Director Notes The 2010 Proxy Season no. dn-011 august 2010 Enhanced Disclosure in the Dow 30 and Select Financial Companies Board Leadership Structure by Louis L. Goldberg and Justine Lee The analysis of disclosure on board leadership structure included in 2010 proxy statements by some of the largest U.S. public companies shows that over 75 percent of those companies continue to combine the CEO/chairman positions. Also, a large majority do not have formal policies that address whether the CEO may assume the chairmanship, but rather believe that the directors should be able to exercise their discretion in light of prevailing circumstances. However, all but three of the surveyed companies have appointed a lead independent director, whose role may encompass reviewing, assisting or consulting on (and, in some instances, approving) the meeting agenda as well as leading the CEO evaluation process. C alls for independent board leadership have increased in recent years, with proponents arguing that the failure to separate the roles of CEO and chairman of the board contributed to poor risk oversight at financial institutions leading up to the economic crisis. 1 Resolutions requesting an independent board chair or the separation of the offices of CEO and board chairman were voted on at 31 companies in the 2009 proxy season 2 and filed at over 50 companies in 2010. However, compared to other governance reforms such as majority voting or say-on-pay, shareholder support for proposals for separate or independent board chairs has been modest, averaging 36.3 percent in 2009, with only four independent chair proposals receiving majority support during the 2009 season. 3 As of June 1, 2010, shareholder proposals for separate or independent board chairs have been rejected at the nine S&P 100 companies where they have come to a vote, averaging only 27 percent support. 4 1 See, for example, Stephen Alogna, Mariana Pargendler, and Meagan Thompson-Mann, “Chairing the Board: The Case for Independent Leadership in Corporate America,” Yale School of Management—Millstein Center for Corporate Governance and Performance Policy Briefing No. 4, March 30, 2009 (available at millstein.som.yale.edu). 2 2009 Annual Corporate Governance Review: Annual Meetings, Share- holder Initiatives, Proxy Contests, Georgeson, 2009, p. 21. On shareholder activism in this area, see Matteo Tonello and Damien Park, The Share- holder Activism Report, The Conference Board, April 2010, available at www.conference-board.org. 3 2010 Proxy Season: Key Trends and Developments, RiskMetrics, June 24, 2010, available at http://www.riskmetrics.com/webcasts/ 2010proxy_season_trends. 4 Id.
Transcript
Director NotesThe 2010 Proxy Season
no. dn-011 august 2010
Enhanced Disclosure in the Dow 30 and Select Financial Companies
Board Leadership Structureby Louis L. Goldberg and Justine Lee
The analysis of disclosure on board leadership structure included in 2010 proxy statements
by some of the largest U.S. public companies shows that over 75 percent of those companies
continue to combine the CEO/chairman positions. Also, a large majority do not have formal
policies that address whether the CEO may assume the chairmanship, but rather believe that
the directors should be able to exercise their discretion in light of prevailing circumstances.
However, all but three of the surveyed companies have appointed a lead independent director,
whose role may encompass reviewing, assisting or consulting on (and, in some instances,
approving) the meeting agenda as well as leading the CEO evaluation process.
C alls for independent board leadership have increased
in recent years, with proponents arguing that the
failure to separate the roles of CEO and chairman of the
board contributed to poor risk oversight at financial
institutions leading up to the economic crisis.1
Resolutions requesting an independent board chair or
the separation of the offices of CEO and board chairman
were voted on at 31 companies in the 2009 proxy season2
and filed at over 50 companies in 2010. However, compared
to other governance reforms such as majority voting or
say-on-pay, shareholder support for proposals for separate
or independent board chairs has been modest, averaging
36.3 percent in 2009, with only four independent chair
proposals receiving majority support during the 2009 season.3
As of June 1, 2010, shareholder proposals for separate or
independent board chairs have been rejected at the nine
S&P 100 companies where they have come to a vote,
averaging only 27 percent support.4
1 See, for example, Stephen Alogna, Mariana Pargendler, and MeaganThompson-Mann, “Chairing the Board: The Case for Independent Leadershipin Corporate America,” Yale School of Management—Millstein Center forCorporate Governance and Performance Policy Briefing No. 4, March 30,2009 (available at millstein.som.yale.edu).
2 2009 Annual Corporate Governance Review: Annual Meetings, Share-holder Initiatives, Proxy Contests, Georgeson, 2009, p. 21. On shareholder activism in this area, see Matteo Tonello and Damien Park, The Share-holder Activism Report, The Conference Board, April 2010, available at www.conference-board.org.
3 2010 Proxy Season: Key Trends and Developments, RiskMetrics, June 24, 2010, available at http://www.riskmetrics.com/webcasts/2010proxy_season_trends.
4 Id.
Instead, much of the momentum on this initiative has
been generated by the legislative and regulatory debate
that followed the financial crisis.5
The new SEC disclosure requirements have further
focused the spotlight on this topic. Item 407(h) of
Regulation S-K6 requires disclosure of a company’s
board leadership structure, including whether and why
the company has chosen to combine or to separate the
principal executive officer and board chair positions.
A company is also required to state why it believes that
its leadership structure is the “most appropriate structure
for it at the time of filing.” If the same person serves as
both board chair and CEO, the company must disclose
whether the board has a lead independent director and
describe that director’s role.
This Director Notes is the second in a series of studies de-
veloped in collaboration with Davis Polk & Wardwell LLP
to provide guidelines and examples to member companies
of The Conference Board on emerging practices following
the SEC enhanced disclosure reform of December 2009.
It is based on the analysis of 2010 proxy statements of
the 30 companies in the Dow Jones Industrial Average
as well as those of select financial institutions (see
“The Survey,” below.)
2 director notes board leadership structure www.conferenceboard.org
The SurveyFindings discussed in this report are based on the analysis of 2010 proxy statements filed with the U.S. Securities andExchange Commission by corporations in the Dow Jones Industrial Average, as well as those of select financial institutions.See Appendix 1, on p. 9, for a comparative table reproducing the disclosure language used by surveyed companies.
Dow 30 Companies
3M Company
Intel Corporation
Alcoa Inc.
International Business Machines Corporation
American Express Company
Johnson & Johnson
AT&T Inc.
JPMorgan Chase & Co.
Bank of America Corporation
Kraft Foods, Inc.
The Boeing Company
McDonald’s Corporation
Caterpillar Inc.
Merck & Co., Inc
Chevron Corporation
Microsoft Corporationa
Cisco Systems, Inc.a
Pfizer Inc.
The Coca-Cola Company
The Procter & Gamble Companya
E.I. du Pont de Nemours and Company
The Travelers Companies, Inc.
Exxon Mobil Corporation
United Technologies Corporationa
General Electric Company
Verizon Communications Inc.
Wal-Mart Stores, Inc.
Hewlett-Packard Companya
The Walt Disney Companya
The Home Depot, Inc.
Select Financial Institutions
Bank of America Corporationb
Citigroup Inc.
The Goldman Sachs Group, Inc.
JPMorgan Chase & Co.b
Morgan Stanley
a These companies (collectively the “Early Filers”) filed their proxy statement before the effective date of the new Regulation S-K rules. As a result,they are largely excluded from the Survey results except in instances where the company provided the new disclosures in full voluntarily or theinformation was available from another source as noted.
b Bank of America and JPMorgan Chase are also in the Dow 30.
5 The Dodd-Frank Act, approved on July 16, 2010 and signed into law byPresident Obama on July 21, directs the SEC to adopt, no later than 180days after the bill’s enactment, rules requiring an issuer to disclose in itsproxy statement the reasons why its board chairman and chief executiveofficer positions are held either by the same person or by differentpersons, as the case may be. The enhanced executive compensationregulations in Item 402 of Regulation S-K adopted in December 2009 (seethe next footnote) already require disclosure of the company’s boardleadership structure and a discussion regarding why the companydetermined that such structure was appropriate.
6 SEC Release No. 33-9089; 34-61175 (“Proxy Disclosure Enhancements”),December 16, 2009, available at www.sec.gov/rules/final/2009/33-9089.pdf. The rules apply to proxy and information statements, annualreports and registration statements under the Exchange Act, and regis-tration statements under the Securities Act as well as the InvestmentCompany Act. They do not apply to foreign private issuers. For anextensive discussion of the practical implications of the reform, seeWilliam M. Kelly and Mutya Fonte Harsch, “Directors’ Duties Under theNew SEC Rules on Disclosure Enhancement,” Director Notes No. DN-005,February 2010.
director notes board leadership structure www.conferenceboard.org 3
The IssueTraditionally, in U.S. public companies, the CEO heads themanagement team overseen by the board and is also amember of the board. Those who support the preservationof this traditional structure of duality argue that a singleleadership fosters more operational efficiency, facilitatesinternal communication from and to the board, andultimately enables better business performance.a
The Business Roundtable, for instance, believes thatmost American corporations have been “well served” bya structure where the CEO also operates as chairman ofthe board, since it bridges management and directorshiplevels while ensuring that both act with commonality ofpurpose.b On the other hand, detractors of this practicewarn of the dangers of corporate power concentratingin one individual and observe that separating the roleswould favor a clearer delineation between the purpose ofthe board and the responsibilities of management.c
However companies decide this structural issue, today’sboards are unquestionably expected to establish theprocedural safeguards necessary to avoid conflicts ofinterests and ensure appropriate balance of power.The role of outside directors has been transformed overthe years as boards have expanded their expertise andintensified their monitoring activities. In this new context,outside members should be able to rely on leadership toact independently and perform effectively.
The Conference Board RecommendationsSince 2003, The Conference Board Commissionon Public Trust and Private Enterprise has beenrecommending the adoption of one of the followingapproaches to achieve such balance of powers:
• Separating the two roles, with an independentdirector as chairman This approach clearly delineatesthe roles and responsibilities of the chairman andCEO and provides the greatest potential for creatingappropriate checks and balances between the boardand management. In this scenario, the chairman wouldhave such responsibilities as: presiding at boardmeetings; having ultimate approval over board agendas,length of discussion time for agenda items, andinformation flow to the board; and working with thecorporate governance committee to coordinate CEOand board assessments.
• Appointing a lead, presiding, or senior independentdirector This approach could be employed whenboards do not choose to separate the chairman andCEO positions, or when the roles are separated but theappointed chairman is not an independent director.In this scenario, the lead, presiding, or senior directorshould not be a member of management or have anyconflicting ties to the CEO. Preferably, he or she shouldmeet the independence requirements under applicablelisting standards. The presiding director (or other equi-valent designation) would have such responsibilities as:chairing executive sessions; serving as the principalliaison between management and independent directors;and working closely with the chairman to finalize boardmeeting agendas. The lead or presiding director wouldalso be in charge of meetings of independent directorsand have approval over information flow to the boardand other operational aspects. (See p. 8 for a sampleboard resolution containing the description of theresponsibilities assigned to a lead independent director).
(Continued on page 4)
a Aiyesha Dey, Ellen Engel, and Xiaohui Liu, “Determinants and Implicationsof Board Leadership Structure,” Chicago Booth Research Paper No. 09-23,June 2009 (available at www.ssrn.com/ abstract=1412827); James A. Brickley,Jeffery L. Coles, and Gregg Jarrell, “Leadership Structure: Separating theCEO and Chairman of the Board,” Journal of Corporate Finance, Vol. 3, 1997,p. 189; Ram B. Baliga, Charles R. Moyer, and Ramesh S. Rao, “CEO Dualityand Firm Performance: What’s the Fuss?” Strategic Management Journal,Vol. 17, 1996; and S.V. Berg and S.K. Smith, “CEO and Board Chairman: A Quantitative Study of Dual vs. United Board Leadership,” Directors andBoards, Vol. 3, 1978, pp. 34–37.
b Principles of Corporate Governance, The Business Roundtable, 2005, p. 15.c See, for example, Alogna, et al., “Chairing the Board;” and Paul Coombes
and Simon C.Y. Wong, “Chairman and CEO—One Job or Two?” The McKinseyQuarterly, No. 2, 2004; and Chul W. Park and Vidhan K. Goyal, “BoardLeadership Structure and CEO Turnover,” Journal of Corporate Finance,Vol. 8, No. 1, January 2002.
Chairman of the Board of DirectorsSurvey findings show that while a number of the
analyzed companies have persons other than the CEO
serving as chairman of the board, over 75 percent of
them continue to combine the CEO/chairman positions.
4 director notes board leadership structure www.conferenceboard.org
Independent director
Former executive
CEO
Chairman of the Board – Select Financial InstitutionsChart 2
40%40
20
Chairman of the Board – Dow 30 companiesChart 1
Former executive
Independent director
74%13
13
CEO
RiskMetrics’ voting policies onindependent chair shareholder proposalsUnder its voting policies, proxy advisor RiskMetricsgenerally recommends a vote for shareholder proposalsrequiring that the chairman’s position be filled by anindependent director, unless the company maintains allthe elements of the following counterbalancinggovernance structure:
• Designated lead director, elected by and from theindependent board members with clearly delineatedand comprehensive duties. (The role may alternativelyreside with a presiding director, vice chairman, or rotatinglead director, however, the director must serve a minimumof one year in order to qualify as a lead director.)
The duties should include, but are not limited to,the following:
— presides at all meetings of the board at whichthe chairman is not present, including executivesessions of the independent directors;
— serves as liaison between the chairman and the independent directors;
— approves information sent to the board;
— approves meeting agendas for the board;
— approves meeting schedules to assure thatthere is sufficient time for discussion of allagenda items;
— has the authority to call meetings of theindependent directors;
— if requested by major shareholders, ensuresthat he is available for consultation and directcommunication.
The Issue (continued)
Source: Matteo Tonello, Corporate Governance Handbook: Legal Standards and Board Practices (Third Edition), The Conference Board, 2009, p. 33; U.S. Corporate Governance Policy—2010 Update, RiskMetrics Group, November 19, 2009.
Formal policies on CEO/chairman separationOrganizational documents may provide guidelines
on the board leadership structure. More specifically,
of the surveyed companies:
• Three have explicit policies for separating the positionsof CEO and chairman of the board.
• Three have explicit policies against separating the positionsof CEO and chairman of the board.
• Twenty-seven do not have formal policies that addresswhether the CEO may assume the chairmanship, but ratherbelieve that the directors should be able to exercise theirdiscretion in light of prevailing circumstances.
Lead Independent DirectorSurvey findings show that all but three of the companies
whose CEO serves as chairman of the board have lead
independent directors.
Of the 29 companies that set forth lead directors duties:
• Eight authorize the lead director to “approve” boardmeeting agendas.
• Fifteen authorize the lead director to review, assist orconsult on the meeting agenda, but do not grant approvalover the agenda.
• Six authorize the lead director to “approve” informationsent to the board.
• Six task the lead director with leading the CEO’s evaluation.
Table 1 (pp. 6–7) details responsibilities of the lead
independent directors, as disclosed by the surveyed
companies that reported having instituted this position
within the board. (Also see “Lead Independent Director
Charter,” on p. 8, for a sample organizational document).
director notes board leadership structure www.conferenceboard.org 5
Explicit policy for CEO/chairman separation
Explicit policy against CEO/chairman separation
Decision left to board, in light of circumstances
Formal policies on CEO/Chairman separationChart 3
82%9
9
6 director notes board leadership structure www.conferenceboard.org
Tab
le 1
C
om
pa
ris
on
of
Le
ad
Dir
ec
tor
Du
tie
s
Pre
sid
e a
t all
bo
ard
m
eeti
ng
s
wh
en
ch
air
n
ot
pre
sen
t1
Lia
ise
betw
een
C
hair
an
d
ind
ep
en
den
t d
ire
cto
rs
Ap
pro
ve
info
rma
tio
n
sen
t to
bo
ard
Ap
pro
ve
meeti
ng
ag
en
das f
or
bo
ard
Ap
pro
ve
meeti
ng
sch
ed
ule
s
Revie
w
(bu
t n
ot
ap
pro
ve)
ag
en
da,
sch
ed
ule
, m
ate
rials
Au
tho
rity
to
ca
ll
meeti
ng
s o
f in
dep
en
den
t d
ire
cto
rs
Av
ail
ab
le
to c
on
su
lt
wit
h m
ajo
r sh
are
ho
lders
L
ead
CE
O
evalu
ati
on
A
dd
itio
nal
du
ties/N
ote
s
Com
mun
icat
e bo
ard
feed
back
to C
EO
Res
pond
dire
ctly
to s
hare
hold
er c
omm
ents
dire
cted
to
lead
No
lead
dire
ctor
; exe
cutiv
e se
ssio
ns p
resi
ded
over
by
chai
r of
rel
evan
t com
mitt
ee o
r by
long
est s
ervi
ng
mem
ber
of th
e bo
ard
**A
ppro
ve "
addi
tion
of a
ny it
em"
to a
gend
a; R
equi
re
info
rel
atin
g to
any
mat
ter
to b
e di
strib
uted
to b
oard
Cha
ir is
inde
pend
ent
Pro
xy fi
ling
prec
eded
effe
ctiv
e da
te o
f new
SE
C
disc
losu
re r
ules
.
Lead
dire
ctor
dut
ies
in th
e ev
ent C
EO
is n
ot
inde
pend
ent
Mon
itor
and
coor
dina
te w
ith m
anag
emen
t on
corp
orat
e go
vern
ance
issu
es
Adv
ise
on s
elec
tion
of c
omm
ittee
cha
irs; P
rovi
de
lead
ersh
ip w
here
cha
ir m
ay b
e pe
rcei
ved
to b
e in
co
nflic
t; W
ork
with
cha
ir to
pro
pose
ann
ual s
ched
ule
of
maj
or d
iscu
ssio
n ite
ms
1 N
ote
that
this
col
umn
does
not
cap
ture
aut
horiz
atio
n to
pre
side
sol
ely
at e
xecu
tive
sess
ions
of t
he in
depe
nden
t dire
ctor
s.
Tabl
e 1
Com
pari
son
of L
ead
Dir
ecto
r D
utie
s
Pre
sid
e a
t all
bo
ard
m
eeti
ng
s
wh
en
ch
air
n
ot
pre
sen
t1
Lia
ise
betw
een
C
hair
an
d
ind
ep
en
den
t d
ire
cto
rs
Ap
pro
ve
info
rma
tio
n
sen
t to
bo
ard
Ap
pro
ve
meeti
ng
ag
en
das f
or
bo
ard
Ap
pro
ve
meeti
ng
sch
ed
ule
s
Revie
w
(bu
t n
ot
ap
pro
ve)
ag
en
da,
sch
ed
ule
, m
ate
rials
Au
tho
rity
to
ca
ll
meeti
ng
s o
f in
dep
en
den
t d
ire
cto
rs
Av
ail
ab
le
to c
on
su
lt
wit
h m
ajo
r sh
are
ho
lders
L
ead
CE
O
evalu
ati
on
A
dd
itio
nal
du
ties/N
ote
s
Mee
t dire
ctly
with
man
agem
ent a
nd n
on-m
anag
emen
t em
ploy
ees
Rec
omm
end
chan
ges
to im
prov
e bo
ard,
com
mitt
ee o
r di
rect
or e
ffect
iven
ess
Con
sult
with
cha
ir on
oth
er m
atte
rs p
ertin
ent t
o bo
ard/
com
pany
Cha
ir is
inde
pend
ent
No
lead
dire
ctor
; cha
ir of
rel
evan
t com
mitt
ee p
resi
des
at e
xecu
tive
sess
ion
Adv
ised
pro
mpt
ly o
f any
com
mun
icat
ions
alle
ging
m
isco
nduc
t or
rais
ing
lega
l/eth
ical
con
cern
s
Cha
ir is
inde
pend
ent
Ser
ve a
s lia
ison
bet
wee
n bo
ard
and
stoc
khol
ders
on
inve
stor
mat
ters
Pre
sidi
ng d
irect
or d
utie
s;
coor
dina
te w
ith C
EO
to s
et a
gend
a
May
req
uest
incl
usio
n of
add
ition
al a
gend
a ite
ms;
A
dvis
e on
info
rmat
iona
l nee
ds
Aut
horiz
e re
tent
ion
of o
utsi
de a
dvis
ors
and
cons
ulta
nts
Com
mun
icat
e bo
ard
feed
back
to C
EO
Res
pond
to c
orre
spon
denc
e se
nt to
boa
rd;
Rec
omm
end
outs
ide
cons
ulta
nts
and
advi
sors
with
out
cons
ultin
g an
y of
ficer
of t
he c
ompa
ny
Pre
side
s ov
er B
oard
’s a
nnua
l sel
f-ev
alua
tion;
may
cal
l m
eetin
gs o
f the
boa
rd.
For
mer
CE
O s
erve
s as
Cha
ir; p
resi
ding
Dire
ctor
pr
esid
es a
t exe
cutiv
e se
ssio
ns.
Cha
ir is
inde
pend
ent
7 director notes board leadership structure www.conferenceboard.org
Tabl
e 1
cont
inue
d
Com
pari
son
of L
ead
Dir
ecto
r D
utie
s
8 director notes board leadership structure www.conferenceboard.org
If the Chairman of the Board and Chief Executive Officer
are the same person, the Pfizer Board of Directors will
annually elect a non-management director to serve in
a lead capacity. Although annually elected, the Lead
Independent Director is generally expected to serve for
more than one year.
The Lead Independent Director coordinates the activities
of the other nonmanagement directors, and performs such
other duties and responsibilities as the Board of Directors
may determine.
The specific responsibilities of the Lead Independent
Director are as follows:
Preside at Executive Sessions
• Preside at all meetings of the Board at which the
Chairman is not present, including executive sessions
of the independent directors.
Call Meetings of Independent Directors
• Has the authority to call meetings of the independent
directors.
Function as Liaison with the Chairman
• Serve as principal liaison on Board-wide issues
between the independent directors and the Chairman.
Approve appropriate provision of information to theBoard such as board meeting agendas and schedules
• Approve the quality, quantity and timeliness of
information sent to the Board as well as approving
meeting agenda items.
• Facilitate the Board’s approval of the number and
frequency of board meetings, as well as meeting
schedules to assure that there is sufficient time for
discussion of all agenda items.
Authorize Retention of Outside Advisors andConsultants
• Authorize the retention of outside advisors and
consultants who report directly to the Board of
Directors on board-wide issues.
Shareholder Communication
• If requested by shareholders, ensures that he/she is
available, when appropriate, for consultation and direct
communication.
Pfizer Inc
Lead Independent Director Charter
Source: Pfizer Inc, 2010.
director notes board leadership structure www.conferenceboard.org 9
Ap
pe
nd
ix 1
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
CE
O s
erv
es
as C
hairm
an
“The B
oard
belie
ves t
hat
its c
urr
ent
leaders
hip
str
uctu
re p
rovid
es independent
board
le
aders
hip
and e
ngagem
ent
while
derivin
g t
he b
enefit
of
havin
g o
ur
CE
O a
lso s
erv
e
as C
hairm
an o
f th
e B
oard
.”
“Couple
d w
ith a
n independent
Lead D
irecto
r, t
his
com
bin
ed s
tructu
re p
rovid
es
independent
overs
ight
while
avoid
ing u
nnecessary
confu
sio
n r
egard
ing t
he B
oard
’s
overs
ight
responsib
ilities a
nd the d
ay-t
o-d
ay m
anagem
ent
of
busin
ess o
pera
tions.”
“T
he B
oard
belie
ves t
hat com
bin
ing t
he r
ole
s o
f C
EO
and C
hairm
an c
ontr
ibute
s to
an e
ffic
ient
and e
ffective B
oard
…. T
he B
oard
belie
ves t
hat to
drive c
hange a
nd
continuous im
pro
vem
ent
within
the C
om
pany,
tem
pere
d b
y r
espect
for
3M
’s
traditio
ns a
nd v
alu
es, th
e C
EO
must have m
axim
um
auth
ority
to b
e e
ffective…
The
Board
curr
ently b
elie
ves the C
EO
is b
est able
to c
hair r
egula
r B
oard
meetings a
nd,
with h
is in-d
epth
know
ledge a
nd u
nders
tandin
g o
f th
e C
om
pany,
bring k
ey b
usin
ess
issues a
nd s
takehold
er
inte
rests
to t
he B
oard
’s a
ttention.”
“The B
oard
of
Directo
rs b
elie
ves it is
fundam
enta
lly w
rong t
o
perm
anently a
nd inflexib
ly s
epara
te or c
om
bin
e the p
ositio
ns o
f C
hairm
an o
f th
e B
oard
and C
hie
f E
xecutive O
ffic
er.
To d
o s
o
pre
vents
the B
oard
fro
m a
cting in the s
tockhold
ers
’ best
inte
rests
w
hen s
ele
cting futu
re B
oard
leaders
hip
. T
he B
oard
reje
cte
d
perm
anently s
epara
ting o
r com
bin
ing t
he p
ositio
ns o
f C
hairm
an a
nd
CE
O in its
Corp
ora
te G
overn
ance G
uid
elin
es..
. In
ste
ad, th
e B
oard
adopte
d a
n a
ppro
ach that
allo
ws it, in r
epre
senting the s
tockhold
ers
’ best in
tere
sts
, to
decid
e w
ho s
hould
serv
e a
s C
hairm
an o
r C
EO
, or
both
, under
pre
sent
or
anticip
ate
d futu
re c
ircum
sta
nces.”
Form
er
CE
O
serv
es a
s
Chairm
an
“For
the p
ast tw
o y
ears
we h
ave s
plit
the r
ole
s o
f C
hairm
an o
f th
e B
oard
and C
hie
f E
xecutive O
ffic
er
in o
rder
to p
rovid
e a
tra
nsitio
n in leaders
hip
.” It is
anticip
ate
d that
aft
er
the 2
010 a
nnual m
eeting o
f share
hold
ers
, th
e C
EO
would
assum
e t
he r
ole
s o
f both
the C
EO
and c
hairpers
on.
None s
pecifie
d.
CE
O s
erv
es
as C
hairm
an
“The B
oard
belie
ves t
hat separa
ting t
he p
ositio
n o
f C
hairm
an a
nd C
EO
does n
ot
serv
e t
he b
est in
tere
sts
of th
e C
om
pany a
t th
is tim
e.”
“T
he B
oard
belie
ves t
hat
by s
erv
ing a
s b
oth
Chairm
an a
nd C
EO
, M
r. C
henault is
able
to d
raw
on h
is intim
ate
know
ledge o
f th
e d
aily
opera
tions o
f th
e C
om
pany a
nd
its r
ela
tionship
s w
ith c
usto
mers
, em
plo
yees a
nd b
usin
ess p
art
ners
to p
rovid
e t
he
Board
with leaders
hip
in s
ettin
g its
agenda a
nd f
ocusin
g its
dis
cussio
n.
Mr.
Chenault’s
com
bin
ed r
ole
as C
hairm
an a
nd C
EO
als
o e
nsure
s that
the C
om
pany
pre
sents
its
message a
nd s
trate
gy t
o s
hare
hold
ers
, em
plo
yees a
nd c
usto
mers
with a
unifie
d v
oic
e.”
“The C
om
pany’s
Govern
ance P
rincip
les p
rovid
e t
hat
ord
inarily
and in
norm
al circum
sta
nces, th
e C
EO
shall
als
o s
erv
e a
s C
hairm
an o
f th
e
Board
.”
“During d
ifficult t
ransitio
n p
eriods o
r in
periods o
f re
duced investo
r confidence, it m
ay b
e a
ppro
priate
to h
ave a
non-e
xecutive C
hair a
s a
sym
bol of th
e B
oard
’s r
esponsiv
eness t
o s
hare
hold
er
concern
s. T
he
Board
does n
ot
recom
mend d
esig
nating a
sin
gle
indiv
idual to
serv
e
as lead d
irecto
r or
to a
ct
as a
spokespers
on for
the B
oard
. In
ste
ad,
various indiv
idual non-m
anagem
ent
directo
rs,
part
icula
rly those w
ho
chair C
om
mitte
es,
will
chair the E
xecutive S
essio
ns a
nd m
ay b
e
asked t
o s
peak f
or
the B
oard
on m
att
ers
in w
hic
h they a
re involv
ed,
for
exam
ple
, at A
nnual M
eetings o
f S
hare
hold
ers
.”1
CE
O s
erv
es
as C
hairm
an
“The b
oard
belie
ves that
havin
g M
r. S
tephenson s
erv
e in b
oth
capacitie
s is in t
he
best in
tere
sts
of
AT
&T
and its
sto
ckhold
ers
because it
enhances c
om
munic
ation
betw
een t
he B
oard
and m
anagem
ent
and a
llow
s M
r. S
tephenson to m
ore
eff
ectively
execute
the C
om
pany’s
str
ate
gic
initia
tives a
nd b
usin
ess p
lans a
nd c
onfr
ont
its
challe
nges.
The B
oard
belie
ves that
the a
ppoin
tment
of
an independent
Lead
Directo
r and the u
se o
f re
gula
r executive s
essio
ns o
f th
e n
on-m
anagem
ent
Directo
rs,
alo
ng w
ith t
he B
oard
’s s
trong c
om
mitte
e s
yste
m a
nd s
ubsta
ntial m
ajo
rity
of
independent
Directo
rs, allo
w it to
main
tain
eff
ective o
vers
ight
of m
anagem
ent.
”
None s
pecifie
d.
Independent
directo
r serv
es a
s
“The B
oard
is c
om
mitte
d to s
trong,
independent
Board
Leaders
hip
and b
elie
ves that
obje
ctive o
vers
ight
of m
anagem
ent
perf
orm
ance is a
critical aspect
of
eff
ective
corp
ora
te g
overn
ance.”
None s
pecifie
d.
1 E
xcerp
t fr
om
Am
erican E
xpre
ss G
overn
ance P
rincip
les o
bta
ined fro
m c
orp
ora
te w
eb s
ite.
1x
nd
ip
ep
A
yn
pa
om
C
dro
aB
pish
er
ead
Loit
aR
an
mrhai
Cas
es
verrv
sO
EC
fh
iC
p a
nd
hi
seader
li
bel
d
oar
he B
T“
oitio
s p
dn
eb
io
mc
or
fn
ev
gi
elo
na
”d
hB
tff
he
ben
ng t
ivi
der
elhi
went
mengage
urts
phi
seader
lent
rur
cst
itha
tes
ev
i
rih
ac
nt
nd
ep
en
de
i o
ro
n
ev
errv
so
sal
OE
Cour
ng
ihav
off
tinef
dboar
ndent
ndepe
ides
iov
e p
rur
tuc
yci
ol
pla
mF
or
hi
dd
CB
htf
hi
Cepa
sy
bl
iex
lnf
and
iyl
anent
mper
eev
ibel
sor
tec
riD
off
d
oar
he B
T“
ph
isr
de
ael
dro
n b
oa
dT
iffO
itE
ff
os
on
itihe p
os
tne
bi
mo
cor
eat
ar
oong t
r w
ylal
ten
munda
fsi
ties
dept
-in
ish
hit
wyl
ent
rur
d c
oar
Bv
and
ons
itadi
rtp
mis
nuou
iont
c a
nd
ten
icif
an e
fffi
bel
d
oar
he B
T“
po
es
rght
is
er
ov
ov
ndependent
ih
ati
ed
woupl
C“
of
an
mrhai
Cas
ak
t s
and
ues
ssi
ng o
ffandi
ts
nder
edge a
nd u
lnow
kh
co
e t
abl
ts
be
siO
Ehe C
tes
ev
i b
el
yu
miax
me
hav
ts
um
OE
he C
t,
ues
al
vm
et,
pany
mo
eC
htn
hi
tiw
ten
em
ov
rei
d b
el
oar
he B
T.
d…
oar
Be
vitc
effffd e
EC
fo
se
ol
he r
g t
nni
bi
mo
ct
ha
tes
ev
i
ana
mday
-to-
ay
he d
t a
nd
seitil
bi
is
on
yar
ses
ng u
nnec
di
oi
e a
vl
hi
wght
is
er
vc
siht
,or
tec
riLead
Dndependent
an
i
”d.
oar
he B
tff
tat
sd’
oar
Bhe
o t
tst
es
er
nt
iderr
ehol
k
snes
is
bu
ey
g k
nibr
,pany
mo
Che
tand,
ngs
itee
md
oar
Barr
egul
rrr
hai
he
Te…
vitc
effffe
be
otyti
hor
aut
mu
s’3M
or
ft
cpe
es
red b
yper
mhange a
nd
ce
vio d
rt
tha
ts
eev
ots
ebut
iront
can
mrhai
Cand
OE
”.s
on
iat
oper
ss
ne
ibus
off
ent
mage
sd’
oar
Bhe
ng t
di
egar
on rr
ei
us
fon
cy
des
iov
pr
eur
tc
urts
ned
bi
mo
c
”on.
iten
t
pat
icit
an
orr
ten
es
pr
under
h,
bot
hho s
de w
ic
o d
et
,st
es
er
nt
it
bes
ow
lal
hat
th
oac
appr
ed
an
adopt
nan
er
ov
Ge
at
por
or
Csti
niO
CE
mo
cor
ng
iat
epar
syl
anent
mper
ea
ld
oar
eB
ur
ut
ng f
itec
el
shen
wng
itc
am
orfd
oar
Bhe
ts
ent
ev
pr
hi
d a
nd C
oar
Bhe
tf
an o
mrhai
C
”.s
eanc
ts
mu
cric
eur
ut
fed
to
,O
EC
an o
rrmr
hai
Ce a
sv
errv
sd
houl
de
hol
kc
ots
he
tng
ient
es
epr
rni
,tis
wd
oar
he B
t,
ead
ts
nI...
nes
idel
ui
Ge
nc
an
an
mrhai
Cff
os
on
itis
he p
ong t
ni
bi
ed
tec
ej
rd
oar
he
BT
p.
hi
srade
stes
er
tni
t b
es
’s
der
hol
kc
othe s
tni
o
sdo
oT
.er
ciffe O
viut
ec
xE
ef
or
’srd nd
aO
E C
he
h t
bot
he 2
010 a
ter
taf
ciffffe
Ovi
ut
ec
xE
wtt
she p
at
orr
F“
an
mrhai
Cs
as
evrrv
es
OE
Cerr
mor
F
tit
s’thenaul
C.
Mr
ead
hl
tid
woar
Bps
hi
son
iat
el
rsti
on
aww
o d
re t
abl
ibel
doar
he
BT“
its
he b
ee t
verrv
si
bel
doar
he
BT“
an
mrhai
Cas
es
verrv
sO
EC
on.
sperrs
rhai
and c
he
t,s
der
ehol
har
sof
ng
ieet
mannual
nion
itis
an
ra
tde
iov
pr
otderr
or
nier
C o
ff s
eol
he r
tti
pl
e s
e h
av
ws
ear
o y
w
dh
lh
tt
td
Eand C
an
mrhai
Cs
ae
ol
ned r
bi
mo
cc
oagenda a
nd f
stng i
itet
sni
p
hi
sder
and b
ees
oy
lp
me
,s
er
mot
us
chti
ws
ylhe d
ai
tedge o
fl
now
ke
at
mint
is
hi
n
mrhai
hC
tbo
ng a
si
verrv
s b
yt
ha
tes
ev
i
mi t
shi
tt
apany
mo
Che
tf
ost
ser
ent
oon
itis
he p
ot
g
niat
epar
st
ha
tes
ev
i
of
es
ol
rhe
te
mu
sd a
soul
wO
EC
ehat
ed
tt
pa
ici
nt
ais
tI”
p.
hi
seader
lef
hi
d a
nd C
oar
Bhe
tf
an o
mrhai
C
htit
dl
pany
mo
Che
tat
htes
ur
so e
ns
al
OE
on.
is
su
cs
di
stng i
ius
che
de t
iov
o p
r t
sner
tar
ps
sne
is
uand
pany
om
Che
tf
os
on
iat
oper
ysi
thenaul
C.r
M,
OE
and
Can
m
”e.
mnot
does
OE
Cand
an
mrhai
Cf
ed.
ifipec
one s
N
tt
ti
dd
ldes
end
mm
oc
e rt
no
d d
oes
oar
Bvi
pons
ser
sd’
oar
he
Bt
fo
bol
my
sai
opr
pr
ap
be
ay
mti
e,
cden
ionf
cod
iper
on
itis
an
rratt
ul
ciffng d
ii
ur
D“
”d.
oar
BO
Ehe C
t,s
eanc
ts
mu
crrci c
al
mnor
eP
nanc
er
ov
Gs’
pany
mo
he
CT“
dt
Id
Bht
fk
verrv
sot
dual
iv
ndi
ie
ngl
is
ng a
inat
gis
hT
.ns
er
onc
cder
ehol
har
sot
ses
en
va
rr hai
e C
viut
ec
ex
-e a
non
hav
o
te
at
or
tes
nv
ed i
cedu
roff
ods
in p
er
iorr
ds
htoff
an
mrhai
Cas
ev
errv
so
s a
ll
hal
sO
and
ylinar
di
or
tha
de
ti
ov
pr
se
pl
ic
nirP
dehea
sheni
d
”.e
coi
ed
vif
uni
em
stis
ent
es
pr
ndependent
ioff
ong
al
,sr
otc
erD
ihe
tand
orr
tec
riD
he
T.
enges
lhal
co
he C
e t
ut
ec
ex
ohe
Been
tw
bet
ost
es
erre
nt
it
bes
id b
el
he b
oar
T“an
mrhai
Cas
es
verrv
sO
EC
sder
ehol
har
so
tegy
at
rtand s
age
ss
e
ec
fefff
nai
nt
ai
mot
tioww
lal
,s
orrs
tc
eriD
ee
ttim
mo
ong c
rrots
sd’
oar
Bhe
h t
tiw
gs
on
is
es
se
viut
ec
ex
arr
egul
rff
eo
se
ue
mnt
appoi
he
tat
htes
ev
id
bel
oar
Be
and b
us
evi
at
itni
ic
egi
at
rts
s’pany
mM
sow
land
al
ent
manage
md
and
oar
aus
cbe
sder
hol
kc
ots
stand
iT
&T
Aoff
son
ephens
t S.r
ng M
ihav
hat
tes
ev
ah
ti w
serrs
mot
us
c a
nd
ees
oy
pl
me
,s
”.ent
anagem
mof
tgh
is
er
eov
vitc
ytior
jaaj
mal
iant
tubs
sand
met
sy
se
ten
gem
ana
m-he
non
tf
os
Lead
ndependent
ian
ffo
ten
st i
ont
ronf
cand
ans
pl
ss
ne
is
uy
el
vitc
efef
eor
om
ton
sephen
tS
.rM
on
iat
cuni
mm
oc
se
enhanc
tie
she
tni
s i
es
itiapac
ch
tn b
oe i
verrv
ng
ieet
Mnnual
Aat
e,
pl
am
ex
orr
fd o
noar
Bhe
torr
fk
pea
sot
ed
kas
he
tr
hai
clli
w,
ees
ttim
mo
Crr hai
cm
anage
m-non
dual
iv
di
nious
iar
vp
s a
sa
tac
otorr
or
tec
riead d
las
a
ed.
ifipec
one s
N
1 ”.s
der
ehol
har
Sf
os
ed
vol
nv
e i
ar
hey
th
chi
wni
ser
tat
mn
be
ay
mand
son
is
es
Se
viut
ec
xe E
hw
ehos
tyl
ar
ul
citpar
,s
or
tec
rdi
nt
em
ead
ts
nId.
oar
Bhe
torr
fon
sper
es
kpo
d,
ho
d,
morf
pt
er
cx
E1
ndependent e
gov
eat
por
or
cs
er
e o
vvit
ec
obj
csi
doarrd
he
BT“
sa
se
vrrve
sor
tec
rdi
tndependen
I
re
Pnanc
re
ov
Gs
es
pr
xE
an
cier
mA
,
”e.
nanc
rs
e i
can
mor
fperrf
ten
manage
mf
otgh
iB
ndependent
iong,
rts
oted
ttim
mo
c
ew
eat
por
or
com
rned
fai
obt
es
pl
inc
i
anagem
gh
evit
ec
fefff
fo
tc
pe
s a
al
citirc
as
hat
tes
ev
id
bel
p a
nhi
sd
Leaderrs
oar
.eti
seb
ed.
ifipec
one
sN
App
endi
x 1
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
10 director notes board leadership structure www.conferenceboard.org
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
continued
Chairm
an
“The c
urr
ent str
uctu
re is a
ppro
priate
in r
esponse t
o o
ur
sto
ckhold
ers
vote
in A
pril
2009 t
o a
ppro
ve a
Byla
w a
mendm
ent
pro
vid
ing f
or
an independent
Chairm
an o
f th
e
Board
. A
fter
that,
the B
oard
, upon t
he r
ecom
mendation o
f th
e C
orp
ora
te
Govern
ance C
om
mitte
e,
appoin
ted independent
directo
r D
r. M
assey t
o s
erv
e a
s
Chairm
an o
f th
e B
oard
.”
Follo
win
g 2
010 a
nnual m
eeting, th
e B
oard
will
, upon r
ecom
mendation f
rom
corp
ora
te g
overn
ance c
om
mitte
e, appoin
t in
dependent chair for
2010 t
o 2
011 term
.
CE
O s
erv
es
as C
hairm
an
“The B
oard
has d
ete
rmin
ed t
hat th
e a
ppro
priate
leaders
hip
str
uctu
re for
the B
oard
at
this
tim
e”
is to h
ave a
com
bin
ed c
hair w
hile
als
o s
ele
cting a
Lead D
irecto
r…to
pro
vid
e independent
leaders
hip
.”
“The independent
directo
rs b
elie
ve t
hat
our
Pre
sid
ent
and C
hie
f E
xecutive O
ffic
er’s
in-d
epth
know
ledge o
f each o
f our
busin
esses a
nd the c
om
petitive c
halle
nges e
ach
busin
ess faces, as w
ell
as h
is e
xte
nsiv
e e
xperience a
s a
directo
r and s
enio
r m
em
ber
of m
anagem
ent
at
oth
er
Fort
une 1
00 c
om
panie
s, m
ake h
im t
he b
est-
qualif
ied
directo
r to
serv
e a
s C
hairm
an.”
The b
oard
may d
ecid
e to c
hange t
he b
oard
’s leaders
hip
str
uctu
re
and d
oes n
ot
have a
form
al polic
y to r
equire t
hat th
e C
EO
or
any
oth
er
mem
ber
of m
anagem
ent
serv
e a
s C
hairm
an o
f th
e B
oard
.
CE
O s
erv
es
as C
hairm
an
“The B
oard
has d
ete
rmin
ed t
hat th
e c
om
bin
ed r
ole
of
Chairm
an a
nd C
EO
is
appro
priate
for
the C
om
pany a
s it pro
mote
s u
nifie
d leaders
hip
and d
irection for
the
Com
pany,
allo
win
g f
or
a s
ingle
, cle
ar
focus for
managem
ent to
execute
the
Com
pany’s
str
ate
gy a
nd b
usin
ess p
lans. T
his
str
uctu
re a
lso a
void
s t
he a
dded c
osts
and ineff
icie
ncie
s t
hat
would
result b
y m
andating a
n independent
Chairm
an. T
he
Board
belie
ves that
the g
overn
ance s
tructu
re a
nd r
ole
of
the P
resid
ing D
irecto
r allo
w
the B
oard
to e
ffectively
work
with t
he c
om
bin
ed r
ole
of
the C
hairm
an a
nd C
EO
.”
“The B
oard
belie
ves t
he c
om
bin
ed r
ole
of
Chairm
an a
nd C
EO
is a
n e
ffective
str
uctu
re for
the B
oard
to u
nders
tand t
he r
isks a
ssocia
ted w
ith the C
om
pany’s
str
ate
gic
pla
ns a
nd o
bje
ctives. A
dditio
nally
, m
ain
tain
ing a
n independent
Board
with
a P
resid
ing D
irecto
r perm
its o
pen d
iscussio
n a
nd a
ssessm
ent
of th
e C
om
pany’s
abili
ty t
o m
anage these r
isks.”
“As s
et
fort
h in t
he C
om
pany’s
Byla
ws,
the C
hairm
an o
f our
Board
is
als
o the C
EO
of
the C
om
pany.”
CE
O s
erv
es
as C
hairm
an
“At
pre
sent, C
hevro
n’s
Board
belie
ves t
hat
it is in the s
tockhold
ers
’ best in
tere
sts
for
the C
EO
to a
lso s
erv
e a
s C
hairm
an o
f th
e B
oard
. T
he B
oard
belie
ves that th
is
str
uctu
re foste
rs a
n im
port
ant
unity o
f le
aders
hip
betw
een t
he B
oard
and t
he
Com
pany a
nd e
nable
s the B
oard
to o
rganiz
e its
functions a
nd c
onduct
its b
usin
ess
in t
he m
ost
eff
icie
nt
and e
ffective m
anner.
Chevro
n’s
sto
ckhold
ers
agre
ed w
ith t
his
appro
ach in 2
007 a
nd 2
008,
when t
hey c
onsid
ere
d a
nd v
ote
d o
n s
tockhold
er
pro
posals
to s
epara
te the r
ole
s o
f B
oard
Chairm
an a
nd C
EO
.”
The B
oard
Nom
inating a
nd G
overn
ance C
om
mitte
e c
onducts
an
annual assessm
ent
of
Chevro
n’s
corp
ora
te g
overn
ance s
tructu
res
and p
rocesses,
whic
h inclu
des a
revie
w o
f C
hevro
n’s
board
le
aders
hip
str
uctu
re a
nd w
heth
er
com
bin
ing o
r separa
ting the r
ole
s o
f C
hairm
an a
nd C
EO
is in t
he b
est in
tere
sts
of
Chevro
n’s
sto
ckhold
ers
. B
yla
ws p
rovid
e t
hat th
e B
oard
’s independent
directo
rs s
ele
ct th
e
Chairm
an o
f th
e B
oard
annually
.2
P
roxy f
ilin
g p
reced
es
eff
ective
da
te o
f n
ew
SE
C
dis
clo
sure
ru
les.
CE
O s
erv
es
as C
hairm
an
None s
pecifie
d.
Corp
ora
te G
overn
ance P
olic
ies p
rovid
e t
hat
“both
independent
and
managem
ent
directo
rs, in
clu
din
g t
he C
EO
, are
elig
ible
for
appoin
tment
as t
he C
hair.”
2 I
nfo
rmation o
bta
ined f
rom
corp
ora
te w
eb s
ite.
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
director notes board leadership structure www.conferenceboard.org 11
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
Independent
directo
r serv
es a
s
Chairm
an
“Citi curr
ently h
as a
n independent chairm
an s
epara
te fro
m the C
EO
. T
he b
oard
belie
ves it
is im
port
ant to
main
tain
fle
xib
ility
in its
board
leaders
hip
str
uctu
re a
nd h
as
had in p
lace d
iffe
rent le
aders
hip
str
uctu
res o
ver
the p
ast fe
w y
ears
, dependin
g o
n
the c
om
pany’s
needs a
t th
e tim
e, but
firm
ly s
upport
s h
avin
g a
n independent
directo
r in
a b
oard
leaders
hip
positio
n a
t all
tim
es.”
“H
avin
g a
n independent
chairm
an o
r le
ad d
irecto
r enable
s n
on-m
anagem
ent
directo
rs t
o r
ais
e issues a
nd c
oncern
s f
or
board
consid
era
tion w
ithout
imm
edia
tely
in
volv
ing m
anagem
ent.
”
Byla
ws p
rovid
e t
hat if t
he c
hairm
an is n
ot
independent,
the b
oard
shall
ele
ct
a lead independent
directo
r, “
havin
g s
imila
r duties to a
n
independent
chairm
an,
inclu
din
g leadin
g t
he e
xecutive s
essio
ns o
f th
e n
on-m
anagem
ent
directo
rs a
t board
meetings.
CE
O s
erv
es
as C
hairm
an
“The C
om
pany’s
busin
ess is c
om
ple
x a
nd o
ur
pro
ducts
are
sold
in m
ore
than 2
00
countr
ies a
round t
he w
orld.
Because the C
hie
f E
xecutive O
ffic
er
travels
exte
nsiv
ely
and is c
losest
to the m
any f
acets
of
our
busin
ess,
the B
oard
belie
ves the C
hie
f E
xecutive O
ffic
er
is in the b
est positio
n to lead m
ost
eff
ectively
and t
o s
erv
e in t
he
critical ro
le o
f C
hairm
an o
f th
e B
oard
. In
additio
n,
as h
e is d
irectly involv
ed in
managin
g t
he C
om
pany,
havin
g a
Chairm
an w
ho a
lso s
erv
es a
s t
he C
hie
f E
xecutive
Off
icer
allo
ws tim
ely
com
munic
ation w
ith t
he B
oard
on c
ritical busin
ess m
att
ers
giv
en t
he c
om
ple
xity a
nd g
lobal re
ach o
f our
busin
ess.
Furt
her,
most of th
e
Com
pany’s
pro
ducts
are
manufa
ctu
red a
nd s
old
by b
ott
ling p
art
ners
aro
und t
he
world,
most of
whic
h a
re s
epara
te,
unconsolid
ate
d c
om
panie
s. T
his
fra
nchis
e
str
uctu
re r
equires o
ur
leader
to h
ave s
trong r
ela
tionship
s w
ith the leaders
of
the
bott
lers
. H
avin
g a
sin
gle
pers
on in b
oth
role
s is im
port
ant so t
hat th
e C
om
pany is
repre
sente
d b
y a
sin
gle
voic
e to b
ott
lers
, custo
mers
and c
onsum
ers
…T
he B
oard
als
o b
elie
ves there
is a
very
well-
functionin
g a
nd e
ffective b
ala
nce b
etw
een s
trong
Com
pany leaders
hip
and a
ppro
priate
safe
guard
s a
nd o
vers
ight
by n
on-e
mplo
yee
Directo
rs.”
“Our
govern
ance d
ocum
ents
pro
vid
e t
he B
oard
with f
lexib
ility
to
sele
ct th
e a
ppro
priate
leaders
hip
str
uctu
re for
the C
om
pany.”
C
EO
serv
es
as C
hairm
an
“At th
is tim
e,
the B
oard
belie
ves that
the b
est
inte
rests
of th
e C
om
pany a
re s
erv
ed
by h
avin
g a
sin
gle
Chair/C
EO
.”
“The B
oard
appre
cia
tes t
hat
any a
dvanta
ges g
ain
ed b
y h
avin
g a
sin
gle
Chair/C
EO
m
ust
be w
eig
hed a
gain
st
any a
ssocia
ted independence c
oncern
s.
How
ever,
the
Com
pany h
as im
ple
mente
d a
dequate
safe
guard
s to a
ddre
ss t
hose c
oncern
s.”
“The p
ositio
ns o
f C
hair o
f th
e B
oard
and C
EO
are
held
by the s
am
e
pers
on,
except
in s
pecific
circum
sta
nces.”
CE
O s
erv
es
as C
hairm
an
“The B
oard
belie
ves t
he inte
rests
of
all
share
hold
ers
are
best serv
ed a
t th
e p
resent
tim
e t
hro
ugh a
leaders
hip
model w
ith a
com
bin
ed C
hairm
an/C
EO
positio
n a
nd a
n
independent
Pre
sid
ing D
irecto
r. H
ow
ever,
the B
oard
reta
ins a
uth
ority
to a
mend t
he
By-L
aw
s t
o s
epara
te t
he p
ositio
ns o
f C
hairm
an a
nd C
EO
at
any tim
e.”
“The c
urr
ent
CE
O p
ossesses a
n in-d
epth
know
ledge o
f th
e C
om
pany,
its inte
gra
ted,
multin
ational opera
tions,
the e
volv
ing e
nerg
y industr
y s
upply
and d
em
and,
and the
arr
ay o
f challe
nges to b
e faced,
gain
ed t
hro
ugh o
ver
34 y
ears
of successfu
l exp
erience in p
rogre
ssiv
ely
more
senio
r positio
ns, in
clu
din
g d
om
estic a
nd
inte
rnational re
sponsib
ilities.
The B
oard
belie
ves t
hat th
ese e
xp
eriences a
nd o
ther
insig
hts
put th
e C
EO
in t
he
best
positio
n to p
rovid
e b
road leaders
hip
for
the B
oard
as it consid
ers
str
ate
gy a
nd
as it
exerc
ises its
fid
ucia
ry r
esponsib
ilities to its
share
hold
ers
.”
“The C
om
pany’s
Byla
ws c
urr
ently p
rovid
e t
hat,
subje
ct
to t
he
auth
ority
of
the B
oard
of
Directo
rs,
the C
hairm
an o
f th
e B
oard
‘shall
have t
he g
enera
l care
and s
uperv
isio
n o
f th
e b
usin
ess a
nd a
ffairs o
f th
e c
orp
ora
tion,’ a
nd in the a
bsence o
f a P
resid
ent, s
hall
als
o ‘direct
the c
urr
ent
adm
inis
tration o
f th
e b
usin
ess a
nd a
ffairs o
f th
e
corp
ora
tion.’”
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
12 director notes board leadership structure www.conferenceboard.org
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
CE
O s
erv
es
as C
hairm
an
“We b
elie
ve that
this
str
uctu
re is a
ppro
priate
for
the c
om
pany b
ecause it
allo
ws o
ne
pers
on t
o s
peak for
and lead the c
om
pany a
nd t
he b
oard
, w
hile
als
o p
rovid
ing f
or
eff
ective o
vers
ight
by a
n independent
board
thro
ugh a
n independent pre
sid
ing
directo
r.
For
a c
om
pany a
s larg
e a
nd d
ivers
e a
s G
E,
we b
elie
ve t
he C
EO
is in t
he b
est
positio
n t
o f
ocus t
he independent directo
rs’ att
ention o
n the issues o
f gre
ate
st
import
ance t
o t
he c
om
pany a
nd its
share
ow
ners
. O
ur
overa
ll corp
ora
te g
overn
ance
polic
ies a
nd p
ractices c
om
bin
ed w
ith the s
trength
of
our
independent
directo
rs
min
imiz
es a
ny p
ote
ntial conflic
ts that m
ay r
esult f
rom
com
bin
ing the r
ole
s o
f C
EO
and C
hair.
In o
ur
vie
w, split
ting the r
ole
s w
ould
pote
ntially
have t
he u
ndesirable
consequence o
f m
akin
g o
ur
managem
ent
and g
overn
ance p
rocesses less e
ffective
than t
hey a
re today t
hro
ugh u
ndesirable
duplic
ation o
f w
ork
and, in
the w
ors
t case,
leadin
g t
o a
blu
rrin
g o
f th
e c
lear
lines o
f accounta
bili
ty a
nd r
esponsib
ility
, w
ithout
any
cle
ar
offsett
ing b
enefits
.”
None s
pecifie
d.
CE
O s
erv
es
as C
hairm
an
“Our
Board
does n
ot
have a
polic
y o
n w
heth
er
the r
ole
of
Chairm
an a
nd C
EO
should
be s
epara
te o
r com
bin
ed,
but
belie
ves t
hat
the m
ost eff
ective leaders
hip
model fo
r our
firm
at th
is tim
e is t
o h
ave t
hese r
ole
s c
om
bin
ed. T
his
board
leaders
hip
str
uctu
re
help
s to e
nsure
cla
rity
regard
ing leaders
hip
of
our
firm
and a
llow
s u
s to s
peak w
ith
one v
oic
e.
Our
Chairm
an a
nd C
EO
thus c
an s
erv
e a
s t
he focal poin
t fo
r in
form
ation
and c
om
munic
ations f
rom
us to s
hare
hold
ers
, re
gula
tors
and o
ther
exte
rnal
constitu
encie
s. T
he c
om
bin
ation o
f our
Chairm
an’s
abili
ty to c
all
and s
et
the a
genda
for
Board
meetings w
ith the C
EO
’s intim
ate
know
ledge o
f our
busin
ess p
rovid
es the
best str
uctu
re f
or
the e
ffic
ient
opera
tion o
f our
Board
pro
cess a
nd e
ffective
leaders
hip
of
our
Board
overa
ll. T
his
is p
art
icula
rly t
rue in t
imes o
f m
ark
et tu
rmoil
or
crisis
, w
hen o
ur
Board
must act
with g
reat
urg
ency.
Nevert
hele
ss,
our
Board
, w
hen
appro
priate
, assesses a
nd d
elib
era
tes the m
erits
of th
is s
tructu
re.”
“Our
Board
does n
ot
have a
polic
y o
n w
heth
er
the r
ole
of
Chairm
an
and C
EO
should
be s
epara
te o
r com
bin
ed.”
P
roxy f
ilin
g p
reced
es
eff
ective
da
te o
f n
ew
SE
C
dis
clo
sure
ru
les.
CE
O s
erv
es
as C
hairm
an
None s
pecifie
d.
“HP
’s C
orp
ora
te G
overn
ance p
rincip
les p
rovid
e that th
e independent
directo
rs w
ill d
esig
nate
a lead independent
directo
r w
hen t
he
positio
ns o
f C
hairm
an a
nd C
EO
are
held
by t
he s
am
e p
ers
on.
CE
O s
erv
es
as C
hairm
an
“We b
elie
ve that
havin
g a
com
bin
ed C
hairm
an/C
EO
, in
dependent m
em
bers
and
chairs f
or
each o
f our
Board
com
mitte
es a
nd a
n independent
Lead D
irecto
r curr
ently
pro
vid
es t
he b
est board
leaders
hip
str
uctu
re f
or
The H
om
e D
epot. T
his
str
uctu
re,
togeth
er
with o
ur
oth
er
good c
orp
ora
te g
overn
ance p
ractices, pro
vid
es s
trong
independent
overs
ight
of m
anagem
ent
while
ensuring c
lear
str
ate
gic
alig
nm
ent
thro
ughout
the C
om
pany. S
pecific
ally
, [o
ur
CE
O/C
hairm
an]
pro
poses s
trate
gic
priorities t
o the B
oard
(w
ith input fr
om
the L
ead D
irecto
r), com
munic
ate
s its
guid
ance
to m
anagem
ent,
and is u
ltim
ate
ly r
esponsib
le f
or
imple
menting the C
om
pany’s
key
str
ate
gic
initia
tives.”
None s
pecifie
d.
Independent
directo
r serv
es a
s
Chairm
an
“The B
oard
belie
ves t
hat th
ere
may b
e a
dvanta
ges to h
avin
g a
n independent
chairm
an for
matt
ers
such a
s c
om
munic
ations a
nd r
ela
tions b
etw
ee
n t
he B
oard
, th
e
CE
O,
and o
ther
senio
r m
anagem
ent;
in a
ssis
ting t
he B
oard
in r
eachin
g c
onsensus
on p
art
icula
r str
ate
gie
s a
nd p
olic
ies;
and in facili
tating r
obust
directo
r, B
oard
, and
CE
O e
valu
ation p
rocesses.”
Sin
ce 2
009, th
e B
oard
ele
cte
d a
n independent
directo
r as C
hairm
an.
“His
torically
, th
e B
oard
has h
ad a
genera
l polic
y that th
e p
ositio
ns o
f C
hairm
an o
f th
e B
oard
and C
EO
should
be h
eld
by s
epara
te p
ers
ons
as a
n a
id in the B
oard
’s o
vers
ight of m
anagem
ent…
Typic
ally
, in
the
past,
the C
hairm
an h
as b
een a
form
er
CE
O o
f th
e c
om
pany a
nd h
as
serv
ed a
s a
full-
tim
e s
enio
r executive.”
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
director notes board leadership structure www.conferenceboard.org 13
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
CE
O s
erv
es
as C
hairm
an
“The D
irecto
rs a
nd C
orp
ora
te G
overn
ance C
om
mitte
e a
nd t
he B
oard
belie
ve t
hat
the
leaders
hip
str
uctu
re is a
ppro
priate
for
the c
om
pany a
t th
is tim
e a
s it pro
vid
es f
or
focused e
ngagem
ent
by t
he b
oard
com
mitte
es a
nd their c
hairs in their r
espective
are
as o
f re
sponsib
ility
, w
hile
als
o p
rovid
ing f
or
engagem
ent
and p
art
icip
ation b
y a
ll board
mem
bers
with r
espect to
ite
ms p
resente
d f
or
delib
era
tion.”
None s
pecifie
d.
C
EO
serv
es
as C
hairm
an
“The independent
Directo
rs b
elie
ve t
hat
the C
om
pany’s
curr
ent m
odel of th
e
com
bin
ed C
hairm
an/C
EO
role
in c
onju
nction w
ith t
he P
resid
ing D
irecto
r positio
n is
the a
ppro
priate
leaders
hip
str
uctu
re f
or
Johnson &
Johnson a
t th
is tim
e.”
“The independent
Directo
rs b
elie
ve t
he c
om
bin
ed C
hairm
an/C
EO
positio
n, to
geth
er
with t
he P
resid
ing D
irecto
r, h
as c
ert
ain
advanta
ges o
ver
oth
er
board
leaders
hip
str
uctu
res t
hat continue to b
est m
eet
the C
om
pany’s
curr
ent
needs, in
clu
din
g:
E
ffic
ient com
munic
ation b
etw
een m
anagem
ent
and t
he B
oard
C
lear
delin
eation o
f th
e P
resid
ing D
irecto
r’s a
nd o
ther
independent D
irecto
rs’
overs
ight
role
fro
m the C
hairm
an/C
EO
’s a
nd o
ther
managem
ent’s d
ay-t
o-d
ay
opera
tional ro
le
C
larity
for
the C
om
pany’s
key s
takehold
ers
on c
orp
ora
te leaders
hip
and
accounta
bili
ty
T
he B
oard
Chairm
an p
ossessin
g t
he b
est know
ledge o
f th
e C
om
pany’s
str
ate
gy,
opera
tions a
nd fin
ancia
l conditio
n a
nd,
in t
urn
, th
e a
bili
ty t
o
com
munic
ate
that to
exte
rnal sta
kehold
ers
.”
“The independent
Directo
rs b
elie
ve t
hat
each o
f th
e p
ossib
le
leaders
hip
str
uctu
res f
or
a b
oard
has its
part
icula
r pro
s a
nd c
ons,
whic
h m
ust
be c
onsid
ere
d in the c
onte
xt
of
the s
pecific
circum
sta
nces, culture
and c
halle
nges f
acin
g a
com
pany,
and t
hat
such c
onsid
era
tion f
alls
square
ly o
n t
he s
hould
ers
of
a c
om
pany’s
board
and n
ecessitate
s a
div
ers
ity o
f vie
ws a
nd e
xperiences. T
he
com
bin
ed C
hairm
an/C
EO
model is
a leaders
hip
model th
at
has
serv
ed o
ur
share
hold
ers
well
for
many g
enera
tions, th
rough
num
ero
us e
conom
ic c
ycle
s a
nd t
hro
ugh a
successio
n o
f eff
ective
leaders
. T
he N
om
inating &
Corp
ora
te G
overn
ance C
om
mitte
e a
nd
the o
ther
independent
Directo
rs p
eriodic
ally
revie
w t
his
str
uctu
re t
o
ensure
it is
still
appro
priate
for
the C
om
pany.
Sin
ce 2
002,
the b
oard
has h
ad a
n independent
Pre
sid
ing D
irecto
r w
ho is s
ele
cte
d a
nnually
by t
he independent
directo
rs.”
C
EO
serv
es
as C
hairm
an
“The [
Board
had d
ete
rmin
ed t
hat
the] m
ost eff
ective leaders
hip
model fo
r our
Firm
curr
ently is that
Mr.
Dim
on s
erv
e a
s b
oth
Chairm
an a
nd C
hie
f E
xecutive O
ffic
er.
”
“The B
oard
has n
o s
et
polic
y o
n w
heth
er
or
not to
have a
non-
executive C
hairm
an.”
C
EO
serv
es
as C
hairm
an
“The B
oard
conclu
ded that
the C
hie
f E
xecutive O
ffic
er
should
als
o s
erv
e a
s
Chairm
an a
nd b
ecause o
f M
s.
Rosenfe
ld’s
exte
nsiv
e k
now
ledge o
f K
raft
Foods a
nd
the f
ood industr
y,
leaders
hip
experi
ence,
and d
edic
ation to w
ork
ing c
losely
with
oth
er
mem
bers
of
the b
oard
. M
s. R
osenfe
ld’s
first-
hand k
now
ledge a
s C
hie
f E
xecutive O
ffic
er
facili
tate
s the b
oard
decis
ion-m
akin
g p
rocess b
ecause s
he c
hairs
the b
oard
meetings w
here
the b
oard
dis
cusses s
trate
gic
and b
usin
ess issues.”
“The B
oard
belie
ves t
hat
is in t
he b
est in
tere
sts
of
Kra
ft F
oods f
or
the
Board
to p
eriodic
ally
evalu
ate
the leaders
hip
str
uctu
re o
f our
com
pany a
nd m
ake a
dete
rmin
ation r
egard
ing w
heth
er
to s
epara
te o
r com
bin
es the r
ole
s o
f C
hairm
an a
nd C
hie
f E
xecutive O
ffic
er
based
on c
ircum
sta
nces a
t th
e tim
e o
f its d
ecis
ion.”
Independent
directo
r serv
es a
s
Chairm
an
Led b
y independent
chairm
an s
ince 2
004. S
epara
tion o
f th
e r
ole
s w
as first
imple
mente
d t
o f
acili
tate
a t
ransitio
n t
o a
new
CE
O a
fter
the u
ntim
ely
death
of
the
pre
vio
us C
hairm
an a
nd C
EO
at
a tim
e w
hen M
cD
onald
”s w
as in the e
arly s
tages o
f im
ple
menting its
new
busin
ess s
trate
gy.
“In
dependent
leaders
hip
of
the b
oard
allo
wed m
anagem
ent
to f
ocus f
ully
on o
pera
tions d
uring this
period. A
t th
e s
am
e
tim
e,
it a
ssure
d that
the C
EO
had a
n a
ppro
priate
ly s
trong c
ounte
rpoin
t on the b
oard
w
hen c
onsid
ering t
he c
halle
nges a
ssocia
ted w
ith a
change in s
trate
gy.
The b
oard
has r
eta
ined t
his
str
uctu
re b
ecause it has w
ork
ed w
ell
to a
ssure
constr
uctive
engagem
ent
with t
he C
EO
and e
ffective o
vers
ight
of m
anagem
ent
as a
whole
.”
Corp
ora
te G
overn
ance P
rincip
les p
rovid
e t
hat th
e “
independent
Directo
rs w
ill e
xerc
ise t
heir d
iscre
tion in c
om
bin
ing o
r separa
ting t
he
positio
ns o
f C
hairm
an a
nd C
EO
, as t
hey d
eem
appro
priate
in lig
ht
of
the C
om
pany’s
pre
vaili
ng c
ircum
sta
nces.”
3
CE
O s
erv
es
as C
hairm
an
“The B
oard
belie
ves t
hat th
e C
om
pany a
nd its
share
hold
ers
are
well-
serv
ed b
y t
he
Board
’s c
urr
ent le
aders
hip
str
uctu
re.
Havin
g o
ne p
ers
on s
erv
e a
s b
oth
Chairm
an o
f th
e B
oard
and P
resid
ent
and C
hie
f E
xecutive O
ffic
er
of
the C
om
pany p
rovid
es c
lear
leaders
hip
for
the C
om
pany a
nd h
elp
s e
nsure
accounta
bili
ty for
the s
uccesses a
nd
failu
res o
f th
e C
om
pany.
At th
e s
am
e t
ime,
havin
g a
n independent
Lead D
irecto
r veste
d w
ith k
ey d
uties a
nd r
esponsib
ilities a
nd s
ix independent
Board
com
mitte
es
None s
pecifie
d.
3 E
xcerp
t fr
om
McD
onald
’s C
orp
ora
te G
overn
ance P
rincip
les o
bta
ined f
rom
corp
ora
te w
eb s
ite.
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
14 director notes board leadership structure www.conferenceboard.org
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
chaired b
y independent
directo
rs p
rovid
es a
form
al str
uctu
re for
str
ong independent
overs
ight
of
the C
hairm
an a
nd the r
est
of th
e C
om
pany’s
managem
ent
team
.”
P
roxy f
ilin
g p
reced
es
eff
ective
da
te o
f n
ew
SE
C
dis
clo
sure
ru
les.
Form
er
CE
O
serv
es a
s
Chairm
an
“Sin
ce 2
000, th
e r
ole
s o
f chairm
an a
nd c
hie
f executive o
ffic
er
have b
een h
eld
separa
tely
. M
r. G
ate
s s
erv
es a
s C
hairm
an a
nd M
r. B
allm
er
serv
e a
s C
hie
f E
xecutive
Off
icer.
The C
hair o
f our
Govern
ance a
nd N
om
inating C
om
mitte
e s
erv
es a
s t
he
Lead I
ndependent
Directo
r.”
None s
pecifie
d.
Form
er
CE
O
serv
es a
s
Chairm
an
“His
torically
, th
e p
ositio
ns o
f C
hie
f E
xecutive O
ffic
er
and C
hairm
an w
ere
held
by t
he
sam
e indiv
idual. A
s a
result o
f M
r. M
ack’s
dis
cussio
n w
ith the B
oard
about
ste
ppin
g
dow
n a
s C
hie
f E
xecutive O
ffic
er
and a
s p
art
of
its o
ngoin
g r
evie
w o
f th
e B
oard
’s
leaders
hip
str
uctu
re a
nd s
uccessio
n p
lannin
g p
rocess,
the B
oard
in S
epte
mber
2098
dete
rmin
ed t
hat th
e p
ositio
ns o
f C
hie
f E
xecutive O
ffic
er
and C
hairm
an s
hould
be
held
by t
wo s
epara
te indiv
iduals
.”
“The B
oard
belie
ves t
hat th
e C
om
pany is b
est serv
ed b
y m
ain
tain
ing
the f
lexib
ility
to h
ave a
ny indiv
idual serv
e a
s C
hair b
ased o
n w
hat
is
in t
he b
est in
tere
sts
of th
e C
om
pany a
t a g
iven p
oin
t in
tim
e,
rath
er
than m
andating a
part
icula
r le
aders
hip
str
uctu
re.
In m
akin
g this
decis
ion, th
e B
oard
consid
ers
, am
ong o
ther
thin
gs,
the c
om
positio
n
of
the B
oard
, th
e r
ole
of
the C
om
pany’s
Lead D
irecto
r, t
he
Com
pany’s
str
ong c
orp
ora
te g
overn
ance p
ractices,
the C
hie
f E
xecutive O
ffic
er’s w
ork
ing r
ela
tionship
with t
he B
oard
, and the
challe
nges s
pecific
to t
he C
om
pany.”
C
orp
ora
te G
overn
ance P
olic
ies p
rovid
e f
or
an independent
and
active L
ead D
irecto
r w
ith c
learly d
efined leaders
hip
auth
ority
and
responsib
ilities.
CE
O s
erv
es
as C
hairm
an
“The b
oard
has d
ete
rmin
ed that
Jeff
rey K
indle
r serv
ing a
s C
EO
and C
hairm
an is
optim
al fo
r th
e c
om
pany b
ecause it
pro
vid
es the c
om
pany s
trong a
nd c
onsis
tent
leaders
hip
. G
iven the c
urr
ent
regula
tory
and m
ark
et
environm
ent,
couple
d w
ith t
he
ongoin
g inte
gra
tion o
f W
yeth
, th
e c
om
pany b
elie
ves h
avin
g o
ne leader
serv
ing a
s
both
Chairm
an a
nd C
EO
pro
vid
es d
ecis
ive a
nd e
ffective leaders
hip
.”
“The B
oard
recogniz
es t
hat
one o
f its k
ey r
esponsib
ilities is t
o
evalu
ate
and d
ete
rmin
e its
optim
al le
aders
hip
str
uctu
re s
o a
s t
o
pro
vid
e independent
overs
ight
of m
anagem
ent.
.. C
onsis
tent
with this
unders
tandin
g, th
e independent
directo
rs c
onsid
er
the B
oard
’s
leaders
hip
str
uctu
re o
n a
n a
nnual basis
. T
his
consid
era
tion inclu
des
the p
ros a
nd c
ons o
f altern
ative leaders
hip
str
uctu
res in lig
ht
of th
e
Com
pany’s
opera
ting a
nd g
overn
ance e
nvironm
ent
at th
e tim
e,
with
the g
oal of
achie
vin
g t
he o
ptim
al m
odel fo
r eff
ective o
vers
ight
of
managem
ent
by the B
oard
.”
Corp
ora
te g
overn
ance p
rincip
les s
pecify that
independent
directo
rs
will
annually
ele
ct
a C
hairm
an,
who m
ay o
r m
ay n
ot
be t
he C
EO
. If
th
e C
hairm
an is t
he C
EO
, th
e independent
directo
rs w
ill a
lso e
lect
a
lead independent
directo
r. S
ee C
hart
er
of th
e L
ead Independent
Directo
r. I
n 2
010, th
e c
om
pany a
mended its
corp
ora
te g
overn
ance
princip
les t
o r
em
ove t
he p
resum
ption t
hat
the r
ole
of
Chairm
an w
ill b
e
held
by t
he C
EO
.
P
roxy f
ilin
g p
reced
es
eff
ective
da
te o
f n
ew
SE
C
dis
clo
sure
ru
les.
Form
er
CE
O
serv
es a
s
Chair
None s
pecifie
d.
“The C
hair w
ill b
e a
ppoin
ted b
y v
ote
of a m
ajo
rity
of
non-e
mplo
yee
mem
bers
of th
e B
oard
…if t
he B
oard
Chair is t
he C
hie
f E
xecutive o
f th
e C
om
pany, th
en o
ne o
f th
e independent m
em
bers
of
the B
oard
will
be n
am
ed a
s P
resid
ing D
irecto
r.”
C
EO
serv
es
as C
hair
“The B
oard
belie
ves t
hat
its c
urr
ent
leaders
hip
str
uctu
re is a
ppro
priate
for
the
Com
pany a
t th
is t
ime…
the c
om
bin
ed r
ole
of
Chairm
an a
nd C
hie
f E
xecutive O
ffic
er,
in
the c
ase o
f th
e C
om
pany, m
eans that th
e C
hair o
f th
e B
oard
has longsta
ndin
g
exp
erience w
ith p
ropert
y a
nd c
asualty insura
nce a
nd o
ngoin
g e
xecutive
responsib
ility
for
the C
om
pany. I
n t
he B
oard
’s v
iew
, th
is e
nable
s t
he B
oard
to b
ett
er
unders
tand t
he C
om
pany a
nd w
ork
with m
anagem
ent to
enhance s
hare
hold
er
valu
e…
and f
ulfill
its
ris
k o
vers
ight re
sponsib
ilities. In a
dditio
n, th
is e
nable
s t
he C
hie
f E
xecutive O
ffic
er
to e
ffectively
com
munic
ate
the B
oard
’s v
iew
to m
anagem
ent
there
by e
nsuring a
com
mon p
urp
ose.”
“Appro
priate
leaders
hip
str
uctu
re d
epends o
n t
he o
pport
unitie
s a
nd
challe
nges f
acin
g a
com
pany a
t a g
iven t
ime,
and a
one-s
ize-f
its-a
ll appro
ach t
o c
orp
ora
te g
overn
ance,
with a
mandate
d independent
chair,
would
deprive t
he c
om
pany o
f th
e b
enefits
of
its c
urr
ent
leaders
hip
str
uctu
re a
nd w
ould
not
result in b
ett
er
govern
ance o
r overs
ight.
” C
orp
ora
te G
overn
ance g
uid
elin
es p
rovid
e f
or
lead d
irecto
r w
henever
Chair is n
ot
independent.
Lead d
irecto
r is
ele
cte
d b
y s
ecre
t ballo
t of
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
director notes board leadership structure www.conferenceboard.org 15
Co
mp
an
y
Bo
ard
L
ead
ers
hip
R
ati
on
ale
giv
en
fo
r co
mb
ined
po
sit
ion
or
ind
ep
en
den
t ch
air
F
orm
al
po
lic
y o
n b
oard
lead
ers
hip
independent
directo
rs a
nd m
ay n
ot serv
e a
s L
ead f
or
more
than f
ive
years
.
C
EO
serv
es
as C
hair
“In t
he c
onte
xt
of
UT
C’s
glo
bal and d
ivers
e o
pera
tions,
UT
C’s
com
bin
ed leaders
hip
str
uctu
re p
rovid
es im
port
ant
benefits
thro
ugh e
ffective inte
rnal and e
xte
rnal
com
munic
ation o
f critical str
ate
gie
s a
nd b
usin
ess p
riorities.”
“T
he B
oard
belie
ves U
TC
’s u
nitary
leaders
hip
str
uctu
re is a
ppro
priate
ly b
ala
nced b
y
the d
esig
nation o
f a L
ead D
irecto
r ro
le a
nd t
he independence o
f tw
elv
e o
f U
TC
’s
thirte
en d
irecto
rs.”
“UT
C’s
Govern
ance G
uid
elin
es s
tate
that th
ere
is n
o fix
ed p
olic
y o
n
wheth
er
the r
ole
s o
f C
hairm
an o
f th
e B
oard
and C
hie
f E
xecutive
Off
icer
should
be s
epara
te o
r com
bin
ed,
with t
his
decis
ion to b
e
made b
ased o
n t
he b
est
inte
rests
of
UT
C c
onsid
ering t
he
circum
sta
nces a
t th
e tim
e.”
C
EO
serv
es
as C
hair
“The B
oard
belie
ves t
hat V
erizon a
nd its
share
hold
ers
are
best serv
ed b
y h
avin
g a
C
hairm
an w
ho h
as a
wid
e-r
angin
g,
in-d
epth
know
ledge o
f V
erizon’s
busin
ess
opera
tions a
nd c
om
petitive landscape a
nd w
ho c
an b
est
identify
the s
trate
gic
issues
to b
e c
onsid
ere
d b
y t
he B
oard
.” B
ased o
n h
is e
xte
nsiv
e e
xperience a
nd k
now
ledge
of
Verizon’s
com
petitive c
halle
nges a
nd o
pport
unitie
s, th
e b
oard
has d
ete
rmin
ed that
the C
EO
is b
est qualif
ied t
o s
erv
e in t
hat
role
.
“The B
oard
belie
ves t
hat share
hold
er
are
best serv
ed b
y the B
oard
’s c
urr
ent
leaders
hip
str
uctu
re,
because t
he C
orp
ora
te G
overn
ance G
uid
elin
es a
nd t
he
Com
pany’s
polic
ies a
nd p
rocedure
s p
rovid
e f
or
an e
mpow
ere
d,
independent
Pre
sid
ing D
irecto
r and t
he f
ull
involv
em
ent
of
the independent m
em
bers
of
the B
oard
in
the B
oard
’s o
pera
tions a
nd its
decis
ion m
akin
g.”
None s
pecifie
d.
F
orm
er
executive
serv
es a
s
Chair
“We s
epara
te the r
ole
s o
f C
EO
and C
hairm
an in r
ecognitio
n o
f th
e d
iffe
rences
betw
een t
he t
wo r
ole
s.”
“B
y s
epara
ting t
he r
ole
s o
f C
EO
and C
hairm
an, th
e C
EO
is a
ble
to f
ocus h
is t
ime
and e
nerg
y o
n m
anagin
g W
alm
art
’s c
om
ple
x d
aily
opera
tions.”
Byla
ws s
pecify that
CE
O is r
esponsib
le for
genera
l m
anagem
ent,
overs
ight,
superv
isio
n a
nd c
ontr
ol of
the b
usin
ess a
nd a
ffairs o
f th
e
com
pany,
and e
nsuring that
all
ord
ers
and r
esolu
tions o
f th
e b
oard
are
carr
ied into
eff
ect.
C
hairm
an is c
harg
ed w
ith p
resid
ing o
ver
all
meetings o
f th
e b
oard
and s
hare
hold
ers
, and p
rovid
ing a
dvic
e a
nd
counsel to
the C
EO
and c
om
pany’s
oth
er
off
icers
regard
ing b
usin
ess
and o
pera
tions.
P
roxy f
ilin
g p
reced
es
eff
ective
da
te o
f n
ew
SE
C
dis
clo
sure
ru
les.
Independent
directo
r serv
es a
s
Chair
Pre
serv
es d
istinction b
etw
een m
anagem
ent
and o
vers
ight, m
ain
tain
ing r
esponsib
ility
of m
anagem
ent to
develo
p c
orp
ora
te s
trate
gy a
nd r
esponsib
ility
of th
e b
oard
to
revie
w a
nd e
xp
ress its
vie
ws o
n c
orp
ora
te s
trate
gy.
“The C
om
pany’s
Corp
ora
te G
overn
ance G
uid
elin
es s
pecify that
the
Chairm
an o
f th
e B
oard
will
be a
n independent
directo
r unle
ss the
Board
dete
rmin
es that
the b
est in
tere
sts
of
the s
hare
hold
ers
would
be o
therw
ise b
ett
er
serv
ed,
in w
hic
h c
ase t
he b
oard
will
dis
clo
se in
the c
om
pany’s
pro
xy s
tate
ment
the r
easons f
or
a d
iffe
rent
arr
angem
ent
and a
ppoin
t an independent
directo
r as lead d
irecto
r w
ith d
uties a
nd r
esponsib
ilities d
eta
iled in the c
orp
ora
te g
overn
ance
guid
elin
es.”
App
endi
x 1
cont
inue
d
Surv
ey o
f En
hanc
ed D
irec
tor
and
Nom
inee
Dis
clos
ure
16 director notes board leadership structure www.conferenceboard.org
About the AuthorsLouis L. Goldberg Mr. Goldberg is a member of Davis Polk’scorporate department, practicing in the mergers andacquisitions group. His practice focuses on public andprivate mergers and acquisitions, private equity transactions,board and corporate governance advice, joint ventures,spinoffs and defensive assignments. Mr. Goldberg isrecognized as a leading lawyer in several legal industrypublications, including Chambers Global: The World’sLeading Lawyers for Business. He is a magna cum laudegraduate of the University of Cape Town Faculty of Law andearned a LL.M. degree from the University of Cambridge.
Justine Lee is an associate in Davis Polk’s mergers andacquisitions group and a practice resources editor for thefirm. She has published a number of articles on mergersand acquisitions matters and corporate governance issues.Ms. Lee earned a B.A. from Yale University and a J.D.from Columbia Law School, where she was a Harlan FiskeStone Scholar and managing editor of the ColumbiaHuman Rights Law Review.
About the Series DirectorMatteo Tonello is director, corporate governance research,at The Conference Board in New York. For The ConferenceBoard, Tonello has conducted governance and risk manage-ment analyses and research in collaboration with leadingcorporations, institutional investors, and professional firms.Also, he has participated as a speaker and moderator in educational programs on governance best practices.Recently, Tonello served as the co-chair of The ConferenceBoard’s Expert Committee on Shareholder Activism andas a member of the Technical Advisory Group to TheConference Board Task Force on Executive Compensation.Before joining The Conference Board, he practiced corporatelaw at Davis Polk. Tonello is a graduate of Harvard LawSchool and the University of Bologna.
About Director NotesDirector Notes is a series of online publications in which The Conference Board engages experts from several disciplines of business leadership, including corporategovernance, risk oversight, and sustainability, in an opendialogue about topical issues of concern to membercompanies. The opinions expressed in this report arethose of the author(s) only and do not necessarily reflectthe views of The Conference Board. The Conference Boardmakes no representation as to the accuracy and com-pleteness of the content. This report is not intended toprovide legal advice with respect to any particular situation,and no legal or business decision should be based solelyon its content.
About The Conference BoardThe Conference Board is the world’s preeminent businessmembership and research organization. Best known forthe Consumer Confidence Index and the Leading EconomicIndicators, The Conference Board has, for over 90 years,equipped the world’s leading corporations with practicalknowledge through issues-oriented research and seniorexecutive peer-to-peer meetings.
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