Board Guidelines on Corporate Governance Issues
3Com @ a Glance
1. Primary Functions of the Board of Directors.
The business and affairs of the corporation shall be under the direction of the board. This includes overseeing the conduct of the corporation's business by management and review of the corporation's financial objectives and major corporate plans, strategies and actions. 3Com directors are expected to promote the best interests of shareholders in terms of corporate governance, fiduciary responsibilities, compliance with applicable laws and regulations, and maintenance of accounting, financial or other controls.
2. CEO Selection and Evaluation; CEO Succession Plan; Other Senior Executives.
Directors will participate in the selection and, where appropriate, replacement of the Chief Executive Officer and will regularly approve a CEO succession plan and review a succession plan for senior executives.
The board will annually review the performance of the CEO. The Compensation Committee, led by its chair, will manage the evaluation process, including gathering and consolidating input from other directors, and, if appropriate, executive officers and other personnel. The Compensation Committee, led by its chair, will present the results of the review to the board and to the CEO. The Compensation Committee may use the information gathered in the evaluation process in determining CEO compensation. In its discretion, the board may set factors to be considered in assessing CEO performance.
Directors will also provide input to the CEO for the evaluation, as well as the recruitment, of the other principal senior executives of the corporation.
3. Authorization Guidelines.
Consistent with the board's power to delegate management of the day-to-day operation of the corporation's business, the board shall exercise business judgment in establishing and revising guidelines for authorization of expenditures or other corporate actions, and these will periodically be reviewed with management.
4. Board Access to Senior Management.
Directors have complete access to 3Com's executive officers. As a courtesy, directors will use judgment to ensure that such contact would not be distracting to the business operation, or management reporting structure, of the corporation. The board expects the CEO, from time to time, to bring managers into board meetings who can provide additional insight into the items being discussed or who have future potential that the CEO believes should be made visible to the board.
5. Leadership of the Board.
The leadership of the board shall include a chair of the board and a lead independent director. The Chair and Secretary shall disseminate to directors on a timely basis briefing materials to be included in the meeting agenda, as well as minutes from prior meetings and any written reports by committees. The Nominating and Governance Committee, pursuant to its committee charter, shall evaluate candidates for directorships and board committee assignments, evaluate board effectiveness and recommend best practices with respect to corporate governance.
The board endorses the role of a lead independent director, to be nominated by the Nominating and Governance Committee and appointed by the independent directors. The lead independent director shall serve as the focal point for independent directors regarding resolving conflicts with the CEO, or other independent directors, and coordinating feedback to the CEO on behalf of independent directors regarding business issues and board management. The lead independent director will also serve as a special counsel to the CEO. The lead independent director and the other independent directors shall meet regularly without the CEO present.
6. Charters of Standing Committees.
The current committee structure of the board includes the following committees: Audit and Finance, Compensation and Nominating and Governance. The charters of each standing committee will be reviewed periodically with a view to delegating committees with the authority of the board concerning specified matters appropriate to such committee. Such authority will be set forth in board resolutions or bylaws pertaining to the charters of board committees.
7. Board Selection Process; Committee Membership and Rotation.
It is expected that all directors will be alert to potential board candidates with appropriate skills and characteristics and communicate information regarding board selection matters to the Nominating and Governance Committee. The Nominating and Governance Committee shall recommend to the board candidates for directorships and board committee assignments and shall use the same criteria for shareholder-nominated candidates as for other candidates. The board endorses the value of seeking qualified directors from diverse backgrounds otherwise relevant to the corporation's mission, strategy and business operations and perceived needs of the board at a given time. The board and the Nominating and Governance Committee endorse rotating members of the Committees periodically at a five-year interval, but they believe that such rotation should not be mandated since there may be reasons to maintain an individual directorís committee membership for a longer or shorter period.
8. Directorís Term of Office; Other Activities; Retirement Age.
As an alternative to term limits, the Chair of the Nominating and Governance Committee, in consultation with the Chair, will review each director's continuation on the board at the conclusion of each term. This will also allow each director the opportunity to confirm his or her desire to continue as a member of the board.
Each director is required to submit a letter of resignation upon a job change. Such letter is to be accepted or rejected at the discretion of the Chair. The corporation values the experience directors bring from other boards on which they serve and other activities in which they participate, but recognizes that those boards and activities may also present potential conflicts of interest or legal issues, including independence issues. Accordingly, directors should advise the Chair of the Nominating and Governance Committee (and the Chair of the Nominating and Governance Committee should advise the lead independent director) before accepting membership on other boards of directors or establishing other significant relationships with businesses, institutions, governmental units or regulatory entities, particularly those that may result in a change in the directorís relationship to the corporation. These activities may include board service, employment, consulting, investing or other relationships. The Chair of the Nominating and Governance Committee (or the lead independent director) will work with the Chief Legal Officer to ensure that these relationships do not pose any legal issues. Directors may not serve on the board of directors of more than five other public companies and directors that are employed by the corporation may not serve on the board of directors of more than two other public companies.
Directors must retire from the board at the conclusion of any term during which the director reaches the age of seventy years.
9. Director Orientation and Continuing Education.
The corporation will maintain an orientation program for new directors that may include written material, oral presentations and/or site visits. The corporation will also provide continuing education for directors on topics relevant to 3Com and its business. The corporation encourages directors to attend appropriate external continuing education programs, and the corporation will reimburse directors for the cost of these programs. During every three-year period of service on the board, each director shall attend at least one external continuing education program that is accredited by a recognized corporate governance ratings agency, university or comparable independent body, provided that the Nominating and Governance Committee shall be permitted to waive this requirement in appropriate circumstances.
10. Board and Committee Meetings.
In preparation for meetings of the board and its committees, the Chair will consult with the CEO regarding the agenda and content and, with support from the Secretary, shall disseminate to directors on a timely basis briefing materials regarding matters to be included in the meeting agenda, as well as minutes from prior meetings and any written reports by committees. On those occasions in which the subject matter is too sensitive to put on paper, the presentation will be discussed at the meeting. Presentations to the board may rely on directors having reviewed and digested information set forth in the briefing materials, thus allowing more time for discussion, clarification and feedback. Consistent with authorization guidelines and committee charters, day-to-day operational matters, routine administrative items and matters specified in standing committee charters shall be acted upon either by management or a board committee, as reflected in normal management or committee reports to the board. The format of each quarterly board meeting shall include an executive session with the directors and Chair. In addition, the independent directors shall meet in executive session on a regular basis. Adequate time will be scheduled for completion of matters placed on the agenda of each meeting, including an annual off-site meeting of the board to review long-term strategy. The board has the authority to hire its own advisors and to have them present at meetings, as it deems necessary.
11. Stock Ownership Guidelines for Non-Employee Directors.
To further align the interests of non-employee directors and stockholders, each non-employee director is required to own shares of the corporationís common stock having a value equal to at least two times the non-employee directorís regular annual cash retainer. Non-employee directors shall have five years from the date of commencement of service on the board to attain such ownership levels (or five years from June 17, 2009 for non-employee directors already on the Board at the time this provision is initially implemented). The Nominating and Governance Committee in its discretion may extend the period of time for attainment of such ownership levels in appropriate circumstances. For purposes of these guidelines, a non-employee directorís stock ownership includes all shares of the corporationís common stock owned by the non-employee director outright or held in trust for the non-employee director and his or her immediate family, plus a non-employee directorís vested deferred stock, if any, but not a non-employee directorís unvested or unexercised equity or equity derivatives. The value of a share shall be measured as the greater of the then current market price or the closing price of a share of the corporationís common stock on the acquisition date. All purchases will be subject to provisions of 3Comís Trading Window and Insider Trading Policy, including the requirement that directors pre-clear trades with the Chief Compliance Officer.
Amended and Restated: June 17, 2009