation and
goodwill of PGE’s business. All employees are expected to be aware of and follow the
Company’s Core Principles, Guiding Behaviors, Corporate Policy, and individual
departments’ policies and practices. Your good judgment and discretion are essential in
determining appropriate conduct for any situation.
Ethical concerns are rarely clear-cut. As an employee of PGE, it is your responsibility to
identify and work to resolve such concerns. It’s important to question any ethical situations
that are not addressed in this Code of Ethics or that are not clear. In any situation where you
are unsure of your actions, ask yourself if you would be comfortable with your actions being
featured as a major story in the next day’s news.
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4. PGE’S CORE PRINCIPLES AND GUIDING BEHAVIORS
Core Principles
PGE has six core principles that express what is important to our Company and what
our customers expect from us every day. They are:
Safety and Health – We must provide a safe and healthy work environment that minimizes
risk to ourselves and our customers.
Continuous Improvement – Electricity is one of the foundations of modern life. To meet
and exceed our customers’ expectations, we must excel at the fundamentals, aim for
excellence in everything we do, and continuously improve.
Ethical Business Practices – To be effective, we must act with the highest levels of honesty,
integrity and compliance to earn and retain trust.
Diversity – We value diversity. The more our organization reflects the communities we
serve, and promotes inclusion, the more our organization will thrive.
Community Investment – Making strategic investments in our communities strengthens
them and our business. We focus investments in education; customer safety and providing a
safety net for people in need; and promoting a sustainable economy and environment.
Environmental Stewardship – We sustainably manage our business in an environmentally
responsible manner, acknowledging that environmental protection, social responsibility and
sound business practices are one and the same.
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5. Guiding Behaviours
The Guiding Behaviours is a set of values and perspectives that employees use to approach
everyday decisions and guide their behaviour in the workplace. By consistently modelling
these values, we generate a companywide ethical culture. As a PGE employee, you should
integrate these Guiding Behaviours into your daily work, and in part, measure your decisions
and behaviour against these ideals.
Be Accountable – As employees, we have choices. We are held accountable for those
choices. Accepting accountability as individual performers and for the performance of our
work group can be a challenge. Being accountable in all aspects of our work, however, can
make a tremendous difference in the satisfaction we receive from our work and the results we
achieve.
Dignify People – If we fail to listen and really understand our PGE co-workers and
customers, how can we expect them to hear us? An environment in which diverse voices are
not being heard can result in stagnation, a void of new ideas, lack of innovation and an
inability to grow and change.
Make the Right Thing Happen – There is no better time to begin creating a more action-
oriented culture at PGE than now. Jumping in and helping to get a job done or initiating
change will make you more effective. You have the power to influence others by staying
positive and encouraging innovation, flexibility and creativity. Don’t wait for someone else
or some other time.
Positive Attitude – At PGE, one of the greatest strengths we have is our positive attitude –
an inner belief that success is achievable. It’s important we bring that attitude to our
individual work and to our work as a team.
Team Behaviour – Putting the needs of the broader group first is an attitude that, in the end,
benefits everyone.
Earn Trust – As employees we must keep our promises and commitments, be honest and
straightforward and deal with issues fairly and consistently. It is through these behaviours
that we will earn the trust of our co-workers and customers.
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6. FAIRNESS IN THE WORKPLACE
PGE is committed to providing a workplace free of unlawful discrimination, harassment and
violence. All forms of these behaviors in the workplace are strictly prohibited and will not be
tolerated. If you believe you have been subjected to any of these behaviors you should report
the incident promptly.
Discrimination
PGE is an equal employment opportunity employer. PGE makes hiring decisions based solely
on jobrelated criteria without regard to race, color, age, religion, national origin, medical
condition (including pregnancy), disability, genetics, marital status, gender, sexual
orientation, gender identity, veteran status or on any other basis prohibited by law. This
policy covers all aspects of the employment relationship.
Harassment
PGE will not tolerate any form of harassment. Harassment can take many forms and includes
any behavior that has the purpose or effect of creating an intimidating, hostile or offensive
work environment or interferes with an individual’s work performance. Harassing conduct
includes, but is not limited to: using derogatory nicknames or slurs; negative stereotyping;
behaving in a threatening or intimidating
way; and verbal or physical conduct that degrades or shows hostility or hatred toward an
individual.
Displaying or circulating written or graphic material that ridicules or shows hostility or
aversion to an individual or group is also considered harassment. Forms of sexual harassment
include, but are not limited to: verbal harassment, such as unwelcome comments, jokes or
slurs of a sexual nature; physical harassment, such as unnecessary or offensive touching or
impeding or blocking movement; and visual harassment, such as offensive posters, cards,
cartoons, graffiti, drawings or gestures.
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7. Violence
PGE prohibits any act or behavior against an employee, contractor, temporary worker, guest,
visitor, or anyone else engaged in PGE business, that intimidates, threatens or causes harm to
persons or property, or is violent in nature.
If PGE is made aware of a threat of harm to an employee or employees, where prudent or
required, PGE will attempt to notify those who are the intended recipient of the threat as well
as contact the appropriate authorities.
Possession of weapons (other than pocketknives with a blade of four inches or less) or
materials, substances or explosives that may be used to cause harm to persons or property is
prohibited in the workplace or when on PGE business. This also applies to employees with
concealed weapons permits. Security employees are exempt from this prohibition.
Nepotism
PGE does not allow nepotism. Nepotism is favoritism shown to a relative, domestic partner
or spouse based on the relationship. Relatives, domestic partners and spouses will not be
treated differently from other applicants for employment. However, the employment process
requires stricter scrutiny whenever an employee might be involved in a workplace decision
involving a relative, domestic partner or spouse. A person may not enter into or stay in a
position where that person exercises supervisory, appointment, promotional or grievance
authority over a relative, spouse or domestic partner or otherwise creates a conflict of interest
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8. CODE OF ETHICS
Code of Ethics for Chief Executive and Senior Financial Officers.
On March 14, 2006, the Board of Directors adopted the Code of Ethics for Chief Executive
and Senior Financial Officers, replacing in its entirety the PGE Accounting and Reporting
Code of Ethics.
Purpose
Portland General Electric Company (the "Company") is committed to conducting its business
in accordance with applicable laws, rules and regulations and the highest ethical standards of
business conduct, and to full and accurate financial disclosure in compliance with applicable
law. This Code of Ethics for Chief Executive and Senior Financial Officers ("Financial Code
of Ethics") is applicable to the Company's Chief Executive Officer, Chief Financial Officer
and Controller (or persons performing similar functions) (together, the "Senior Financial
Officers"). In addition to complying with this Financial Code of Ethics, Senior Financial
Officers also must abide by the Company's Code of Business Ethics and Conduct and other
Company policies and procedures that govern the conduct of its business (collectively, the
"Company Policies"). The Company Policies set forth the fundamental principles and key
policies and procedures that govern the conduct of all of the Company's directors, officers
and employees in connection with the Company's business.
Ethical standards
Senior Financial Officers are required to conduct themselves honestly, ethically and with
absolute integrity with respect to the Company's business, including accounting and financial
reporting for the Company and, when acting at the request of the Company on behalf of
another entity or enterprise to which the Senior Financial Officer owes a fiduciary obligation,
with respect to accounting and financial reporting for that entity or enterprise. In addition, the
leadership responsibilities of the Company's Senior Financial Officers include creating a
culture of ethical business conduct and commitment to compliance, maintaining a work
environment that encourages employees to raise concerns, and promptly addressing employee
compliance concerns.
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9. Compliance with laws, rules and regulations
Senior Financial Officers are required to comply, and to cause the Company to comply, with
the laws, rules and regulations that govern the conduct of the Company's business and to
report any suspected violations in accordance with the section below entitled "Reporting of
Violations."
Conflicts of interest
A conflict of interest occurs when the private interests of a Senior Financial Officer interfere
in any way, or even appear to interfere, with the interests of the Company. The obligation of
Senior Financial Officers to conduct the Company's business in an honest and ethical manner
includes the ethical handling of actual or apparent conflicts of interest between personal and
professional relationships. A conflict situation can arise when a Senior Financial Officer
takes actions or has interests that may make it difficult to perform his or her company work
objectively and effectively. Conflicts of interest also arise when a Senior Financial Officer, or
a member of his or her family, receives improper personal benefits as a result of the Senior
Financial Officer's position in the Company. Before accepting any position or benefits,
making any investment, participating in any transaction or business arrangement or otherwise
acting in a manner that creates or appears to create a conflict of interest with the Company, a
Senior Financial Officer must comply with his or her reporting obligations under the
Company's Code of Business Ethics and Conduct.
Disclosures
It is Company policy to make full, fair, accurate, timely and understandable disclosure in
compliance with all applicable laws and regulations in all reports and documents that the
Company files with, or submits to, the Securities and Exchange Commission and in all other
public communications made by the Company. Senior Financial Officers are required to
promote compliance by all employees with this policy and to abide by Company standards,
policies and procedures designed to promote compliance with this policy.
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10. Reporting of violations
If a Senior Financial Officer knows of or suspects a violation of applicable laws, rules or
regulations or this Financial Code of Ethics, he or she must immediately report that
information to the Company's Compliance Officer, General Counsel, any member of the
Audit Committee of the Board of Directors or any member of the Board of Directors. No one
will be subject to retaliation because of a good faith report of a suspected violation.
Compliance with Financial Code of Ethics
Senior Financial Officers must comply with this Financial Code of Ethics at all times. Senior
Financial Officers will be requested periodically to certify that they are in compliance with
this Financial Code of Ethics.
This Financial Code of Ethics is important and must be taken seriously by all Senior
Financial Officers. The Board of Directors shall determine, or designate appropriate persons
to determine, appropriate actions to be taken in the event of violations of this Financial Code
of Ethics. Disciplinary action, including, but not limited to, written notices or warnings,
reprimands, demotion or reassignment, suspension with or without pay or benefits, or
termination, may result for those Senior Financial Officers who fail to comply with this
Financial Code of Ethics. In determining what action is appropriate in a particular case, the
Audit Committee of the Board of Directors or its designee may, but will not be required to,
take into account all relevant information, including the nature and severity of the violation,
whether the violation was a single occurrence or repeated occurrences, whether the individual
in question had been advised prior to the violation as to the proper course of action and
whether or not the individual in question had committed other violations in the past.
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11. Waivers; Amendments
If any Senior Financial Officer would like to seek a waiver of this Financial Code of Ethics,
he or she must make full disclosure of his or her particular circumstances to either the
Company's Compliance Officer or General Counsel. Such officer is responsible for making a
determination as to whether the request will be submitted to the Audit Committee for its
consideration. Only the Audit Committee can approve a waiver of this Financial Code of
Ethics.
This Financial Code of Ethics may be amended from time to time by resolution of the Board
of Directors of the Company. Waivers of and amendments to this Financial Code of Ethics
will be publicly disclosed to the extent required by applicable law and regulations.
No rights created
This Financial Code of Ethics is a statement of certain fundamental principles, policies and
procedures that govern the Company's Senior Financial Officers in the conduct of the
Company's business. It is not intended to and does not create any rights in any employee,
customer, supplier, competitor, shareholder or any other person or entity.
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12. OREGON PUBLIC UTILITY COMMISSION
The Oregon Public Utility Commission (OPUC) regulates all aspects of PGE’s provision of
retail electricity services, including the rates, terms and conditions of service and access to
distribution services by electricity service suppliers. PGE may not charge any rates for retail
regulated services that are not approved by the OPUC and may not discriminate among
similarly situated customers.
Environmental Regulations
PGE maintains an environmental policy to ensure it complies with all applicable laws and
regulations while meeting the highest standards of environmental stewardship. All
employees, officers and board members must understand and fully comply with all applicable
environmental laws related to their part of the Company’s business and activities. PGE
facilities and operations are subject to a large variety of requirements that control air
emissions, discharges of effluent and water, handling of solid and hazardous waste and the
unintended or uncontrolled release of pollutants and hazardous substances to the air, water or
land. Such a release, even if accidental, must be reported to your supervisor or manager
immediately. PGE is often required to report such incidents to governmental authorities.
Antitrust Laws
Antitrust laws can be complex, and it is impossible to describe them fully in any code of
ethics. In general, antitrust laws prohibit agreements among competitors on matters such as
prices, terms of sale and allocations of markets or customers. Courts can — and do — infer
agreements based on ―loose talk,‖ informal discussions or the mere exchange between
competitors of information from which pricing or other collusion could result. Should you
become aware of such situations, you should report them immediately.
Political Activities
Corporate political activities, including political contributions, are governed by federal, state
and local laws and regulations. Political contributions include monetary donations to political
parties or candidates, lobbying of legislators or public officials, use of employees.
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13. CONFIDENTIAL INFORMATION
Detailed and up-to-date information is increasingly important in how PGE conducts its
business. As with any other asset — a power line, a truck or a computer — you are
responsible for protecting confidential information.
Confidential Information and Trade Secrets
Some of the information you receive in the course of your work is confidential. You must
protect and prevent the disclosure of confidential information PGE entrusts to you, except
when disclosure is authorized or legally mandated. You must also protect confidential
information provided by any customer, supplier or would-be supplier, including prices, terms
and names of other sources of supply. Confidential information includes all proprietary or
non-public information that might be useful to others or harmful to the Company or its
customers, if disclosed. Examples can include business concepts, trade secrets, lists of leads
or prospects, business and product plans, information about PGE’s business methods,
computer programs, customer and employee information and more. You may not use any
confidential information for your own benefit or the benefit of persons inside or outside PGE.
Your obligation to protect from disclosure any confidential business information acquired
during your service with PGE continues even after you leave the Company. You must not
disclose any confidential PGE information to a new employer or others after you leave the
Company. You also may not disclose your previous employers’ confidential information to
PGE board members, officers or employees.
Gathering Information About Other Businesses
It is entirely proper to gather information about other businesses, including those we serve
and those with whom we compete in various ways. You must never attempt, however, to
acquire trade secrets or other proprietary information through unlawful or unethical means,
such as theft, spying, bribery or breach of a non-disclosure agreement. You should be able to
identify the source of any information you acquire about another business.
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14. Trademarks, Copyrights and Other Intellectual Property
PGE recognizes and respects the individual property rights of others. When using the name,
trademarks, logos or printed materials of another company, you must do so properly and in
accordance with applicable law.
Trademarks: PGE’s logos and the name Portland General Electric Company are examples
of Company trademarks. You must always use our trademarks properly and advise your
supervisor or the Legal department of infringements by others.
Copyright Compliance
Books, articles, drawings, computer software and other such materials may be covered by
copyright laws. It is a violation of those laws to make unauthorized copies of copyrighted
materials. Availability on an Internet website or the absence of a copyright notice does not
necessarily mean that materials are not copyrighted. The Company licenses the use of much
of its computer software from outside companies. In most instances, this computer software
is protected by copyright. You may not make, acquire or use unauthorized copies of computer
software.
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15. CORPORATE GOVERNANCE
CATEGORICAL STANDARDS FOR DETERMINATION OF
DIRECTOR INDEPENDENCE
Purpose
The Board of Directors has adopted the following categorical standards to assist it in
evaluating the independence of each member of the Board. The standards describe various
types of relationships that could potentially exist between a Director and Portland General
Electric Company ("Company" or "PGE") and sets thresholds at which such relationships
could be material. The standards are intended to comply with the listing standards of the New
York Stock Exchange (the "NYSE Standards"). In applying the standards, "Company" or
"PGE" refers to PGE and its direct and indirect subsidiaries.
Categorical standards
Relationships to Company: A director is not independent if during the three fiscal years
preceding the determination:
1. The director is employed by the Company;
2. An immediate family member of the director is an executive officer of the Company;
3. The director receives more than $100,000 per year in direct compensation from the
Company, other than director and committee fees (including fees in the form of shares,
options to purchase Company shares or similar compensation) and pension or other forms
of deferred compensation for prior service that is not contingent on any continued service;
or
4. An immediate family member of the director receives more than $100,000 per year in
direct compensation from the Company, other than director and committee fees
(including fees in the form of shares, options to purchase Company shares or similar
compensation) and pension or other forms of deferred compensation for prior service that
is not contingent on any continued service.
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16. Relationships to Auditor. A director is not independent if:
1. The director is a partner or employee of, or is otherwise affiliated with, the Company's
independent auditor;
2. An immediate family member of the director is a partner of, or is employed or otherwise
affiliated in a professional capacity with, the Company's independent auditor; or
3. During the three fiscal years preceding the determination, the director or an immediate
family member of the director was (but no longer is) a partner or employee of the Company's
independent auditor and personally worked on the Company's audit within that time.
Interlocking Relationships: A director is not independent if, during the three fiscal years
preceding the determination, an executive officer of PGE is on the compensation committee
of the board of directors of a company which employs the director or an immediate family
member of the director as an executive officer.
Relationships to Customers: A director is not independent if during the three fiscal years
preceding the determination:
1. The director is an executive officer or employee of a company that does business with PGE
and the sales by that company to PGE or the purchases by that company from PGE
(excluding sales of electricity under PGE's filed tariffs), in any single fiscal year during the
determination period, are more than the greater of two percent of the annual consolidated
gross revenues of that company or $1 million; or
2. An immediate family member of the director is an executive officer of a company that
does business with PGE and the sales by that company to PGE or the purchases by that
company from PGE (excluding sales of electricity under PGE's filed tariffs), in any single
fiscal year during the determination period, are more than the greater of two percent of the
annual consolidated gross revenues of that company or $1 million.
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17. Indebtedness: A director is not independent if at the time of the determination:
1. The director is an executive officer or employee of another company which is indebted to
PGE or to which PGE is indebted, and the total amount of either company's indebtedness to
the other at the end of the last fiscal year is more than one percent of the other company's
total consolidated assets; or
2. An immediate family member of the director is an executive officer of another company
which is indebted to PGE or to which PGE is indebted, and the total amount of either
company's indebtedness to the other at the end of the last fiscal year is more than one percent
of the other company's total consolidated assets.
Relationships to Charities. A director is not independent if at the time of the determination
the director serves as an executive officer or director of a charitable organization and the
Company's discretionary charitable contributions to the organization exceed the greater of $1
million or two percent of that organization's total annual charitable receipts during its last
competed fiscal year. Neither the Company's automatic matching of employee charitable
contributions nor contributions from the PGE Foundation will be included in the amount of
the Company's contributions for this purpose.
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18. The following Corporate Governance Guidelines have been adopted by the Board of Directors (the
"Board") of Portland General Electric Company (the "Company") to assist the Board in the exercise
of its responsibilities. These Corporate Governance Guidelines are not intended to change or interpret
any Federal or state law or regulation, including the laws of the State of Oregon, or the Articles of
Incorporation or Bylaws of the Company. These Corporate Governance Guidelines are subject to
modification from time to time by the Board.
THE BOARD
1) Role Of Directors:
The business and affairs of the Company shall be managed under the direction of the Board.
A director is expected to spend the time and effort necessary to properly discharge his or her
responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board
and committees on which the director sits, and to review prior to meetings material
distributed in advance for the meetings. A director who is unable to attend a meeting (which
it is understood will occur on occasion) is expected to notify the Chairman of the Board or
the chairperson of the appropriate committee in advance of the meeting.
2)The Board's Goals:
The Board's goal is to build long-term value for the Company's shareholders and to assure the
vitality of the Company for its customers, employees and the other individuals and
organizations who depend on the Company.
To achieve these goals the Board will monitor both the performance of the Company (in
relation to its goals, strategy and competitors) and the performance of the Chief Executive
Officer, and offer him or her constructive advice and feedback. When it is appropriate or
necessary, it is the Board's responsibility to remove the Chief Executive Officer and to select
his or her successor.
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19. 3).Selection of the Chairman of the Board:
To the extent provided in the Company's Bylaws, the Board shall be free to choose its
Chairman of the Board in any way that it deems best for the Company at any given point in
time.
4) Size of the Board:
The Board believes that it should generally have no fewer than 5 and no more than 11
directors. This range permits diversity of experience without hindering effective discussion or
diminishing individual accountability. The size of the Board could, however, be increased or
decreased by resolution of the Board, if determined to be appropriate by the Board. For
example, it may be desirable to increase the size of the Board in order to accommodate the
availability of an outstanding candidate for director.
a. Board Orientation and Continuing Education.
The Company will provide new directors with a director orientation program to familiarize
such directors with, among other things, the Company's business, strategic plans, significant
financial, accounting and risk management issues, compliance programs, conflicts policies,
the Code of Business Ethics and Conduct, these Corporate Governance Guidelines, principal
officers, internal auditors and independent auditors.
The Company also encourages directors to attend outside director education programs and
shall reimburse each director for the cost of attending one such program per year, including
the cost of the program and reasonable related travel and lodging expenses. If the director
serves on the board of one or more other public companies, the director will seek to have
such other companies share equally in the cost of attending such programs.
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20. DIRECTORS
A) Selection of New Directors:
The Board shall be responsible for nominating members for election to the Board and, in
accordance with the Company's Bylaws, for filling vacancies on the Board that may occur
between annual meetings of shareholders. The Nominating and Corporate Governance
Committee is responsible for identifying, screening and recommending candidates to the
Board for Board membership. When formulating its Board membership recommendations,
the Nominating and Corporate Governance Committee shall also consider advice and
recommendations from others as it deems appropriate.
The Nominating and Corporate Governance Committee will consider candidates
recommended by shareholders. In considering candidates submitted by shareholders, the
Nominating and Corporate Governance Committee will take into consideration the needs of
the Board and the qualifications of the candidate. The Nominating and Corporate Governance
Committee may establish procedures, from time to time, regarding shareholder submission of
candidates.
B) Board Membership Criteria:
The Nominating and Corporate Governance Committee shall be responsible for developing
and recommending a set of criteria for selecting candidates to serve as directors of the
Company, and for periodically reviewing and suggesting changes to the criteria.
The Nominating and Corporate Governance Committee may apply several criteria in
selecting nominees. At a minimum, the Committee shall consider (i) whether the nominee has
demonstrated by significant accomplishment in his or her field an ability to make a
meaningful contribution to the Board's oversight of the business and affairs of the Company
and (ii) the nominee's reputation for honesty and ethical conduct in his or her personal and
professional activities. Additional factors which the Committee may consider include a
nominee's specific experiences and skills, relevant industry background and knowledge,
business judgment, time availability in light of other commitments, diversity, age, potential
conflicts of interest, material relationships with the Company and independence from
management and the Company. The Committee also may seek to have the Board represent a
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21. diversity of backgrounds, experience, gender and race and may consider such other relevant
factors that the Committee regards as appropriate in the context of the needs of the Board.
Each director shall be expected, within a reasonable period of time following his or her
election to the Board, to own shares in the Company in an amount that is appropriate for such
director's financial circumstances.
C) Other Public Company Directorships:
In general, the Company does not have a policy limiting the number of other public company
boards of directors upon which a director may sit. However, the Nominating and Corporate
Governance Committee shall consider the number of other public company boards and other
boards (or comparable governing bodies) on which a prospective nominee is a member.
Although the Company does not impose a limit on outside directorships, it does recognize the
substantial time commitments attendant to Board membership and expects that the members
of its Board be fully committed to devoting all such time as is necessary to fulfill their Board
responsibilities, both in terms of preparation for, and attendance and participation at
meetings. Each member of the Board will inform the Secretary of the Company and the
Chairman of the Nominating and Corporate Governance Committee before becoming a
member of another board of directors or an officer of another company. Sufficient time will
be allowed before accepting such a position for the Company to determine whether any
interlocking director or officer restrictions may apply, and for the Chairman of the Committee
to evaluate any impact on fulfilment of Board responsibilities.
D) Directors Who Change Their Present Job Responsibility:
The Board does not believe that directors who retire from, or change, the principal occupation
they held when they became a member of the Board should necessarily leave the Board.
Promptly following such event, the director must notify the Nominating and Corporate
Governance Committee, which shall review the continued appropriateness of the affected
director remaining on the Board under the circumstances. The affected director is expected to
act in accordance with the Nominating and Corporate Governance Committee's
recommendation following such review.
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22. E) Retirement Age:
It is the general policy of the Company that no director having attained the age of 75 years
shall be nominated for re-election or reappointment to the Board. However, the Board may
determine to waive this policy in individual cases.
F) Director Tenure:
In connection with each director nomination recommendation, the Nominating and Corporate
Governance Committee shall consider the issue of continuing director tenure and take steps
as may be appropriate to ensure that the Board maintains an openness to new ideas and a
willingness to critically re-examine the status quo. An individual director's re-nomination is
dependent upon such director's performance evaluation, as well as a suitability review, each
to be conducted by the Nominating and Corporate Governance Committee in connection with
each director nomination recommendation.
G) Retirement of Chief Executive Officer:
The board of directors believes that, as a matter of general policy, when a Chief Executive
Officer retires from the company, the Chief Executive Officer should also resign from the
board of directors. Therefore, as part of the Chief Executive Officer's notification to the board
of directors of his or her retirement, the Chief Executive Officer shall also submit an offer of
resignation from the board of directors effective upon his or her retirement date.
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23. INDEPENDENCE
A) Independence of the Board:
The Board shall be comprised of a majority of directors who qualify as independent directors
("Independent Directors") under the listing standards of the New York Stock Exchange (the
"NYSE Standards"). No more than two management executives may serve on the Board at
the same time.
The Board shall review annually the relationships that each director has with the Company
(directly or as a partner, shareholder or officer of an organization that has a relationship with
the Company). Following such annual review, only those directors who the Board
affirmatively determines have no material relationship with the Company (either directly or
as a partner, shareholder or officer of an organization that has a relationship with the
Company) will be considered Independent Directors, subject to additional qualifications
prescribed under the NYSE Standards or applicable law. The Board has adopted the
categorical standards attached hereto as an Addendum to assist it in determining director
independence. In the event that a director becomes aware of any change in circumstances that
may result in the director no longer being considered independent under the NYSE Standards,
the categorical standards or under applicable law, the director shall promptly inform the
Chairperson of the Nominating and Corporate Governance Committee.
B) Lead Independent Director:
If the Chairman of the Board is not an Independent Director, the Company's Independent
Directors will designate one of the Independent Directors on the Board to serve as a lead
Independent Director (the "Lead Independent Director"). If the Chairman of the Board is an
Independent Director, then he or she shall be deemed the Lead Independent Director and
shall perform the duties of the Lead Independent Director as set forth herein. The Lead
Independent Director's duties will include coordinating the activities of the Independent
Directors, coordinating the agenda for and moderating sessions of the Board's Independent
Directors and other non-management directors, and facilitating communications among the
other members of the Board.
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24. In performing the duties described above, the Lead Independent Director is expected to
consult with the chairpersons of the appropriate Board committees and solicit their
participation in order to avoid diluting the authority or responsibilities of the committee
chairpersons.
C) Separate Sessions of Non-Management Directors:
The non-management directors of the Company shall meet in executive session without
management on a regularly scheduled basis, but not less frequently than quarterly. The
Chairman or, if the Chairman is not an Independent Director, the Lead Independent Director
shall preside at such executive sessions, or in such director's absence, another Independent
Director designated by the Chairman or Lead Independent Director shall preside at such
executive sessions.
In the event that the non-management directors include directors who are not independent
under the NYSE Standards, the Board will, at least once a year, schedule an executive session
including only Independent Directors.
Communications with Non-management Directors:
Any interested parties desiring to communicate with the Lead Independent Director, the
Chairperson of the Audit Committee or the other non-management directors regarding the
Company may directly contact such directors.
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25. BOARD COMPENSATION
A director who is also an officer of the Company shall not receive additional compensation
for service as a director.
The Company believes that compensation for non-employee directors should be competitive
and should encourage increased ownership of the Company's shares through the payment of a
portion of director compensation in Company shares, options to purchase Company shares or
similar compensation. The Compensation and Human Resources Committee will periodically
review the level and form of the Company's director compensation, including how such
compensation relates to director compensation of companies of comparable size, industry and
complexity. Such review will also include a review of both direct and indirect forms of
compensation to the Company's directors, including any consulting or other similar
arrangements between the Company and a director. Changes to director compensation will be
proposed to the full Board for consideration.
A member of the Audit Committee may not receive any consulting, advisory, or other
compensatory fees from the Company or any subsidiary except director's fees (including fees
in the form of shares, options to purchase Company shares or similar compensation and any
additional amounts paid to chairpersons and members of committees of the Board); provided,
however, that a member of the Audit Committee may also receive fixed amounts of
compensation under a retirement plan (including deferred compensation) from the Company
for prior service with the Company so long as such compensation is not contingent in any
way on continued service.
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26. DIRECTOR AND EXECUTIVE OFFICER STOCK
OWNERSHIP REQUIREMENTS
A) General:
The Board believes that it is in the best interest of the Company, and its shareholders and
customers, to require directors and executive officers to retain ownership of a substantial
amount of Company common stock in order to:
Create financial incentives that align the interests of directors and executive officers with
strong operating and financial performance of the Company;
Enhance the commitment of directors and executive officers to the long-term future of the
Company and encourage executive officers to operate the business of the Company with a
long-term perspective when appropriate; and
Align the Company's governance practices with current best practices.
In this regard, the Board has adopted minimum stock ownership requirements.
B) Non-Employee Directors:
Each non-employee director shall be required to own Company common stock with a market
value of at least three times the annual equity retainer fee. Each non-employee director shall
meet such requirement by the later of (i) March 31, 2015 or (ii) five years from the first
annual meeting at which such director is elected.
Once a non-employee director reaches the stock ownership requirement under this provision
(based on the then current stock price and share holdings), such director will remain in
compliance despite future changes in stock price, as long as such director continues to own
the minimum number of shares that brought the director into compliance with the stock
ownership requirement.
In the event of an increase in the annual equity retainer fee for non-employee directors, non-
employee directors who have already met the stock ownership requirement will only need to
increase their common stock ownership to reflect the amount of the increase in the annual
equity retainer fee. In the event of such an increase, the Nominating and Corporate
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27. Governance Committee will determine the appropriate date by which non-employee directors
must reach the new common stock ownership amount required by such increase.
Until non-employee directors meet the stock ownership requirement described above, they
must retain an amount of shares equal to at least 50% of the net after-tax shares from the
vesting or exercise of equity awards granted by the Company in payment of the director's
annual equity retainer fee. This retention requirement only applies to equity awards granted
after October 26, 2011.
C) Executive Officers:
Minimum Ownership Amounts. The Chief Executive Officer is expected to retain 3x his
annual base salary in Company common stock. All other executive officers are expected to
retain 1x their annual base salary in Company common stock. For purposes of this
requirement, the executive officers of the Company shall include the Chief Executive Officer
and all vice presidents.
1. Transition Rules – Chief Executive Officer. If the Chief Executive Officer as of February
16, 2011 (the effective date of this provision) has not reached the applicable share ownership
target, he is not required to acquire additional shares to meet such target, but is required to
retain an amount of shares equal to 50% of the net after-tax shares (based on the statutory
withholding rate) acquired from vests of equity awards under the Company's long term
incentive program, after February 16, 2011, until the share ownership target is reached. In
addition, he is required to retain 100% of his shares that were vested as of February 16, 2011,
until the share ownership target is reached. Once he has exceeded the share ownership target,
he may dispose of shares, provided that he continues to meet the share ownership target.
2. Transition Rules – Other Executive Officers. All other executive officers shall not be
subject to any retention requirements with respect to shares vested as of February 16, 2011.
This stock ownership requirement shall not restrict the ability of such executive officers to
sell or otherwise dispose of such shares. If such an executive officer has not reached the
applicable share ownership target, he or she is not required to acquire additional shares to
meet such target, but is required to retain an amount of shares equal to 50% of the net after-
tax shares (based on the statutory withholding rate), acquired after February 16, 2011,
pursuant to vests of equity awards under the Company's long term incentive program. This
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28. requirement shall continue until such 50% of net after-tax shares is sufficient to meet the
share ownership target. Thereafter, the executive officer must retain an amount of shares
sufficient to meet the share ownership target.
3. Executive Officers Appointed after February 16, 2011. Executive officers appointed after
February 16, 2011 shall not be subject to any retention requirements with respect to shares
vested as of the date of appointment as an executive officer, and this stock ownership
requirement shall not restrict the ability of such executive officers to sell or otherwise dispose
of such shares. If such an executive officer has not reached the applicable share ownership
target, he or she is not required to acquire additional shares to meet such target, but is
required to retain an amount of shares equal to 50% of the net after-tax shares (based on the
statutory withholding rate) acquired, after the date of such person's appointment as an
executive officer, from vests of equity awards under the Company's long term incentive
program. This requirement shall continue until such 50% of net after-tax shares equals or
exceeds the share ownership target. Thereafter, the executive officer must retain an amount of
shares sufficient to meet the share ownership target.
4. Reports Each executive officer shall annually report to the Corporate Secretary, as of
December 31 of each year, the number of shares of Company common stock held by such
executive officer.
5. Changes in Stock Price or Base Salary Once an executive officer reaches the stock
ownership requirement under this provision (based on the then current stock price and share
holdings), such executive officer will remain in compliance despite future changes in stock
price, as long as such executive officer continues to own the minimum number of shares that
brought him or her into compliance with the stock ownership requirement.
In the event of an increase in the annual base salary of an executive officer who has already
met the stock ownership requirement, such executive officer will only need to increase his or
her common stock ownership to reflect the amount of the increase in annual base salary. In
the event of such an increase, the executive officer shall be required to retain an amount of
shares equal to 50% of the net after-tax shares (based on the statutory withholding rate)
acquired, after the relevant measurement date, from vests of equity awards under the
Company's long term incentive program, until such time as the executive officer meets the
stock ownership requirement.
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29. D) Amendments:
The Nominating and Corporate Governance Committee and the Compensation and Human
Resources Committee shall annually review the stock ownership requirements set forth
above, and the ownership of each non-employee director and each executive officer relative
to these requirements, and may recommend changes, as it deems appropriate, for approval by
the Board of Directors.
E) Waivers:
The Nominating and Corporate Governance Committee may grant waivers of this
requirement in circumstances where a non-employee director or an executive officer wishes
to sell shares of Company common stock because of financial hardship or other special
circumstances, or as other otherwise deemed appropriate by the Nominating and Corporate
Governance Committee.
Self-Evaluation by the Board
The Nominating and Corporate Governance Committee will sponsor an annual self-
assessment of the Board's performance as well as coordinate the self-evaluation of each
standing committee of the Board. The results of the evaluations of the Board and the standing
committees will be discussed with the full Board. The assessment should include a review of
any areas in which the Board or management believes the Board can make a better
contribution to the Company. The Nominating and Corporate Governance Committee will
utilize the results of this self-evaluation process in assessing and determining the
characteristics and critical skills required of prospective candidates for election to the Board
and making recommendations to the Board with respect to assignments of Board members to
various committees. The purpose of the evaluations is to assess the Board's and each
committee's functioning as a whole, not to focus on the performance of individual Board
members.
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30. Strategic Direction of the Company
Normally it is management's job to formalize, propose and implement strategic choices and
the Board's role to approve strategic direction and evaluate strategic results. However, as a
practical matter, the Board and management will be better able to carry out their respective
strategic responsibilities if there is an ongoing dialogue among the Chief Executive Officer,
other members of top management and the Board. To facilitate such discussions, members of
senior management who are not directors may be invited to participate in Board meetings
when appropriate.
Board Access to Management
Board members shall have access to the Company's management and, as appropriate, to the
Company's outside advisors. Board members shall coordinate such access through the Chief
Executive Officer and Board members will use judgment to assure that this access is not
distracting to the business operation of the Company.
Board Interaction with Institutional Investors, Analysts, Press and Customers
The Board believes that management generally should speak for the Company. It is suggested
that each director shall refer all inquiries from institutional investors, analysts, the press or
customers to the Chief Executive Officer or his or her designee.
Director Attendance at Annual Meetings of Shareholders.Directors are expected to attend the
Company's annual meeting of shareholders. A director who is unable to attend the Company's
annual meeting of shareholders (which it is understood will occur on occasion) is expected to
notify the Chairman of the Board.
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31. BOARD MEETINGS
A) Frequency of Meetings:
There shall be not less than four regularly scheduled meetings of the Board each year. At
least one regularly scheduled meeting of the Board shall be held quarterly.
B) Selection of Agenda Items for Board Meetings:
The Chairman of the Board, in consultation with the Lead Independent Director if separate
from the Chairman of the Board, and the Chief Executive Officer shall annually prepare a
Board of Directors "Master Agenda." This Master Agenda shall set forth a general agenda of
items to be considered by the Board at each of its specified meetings during the year.
Thereafter, the Chairman of the Board, in consultation with the Lead Independent Director if
separate from the Chairman of the Board, and the Chief Executive Officer may adjust the
Master Agenda to include special items not contemplated during the initial preparation of the
annual Master Agenda.
Upon completion, a copy of the Master Agenda shall be provided to the entire Board. Each
Board member shall be free to suggest inclusion of items on the Master Agenda as well as
raise at any Board meeting subjects that are not specifically on the Master Agenda for that
meeting.
Matters management desires to submit to the Board shall be submitted through the Corporate
Secretary who shall coordinate with the Chairman of the Board regarding the inclusion of
such matters on the agenda for a particular meeting.
C) Attendance of Management Personnel at Board Meetings:
The Board encourages the Chief Executive Officer to bring officers and other members of
management from time to time into Board meetings to (i) provide management insight into
items being discussed by the Board; (ii) make presentations to the Board on matters within
the manager's areas of responsibility; and (iii) bring officers and managers with significant
career potential at the Company into contact with the Board. Attendance of such officers and
managers at Board meetings is at the discretion of the Board. Should the Chief Executive
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32. Officer desire to add officers and managers as attendees on a regular basis, this should be
suggested to the Board for its concurrence.
D) Board Materials Distributed in Advance:
Information and materials that are important to the Board's understanding of the agenda items
and other topics to be considered at a Board meeting should, to the extent practicable, be
distributed sufficiently in advance of the meeting to permit prior review by the directors. In
the event of a pressing need for the Board to meet on short notice or if such materials would
otherwise contain highly confidential or sensitive information, it is recognized that written
materials may not be available in advance of the meeting.
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33. COMMITTEE MATTERS
A) Number and Names of Board Committees:
The Company shall have the following standing committees: Audit Committee, Nominating
and Corporate Governance Committee, and Compensation and Human Resources
Committee. The purpose and responsibilities for each of these committees shall be outlined in
committee charters adopted by the Board. The Board may, from time to time, form new
standing or special committees and determine the composition and areas of competence of
such committees, or disband a current committee depending on circumstances.
B) Independence of Board Committees:
Each of the Audit Committee, the Nominating and Corporate Governance Committee and the
Compensation and Human Resources Committee shall be composed entirely of Independent
Directors satisfying NYSE Standards and any other applicable legal and regulatory
requirements necessary for an assignment to any such committee. All other standing Board
committees shall be chaired by Independent Directors, unless the Board determines otherwise
with respect to a specific committee.
C) Assignment and Rotation of Committee Members:
The Nominating and Corporate Governance Committee shall be responsible, after
consultation with the Chairman of the Board, and if separate from the Chairman of the Board
the Lead Independent Director, for making recommendations to the Board with respect to the
assignment of Board members to various committees. After reviewing the Nominating and
Corporate Governance Committee's recommendations, the Board shall be responsible for
appointing the chairpersons and members to the committees on an annual basis.
The Nominating and Corporate Governance Committee shall annually review the committee
assignments and shall consider the rotation of the chairpersons 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. With regard to the
chairperson of the Nominating and Corporate Governance Committee, such position shall
rotate at least once every five years.
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34. LEADERSHIP DEVELOPMENT
A) Selection of the Chief Executive Officer:
The Board shall be responsible for identifying potential candidates for, and selecting, the
Company's Chief Executive Officer. In identifying potential candidates for, and selecting, the
Company's Chief Executive Officer, the Board shall consider, among other things, a
candidate's experience, understanding of the Company's business environment, leadership
qualities, knowledge, skills, expertise, integrity, and reputation in the business community.
B) Evaluation of Chief Executive Officer:
The Nominating and Corporate Governance Committee will have responsibility for
overseeing the design of the process for the annual performance review of the Chief
Executive Officer. The review should be timed to coincide with the annual evaluation of the
Chief Executive Officer's performance and the determination and approval of compensation
for the Chief Executive Officer. The following steps will be utilized to carry out this review:
 The Chief Executive Officer will develop a self-evaluation at the end of each fiscal year
and coordinate with the Nominating and Corporate Governance Committee to present this
to the non-management members of the Board within one month of the end of the fiscal
year. The Chief Executive Officer's presentation may be delivered either orally or in
writing.
 The non-management directors will meet with and without the Chief Executive Officer
and provide their assessment of the Chief Executive Officer's performance to the
Compensation and Human Resources Committee. These assessments should include the
directors' appraisal of:
1) The Company's performance and the Chief Executive Officer's contribution to it, both
compared to competitors and the Company's own strategic goals;
2) Achievement of personal goals set by the Chief Executive Officer for the year, as part of
his or her self-evaluation; and
3) Other aspects of the Chief Executive Officer's performance which the non-management
director deems relevant.
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35. The Independent Directors will complete the evaluation of the Chief Executive Officer's
performance following the Chief Executive Officer's presentation to the Board. Following
such evaluation, the Compensation and Human Resources Committee will determine and
approve, either as a committee or together with the other Independent Directors (if directed
by the Board), the Chief Executive Officer's compensation level based on such evaluation.
C) Succession Planning:
The Board shall plan for the succession to the position of the Chief Executive Officer. The
Nominating and Corporate Governance Committee, either as a committee or together with
the full Board, shall annually review the Chief Executive Officer and senior management
succession plans. If the Nominating and Corporate Governance Committee conducts this
review as a committee, it shall annually report to the Board on the results of its review.
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