CG Principles for Board of Directors
As Amended through November 11, 2008A. Introduction
The Board of Directors of OM Group, Inc. has adopted these governance principles to assist it in following corporate practices that serve the best interests of the Company and its stockholders. The Board intends that these Principles serve as a flexible framework within which the Board may conduct its business, not as a set of binding legal obligations. The Principles should be interpreted in the context of all applicable laws, the Company’s charter documents and other governing legal documents. See Section G for definitions of certain terms used in these Principles.
1. Role of Senior Management. Senior management, led by the Chief Executive Officer, is responsible for running the Company’s day-to-day operations and appropriately informing the Board of the status of such operations.
2. Role of the Board of Directors. The Board oversees management’s performance on behalf of the Company’s stockholders. Its primary duties are to:
3. Formal Evaluation of Performance and Compensation of CEO. The Board of Directors is responsible for the annual evaluation of the performance of the Chief Executive Officer. This evaluation shall be communicated to the CEO by the Lead Independent Director and the Chair of the Compensation Committee. The Compensation Committee has been delegated the responsibility of developing a suitable plan for effective succession of the Chief Executive Officer and senior management, which shall include policies and principles for selection and performance review of the Chief Executive Officer and for policies regarding succession in the event of an emergency or the retirement of the Chief Executive Officer. Decisions with respect to compensation of the Chief Executive Officer shall be made by the Outside Directors based on recommendations from the Compensation Committee of the Board. All members of the Compensation Committee shall be Independent Directors. The Compensation Committee will consult with the Chief Executive Officer with respect to the evaluation of all Officers, except the Chief Executive Officer.
C. Board Composition and Selection of Directors
1. Size of the Board. The number of directors that constitutes the Board shall be fixed from time to time in the manner prescribed in the By-Laws of the Company. The Board shall periodically review its size to ensure that the current number of members most effectively supports the Company.
2. Proportion of Independent Directors. Two-thirds of the members of the Board shall be, in the business judgment of the Board, independent in accordance with the rules of the New York Stock Exchange and these Principles. In addition, all directors who are not executives of the Company shall be independent.
3. Number of Boards. Independent Directors shall serve on no more than three boards of publicly or privately held corporations, including the Company, provided that the Directors may waive this requirement and permit service on up to five boards of publicly or privately held corporations if the Board determines that particular Director or candidate presents compelling circumstances that justify such a waiver. The Chief Executive Officer shall not serve on more than one board of a publicly traded corporation, in addition to the Company, and shall serve on non-profit boards with the advance consent of the Nominating and Governance Committee.
4. Selection of New Directors. The Company’s stockholders annually elect the directors who will serve on the Company’s Board in accordance with the By-Laws of the Company. The Board is responsible for nominating individuals to present to the stockholders as candidates for Board membership and for selecting members to fill Board vacancies. The Board has delegated to the Nominating and Governance Committee the screening process for identifying possible candidates. The Board and the Nominating and Governance Committee consider the mix of director characteristics, experiences and diverse perspectives and skills that are most appropriate to meet the Company’s needs. All members of the Nominating and Governance Committee shall be Independent Directors.
5. Directors Who Change Their Present Job Status. A Director shall inform the Chairman of the Board of any principal occupation change, including retirement. The director shall offer his or her resignation, subject to acceptance by the full Board. The Chairman of the Board shall advise the Board of such change in status, and the Board shall determine the continued appropriateness of Board membership under these circumstances.
6. Retirement Policy. The Board has adopted a retirement policy for directors under which a director must resign from the Board when he or she reaches age 72 or prior to the next annual meeting of stockholders. The Board, in consultation with management and the retiring member, shall determine on which of the above dates the resignation shall become effective and may waive the policy under special circumstances.
7. Director Orientation and Continuing Education. The Board, in coordination with the management of the Company, shall develop an appropriate orientation program for new directors and standards for continuing education. The orientation program shall acquaint new directors with the Company’s strategies, long-term plans, financial statements, properties and operations, corporate governance principles and the Company’s Code of Ethics. Continuing education is to be completed annually and may focus upon, among other things, legal and regulatory changes that affect the company, internal control procedures, financial statement analysis, corporate governance principles and fiduciary duties of the Board. Directors shall be reimbursed by the Company for all continuing education required in connection with the performance of the Board’s duties. Each Director shall attend a director’s school or course no less than once every three years.
D. Board Procedures
1. Selection of Chairman and Chief Executive Officer. The Board, in coordination with the management of the Company, shall develop an appropriate orientation program for new directors and standards for continuing education. The orientation program shall acquaint new directors with the Company’s strategies, long-term plans, financial statements, properties and operations, corporate governance principles and the Company’s Code of Ethics. Continuing education is to be completed annually and may focus upon, among other things, legal and regulatory changes that affect the company, internal control procedures, financial statement analysis, corporate governance principles and fiduciary duties of the Board. Directors shall be reimbursed by the Company for all continuing education required in connection with the performance of the Board’s duties. Each Director shall attend a director’s school or course no less than once every three years.
2. Lead Independent Director. If the Chairman of the Board is not an Independent Director, then the Independent Directors annually shall elect by majority vote a Lead Independent Director to coordinate among the other Independent Directors. The Lead Independent Director’s duties include to:
- Chair meetings of non-management directors.
- Develop board meeting agendas with CEO.
- Assist board committee chairs with committee meeting agendas, if requested.
- Facilitate communication between the directors and the CEO, communicate the directors’ perspectives and consensus view to the CEO.
- Help resolve board differences.
- Interview board candidates.
- Serve as an independent point of contact for stockholders wishing to communicate with the Board other than through the Chairman
- In conjunction with the Chair of the Compensation Committee, oversee the annual Board evaluation of the CEO.
- Lead the CEO search process should such a need arise.
3. Agenda and Materials. The Chairman will work with the Lead Director to set the agenda for the Board meetings with the opportunity for suggestions from other Directors. Board materials will be provided sufficiently in advance when feasible and appropriate to help the Directors make informed decisions.
4. Attendance at Board Meetings. The Board has four regularly scheduled meetings each fiscal year, plus special meetings as required. Each Board member shall make every effort to attend each board meeting, preferably in person but in special circumstances via telephone conference call or other electronic means, devote the necessary time required and review, in advance, meeting materials so as to be prepared for such meetings to the extent necessary to perform and carry out such director’s duties.
5. Time Commitment and Board Service. Each Board member is expected to ensure that his or her other existing and planned future commitments do not materially interfere with such member’s service on the Company’s Board.
6. Executive Sessions. Outside Directors shall meet in executive sessions without management in connection with each regular Board meeting. The Outside Directors may, at their discretion, request that legal counsel attend such executive sessions. Directors who are Independent Directors shall hold an executive session at least once per quarter.
7. Conflicts of Interest.
8. Availability of Outside Advisors. An Officer’s other relationships, including business, family, or those with non-profits, could occasionally give rise to the perception that the individual has a material, personal interest on a particular issue involving the Company. The Board has delegated the task of evaluating certain conflicts of interest to the Audit Committee of the Board. The Audit Committee, after consulting with counsel if the committee deems necessary or appropriate, shall determine on a case-by-case basis whether a conflict of interest actually exists.
9. Access to Information and Employees. The Board shall have complete, unfettered access to any information about the Company that it deems necessary or appropriate to carry out its duties, which includes, among other things, access to the Company’s employees (senior management, in particular), documents and the Company’s facilities.
10. Corporate Governance Principles and Self-evaluation. The Board shall review these Principles at least every two years and make such amendments as are necessary. The Board shall conduct an annual self-evaluation to determine whether it and its committees are functioning effectively and to evaluate the non-executive Chairman, if applicable. To facilitate this self-evaluation, the Nominating and Governance Committee will survey and receive comments from each director and report annually to the full Board with an assessment of the Board’s performance.
E. Board Committees
1. Number and Composition of Committees. The Company’s Board currently has three committees: Audit, Compensation and Nominating and Governance. From time to time the Board may form a new committee or disband a current committee depending upon the circumstances; provided, however, that committee composition shall conform to the standards of the New York Stock Exchange’s (“NYSE”) Listed Company Manual and other applicable regulations, as such regulations may be amended from time to time. Specifically, and as set forth in these Principles, the Company’s Audit Committee, Nominating and Governance Committee and Compensation Committee shall consist solely of Independent Directors. Each of these Committees shall have not less than three members.
2. Appointment and Term of Service of Committee Members. The Board has delegated to the Nominating and Governance Committee the task of making recommendations as to members and chairs of the various committees. After consideration of these recommendations, the Board shall appoint Committee members and Committee chairpersons (if any), who shall serve until their resignation or until the Board appoints a successor.
3. Committee Proceedings. Committee proceedings shall conform to the standards of the NYSE’s Listed Company Manual and other applicable regulations, as they may be amended from time to time. Specifically, the Company’s Audit Committee, Nominating and Governance Committee and Compensation Committee shall be governed by written charters approved by the Board and by each applicable committee. All Board members are welcome to attend committee meetings. The agendas and meeting minutes of the committees shall be shared with the full Board (if requested). The committee Chairperson shall periodically report to the Board on significant matters discussed by the committees.
F. Board Compensation
Outside Directors shall receive director’s fees as recommended by the Compensation Committee and approved by the Board of Directors. Each member is reimbursed for reasonable out-of-pocket expenses incurred in performing his or her duties as a director, including expenses incurred to attend director education seminars. In order to maintain independence for members of the Audit Committee, directors who are members of the Audit Committee shall receive only director’s fees, which may be in the form of cash, stock options and/or stock of the Company or other in-kind consideration ordinarily available to directors, and all of the regular benefits that other directors receive. It is appropriate for the management to report from time to time to the Compensation Committee on the status of Board compensation in relation to other similarly situated U.S. companies to ensure that the Company’s Board compensation is appropriate and competitive.
G. Definitions
1. Independent Director. "Independence" of a director for membership on a Board Committee will be affirmatively determined according to these Principles and applicable rules of the NYSE, with the goal of assuring that directors have no relationship to the Company that may interfere with the exercise of their independence from management, the Company and the independent auditors. "Independent Director" shall mean a director that:
- is "independent" as that term is defined in the NYSE Listed Company Manual;
- is not and has not been employed by the Company or its subsidiaries in an executive capacity within three years immediately prior to the annual meeting at which the nominees of the Board of Directors will be voted upon;
- has not received any remuneration as an advisor, consultant, or legal counsel to the Company or to a member of the Company’s senior management, and is not employed by a private or public company at which an executive officer of the Company serves as a director;
- has not received, during the current calendar year or any of the three immediately preceding calendar years, remuneration, directly or indirectly, other than de minimis remuneration (less than $25,000), as a result of service as, or being affiliated with an entity that serves as (a) a significant supplier of the Company; or (b) a significant customer of the Company.
- does not have significant personal service contracts with the Company, its subsidiaries or any member of the Company’s senior management;
- is not an employee or officer with a not-for-profit entity that receives contributions from the Company or the Company’s executive officers totaling the lesser of $100,000 or 5% of the entity’s total contribution in the preceding two years;
- during the current calendar year or any of the three immediate preceding calendar years, has not had any business relationship or engaged in any transaction with the Company for which the Company has been required to make disclosure under Regulation S-K of the Securities and Exchange Commission, other than for service as a director;
- has not had any of the relationships described in subsection B through G above with any affiliate of the Company;
- is not a spouse, parent, mother-in-law, father-in-law, sister-in-law, brother-in-law, sibling or child of any person described in B through F above; and
- DDoes not have beneficial ownership interest of five percent or more in an entity that has received remuneration, other than de minimis remuneration, from the Company, its subsidiaries, or affiliates. De minimis remuneration is defined as (a) direct remuneration of $60,000 or less received from the Company, its subsidiaries, or affiliates during a calendar year (other than compensation); or (b) indirect remuneration paid to an entity if such remuneration does not exceed the 3% of the gross revenues of the entity and did not directly result in an increase in the compensation received by the director from that entity.
2. Principles. "Principles" means these corporate governance principles adopted by the Board as of the date first written above, and as may be amended from time to time to conform with applicable rules and regulations.
3. Officer. An "Officer" means an individual who is deemed an executive officer for purposes of Section 16 of the Securities Exchange Act of 1934.
4. Outside Director. An "Officer" means any director who is not currently or formerly an employee of the Company.