CIRCUIT CITY STORES, INC.
CORPORATE GOVERNANCE GUIDELINES
AS AMENDED AND RESTATED AS OF October 23, 2007
This list of practices and policies has
been reviewed and approved by the Board of Directors. It sets forth general
guidelines for the governance of the Company in conjunction with (and subject
to) the requirements of state and federal law, the New York Stock Exchange and
the Company's articles of incorporation and by-laws. These guidelines are
intended to serve as a flexible framework for the conduct of the Board's
business and not as a set of legally binding obligations.
Director Responsibilities and Organizational
Board Oversight Responsibility
The business and affairs of the Company are subject to the overall direction
and authority of the Board of Directors. The Board exercises its
responsibilities on an oversight basis. Day-to-day operation of the Company is
delegated to management, led by the Chief Executive Officer. Important
oversight functions are assigned to the following committees of the Board, each
of which exercises its responsibilities under a written charter: Audit
(financial reporting and internal controls); Compensation and Personnel
(executive compensation and retirement plans); and Nominating and Governance
(corporate governance and succession planning).
Each year, the Board conducts a multi-day strategic planning meeting. The
strategic planning process involves both senior management and the Board and
has been designed with the goal of best serving the long-term interests of the
Company and its shareholders.
Various members of the Company's senior management team are responsible for all
elements of the strategic planning process. The Board approves the strategic
plans, monitors their implementation and assesses their effectiveness.
Chairman and Chief Executive Officer
At present, the offices of Chairman of the Board and Chief Executive Officer
are held by the same person. The Board of Directors shall elect, regularly
evaluate and, if necessary, replace the Chairman and Chief Executive Officer as
the Board believes in the best interests of the Company.
The non-management directors of the Board select a lead non-management director
who also serves as Chairman of the Nominating and Governance Committee, has the
responsibility of chairing the regularly scheduled meetings of non-management
directors, and undertakes such other responsibilities as the directors
designate. "Non-management directors" are persons who are not
currently officers of the Company. Parties wishing to communicate directly with
the Lead Director or with non-management directors as a group should write to:
Lead Director, Circuit City Stores, Inc., 9950 Mayland Drive, Richmond,
The Board has constituted three standing Committees to which it has assigned
substantive duties. These are the Audit Committee, the Compensation and
Personnel Committee and the Nominating and Governance Committee. All members of
the Audit, Compensation and Personnel and Nominating and Governance Committees
will be independent directors (see definition at Item 15). In addition, the
Board has appointed an Executive Committee consisting of the Chairman and Chief
Executive Officer and the chairs of the Audit, Compensation and Personnel and
Nominating and Governance Committees. The Executive Committee's activities are
generally confined to handling matters arising in the ordinary course of the
Company's business or which have been previously approved in substance by the
Board of Directors.
Assignment and Rotation of Committee Members
The Nominating and Governance Committee, with advice from the Chairman and
Chief Executive Officer and with consideration to the requests of individual
directors, nominates members and the Chairman for all Committees. The election
of members of each of the Committees is made by the full Board of Directors.
Each non-management director is appointed to at least one standing Committee.
Consideration is given annually to rotating Committee members, but the Board
has not mandated a formal rotation policy as an individual director's continued
membership on a given Committee may be in the best interests of the Company.
The Frequency and Length of Committee Meetings
Each Committee's Chairman, in consultation with the Chairman and Chief
Executive Officer, will determine the frequency and length of meetings of the
The Chairman of each Committee, with advice from the Chairman and Chief
Executive Officer and with consideration of requests of Committee members and
the Board, develops the Committee's agenda and tentative schedule of meetings.
Agenda for Board Meetings
The Chairman and Chief Executive Officer, in conjunction with the Lead
Director, will determine the frequency and length of the Board meetings and
will establish an agenda for each Board meeting. Each director may suggest
matters to be included on the agenda. The Chairman and Chief Executive Officer
will use best efforts to include all agenda items suggested by directors at the
earliest practicable meeting.
The Lead Director, in consultation with the Chairman and Chief Executive
Officer, will establish an agenda for meetings of non-management directors.
Attendance at Meetings; Advance Delivery of Materials
Directors are expected to ensure that other commitments do not materially
interfere with their regular attendance at, and preparation for, Board and
committee meetings or their ability to fulfill their responsibilities as
Directors. It is important to the Board that information needed for the Board's
understanding of the Company's business be distributed in writing to the Board
before the Board meets.
As a general rule, presentations on specific subjects should be sent to the
Board members in advance so that Board meeting time may be conserved and
discussion time focused on questions that the Board has about the subject.
All directors and, when applicable, all nominees for director are expected to
attend the Annual Meeting of Shareholders.
Executive Sessions of Non-management Directors
The non-management directors of the Board will meet in executive session at
each regularly scheduled Board meeting. These meetings will include a
discussion with and without the Chairman and Chief Executive Officer.
Size of the Board
The Board believes that ten to twelve directors is an appropriate size for the
Board at this time. However, the Board will, in appropriate circumstances,
consider increasing or decreasing its size.
Board Interaction with Constituencies
The Board believes that the management speaks for the Company. Individual Board
members may, from time to time, be asked to meet or otherwise communicate with
various constituencies or respond to inquiries or other requests which relate
to the Company. Board members generally will refer all such requests to the
Chairman and Chief Executive Officer.
Director Qualification Standards
Mix of Directors
A majority of the members of the Board of Directors must meet the independence
requirements of the New York Stock Exchange. As a matter of Company policy,
one-third or less of the members of the Board of Directors should be members of
management. The Board believes that management should encourage senior managers
to understand that Board membership is not necessary or a prerequisite to any
higher management position in the Company.
Definition of Independence
A director is considered to be independent if he or she meets the independence
requirements of the New York Stock Exchange and the Board affirmatively
determines that such director is independent. Affiliation with a customer of,
or supplier of goods or services to, the Company is not considered to be
material to a determination of a Board member's independence so long as
payments in any fiscal year to or from the Company do not exceed 2% of the
gross revenues of the customer or supplier, or $1,000,000, whichever is
greater. Other commercial and business relationships will be evaluated by the
Board on a case-by-case basis to determine if they constitute a material
relationship. Members of the Audit Committee must also meet separate applicable
independence requirements under the rules of the New York Stock Exchange
adopted in accordance with the Sarbanes-Oxley Act of 2002.
The Nominating and Governance Committee will make an annual evaluation of the
independence of each director at the time nominations for election as director
are to be approved by the Board and will report its recommendation to the Board
in order that the Board may make its independence determination.
Each director and each nominee is responsible for disclosing to the Board all
relationships with the Company that should be taken into account in making the
determination and any changes in those relationships. The Company may not enter
into any relationship (whether directly or with an organization of which the
director is a partner, significant shareholder or officer) with any independent
director that would be material to the Board's determination of his or her
independence without disclosure to, and prior approval by, the Board and
compliance with the Company's Related Person Transactions Policy.
Former Chief Executive Officer as a Director
The Board believes Board membership of former Chief Executive Officers should
be decided on an individual basis. When a Chief Executive Officer or other
management director resigns from employment, he or she will also offer to
resign from the Board. Continued service will then be decided by the Board in
consultation with the (new) Chief Executive Officer.
Board Membership Criteria
The Nominating and Governance Committee is responsible for reviewing with the
Board on an annual basis the appropriate skills and characteristics required of
new Board members in the context of the current make-up of the Board and the
needs of the Company. The Chairman and Chief Executive Officer shall advise the
Committee of his recommendations as to the Company's needs for directors.
Selection and Invitation to New Directors
The Board is responsible, in fact as well as procedure, for identifying
individuals to serve as directors. The Board embraces the principle that
diversity in all respects both strengthens its membership and increases its
effectiveness. The Board strives to select for its membership highly qualified
individuals who are dedicated to advancing the interests of the Company's
shareholders. When vacancies on the Board occur, the Nominating and Governance
Committee seeks individuals who, based on their background and other
qualifications, can promote this goal in conjunction with the other members of
the Board. The Committee actively seeks nominees who will bring diverse
talents, experiences and perspectives to the Board's deliberations. The Board
believes that, over the years, this approach has brought together a broad
spectrum of Board members whose collective input has served shareholders well. However,
it has set neither requirements nor limits on diversity. It believes that the
Company and its shareholders are best served by a focus on the overall
qualifications of Board members and their individual contributions to the Board
as a whole, rather than by specific numeric goals for race, gender or any other
The Board has delegated the screening process to the Nominating and Governance
Committee, which seeks advice from the Chairman and Chief Executive Officer and
other Board members. The Nominating and Governance Committee considers and
makes recommendations to the Board regarding shareholder nominations for
director that are submitted in accordance with the Company's by-laws and
The invitation to join the Board should be extended by the Board itself. The
Chairman of the Nominating and Governance Committee, supported by the Chairman
and Chief Executive Officer, should speak for the Board in this context.
Voting For Directors
Any incumbent director nominated for re-election as director who is not elected
in accordance with Section 2.4(b) of the Company's By-Laws will tender his or
her resignation to the Nominating and Corporate Governance Committee for its
consideration. The Nominating and Corporate Governance Committee will consider
the resignation and make a recommendation to the full Board as to whether to
accept or reject the resignation. The full Board will make a determination and
publicly disclose its decision and rationale within 90 days after receipt of
the tendered resignation.
Any director who tenders his or her resignation pursuant to this provision
shall not participate in the Nominating and Corporate Governance Committee
recommendation or Board of Directors' action regarding whether to accept the
resignation offer; provided, however, that if each member of the
Nominating and Corporate Governance Committee fails to receive a sufficient
vote for re-election, then the independent Directors who did receive a
sufficient vote or were not up for re-election shall appoint a committee to
consider the resignation tenders and recommend to the Board of Directors
whether to accept them. If the only Directors who receive a sufficient vote for
re-election or were not up for re-election constitute three or fewer Directors,
then all Directors may participate in the action regarding whether to accept
Directors Who Change Responsibility
Directors who substantially change the principal occupation or professional
responsibility they held when most recently elected to the Board should advise
the Board of such changes when and as they arise and indicate their willingness
to resign from the Board.
Directors who retire or change from the position they held when they most
recently were elected to the Board should not necessarily leave the Board.
There should, however, be an opportunity for the Board through the Nominating
and Governance Committee, to review the continued appropriateness of Board
membership under these circumstances.
Service on Other Public Boards
Non-management directors should advise the Chairman and Chief Executive Officer
in advance of accepting an invitation to join another public company board.
Without specific approval from the Board, non-management directors should serve
on no more than five public company boards (including Circuit
City) and members of management
serving on Circuit
City's board should serve
on no more than one other public company board. No member of the Audit
Committee should serve on more than three public company audit committees
City). In calculating
service on a public company board or audit committee, service on a board or
audit committee of a parent and its substantially owned subsidiary counts a
service on a single board or audit committee. The Nominating and Governance
Committee and the Board will take into account the nature of and time involved
in a director's service on other boards in evaluating the suitability of
individual directors and making its recommendations to Circuit City
shareholders. Service on boards and/or committees of other organizations should
be consistent with Circuit
City's conflict of
The Board does not believe it should establish term limits. While term limits
could help bring fresh ideas and viewpoints to the Board, they hold the
disadvantage of losing the contribution of directors who have been able to
develop, over a period of time, increasing insight into the Company and its
operations and who provide an increasing contribution to the Board as a whole.
As an alternative to term limits, the Nominating and Governance Committee, in
consultation with the Chairman and Chief Executive Officer, will review each
director's continuation on the Board every three years. This will be done when
his or her term expires and will allow each director the opportunity to
conveniently confirm his or her desire to continue as a member of the Board.
A director will not be nominated for election to a term beginning after his or
her 70th birthday. The Board recognizes that exceptional circumstances may
require a waiver of this policy.
Director Access to Management and Independent
Regular Attendance of Non-Directors at Board Meetings
The Board welcomes regular attendance at each of its meetings by selected
members of senior management and the Company's outside counsel for corporate
The Board encourages the Chairman and Chief Executive Officer to invite to
Board meetings members of management who can provide insight into discussion
because of personal involvement with the matter discussed or who represent
managers with future potential who should be given exposure to the Board.
Board Access to Senior Management and Independent Advisors
Board members shall have complete access to the Chief Executive Officer, the
Chief Financial Officer, the General Counsel, and the Senior Vice President of
Human Resources. The Chairman of the Audit Committee shall have complete access
to the head of Internal Audit and the head of Internal Audit shall have
complete access to the Chairman of the Audit Committee. Directors should
consider contacting the Chief Executive Officer verbally before contacting
other employees of the Company, however there may be circumstances where doing
so would not be appropriate. It is assumed the directors will use judgment so
that contacts are not distracting to the Company's business operations.
The Board may obtain advice and assistance as it believes necessary from
external legal, accounting and other advisors, including, but not limited to,
the regular advisors to the Company.
Director Compensation and Stock Ownership
Compensation for non-management directors is described in the Company's proxy
statement. Directors who are employees of the Company do not receive separate
compensation for their service as a director.
The Nominating and Governance Committee of the Board of Directors reviews and
recommends the compensation to be paid to non-management directors. It may, or
it may request management to, retain compensation consultants to assist it in
this regard. In its review and recommendations, the Committee considers (a) the
effect of director compensation on maintenance of the independent status of
independent directors, (b) customary compensation for non-management directors
at similarly situated companies, and (c) use of the compensation program to
align the interests of Board members with shareholders.
Independent directors may not receive any additional compensation, directly or
indirectly, from the Company without prior disclosure to, and approval by, the
Board (and, in the case of Audit Committee members, may not receive additional
compensation under any circumstances).
Changes in Board compensation, if any, should be at the recommendation of the
Nominating and Governance Committee with discussion and concurrence by the full
Stock Ownership by Directors
In order to further encourage a link between director and shareholder
interests, non-management directors receive well over half of their director
compensation in the form of equity, which they are required to hold while they
are serving on the board. Within five years of joining the Circuit City board,
non-management directors are expected to own an amount of shares or share
equivalents equal to five times the annual retainer. Shares or units held by a director
under any deferral plan are included in calculating the value of ownership to
determine whether this minimum ownership requirement has been met.
Director Training and Information
Training for New and Continuing Directors
At the time they join the Board of Directors, new directors are provided with
basic information concerning the Company and with briefings by senior
management to acquaint them with the Company's financial profile, strategic
plans, management organization, compliance programs and corporate policies.
Management is responsible for regularly providing non-management directors with
sufficient and timely information to permit them to perform their oversight
functions and to understand the Company's strategic alternatives, financial
position and the risks and opportunities inherent in its operations. Agenda
materials for Board and committee meetings and management presentations at
these meetings are used to fulfill this responsibility, in conjunction with
regular distribution to Board members of reports and information about the Company.
At the request of individual directors, the Board will make available formal
training opportunities in areas relevant to the discharge of a Board member's
duties. At least every two years, all Directors should participate in one such
director education program.
Evaluation of the Chief Executive Officer;
Evaluation of the Chief Executive Officer
The non-management directors, led by the Nominating and Governance Committee,
shall make an evaluation of the Chief Executive Officer annually and the
results of the evaluation shall be communicated to the Chief Executive Officer
by the Lead Director.
There should be an annual report by the Chief Executive Officer to the Board on
succession planning and management development.
There should be available, on a continuing basis, the Chief Executive Officer's
recommendation as to his successor in the event he unexpectedly dies or becomes
Corporate Governance Evaluation
Assessing Board's and Committees' Performance
The Nominating and Governance Committee will facilitate an annual review of the
performance of the Board. The Nominating and Governance Committee will review
the performance of individual directors annually, both incumbent directors and
director nominees. In its assessment, the Committee considers, among other
items, attendance, preparation, participation, and contribution.
Each of the Audit, Compensation and Personnel and Nominating and Governance
Committees evaluates its respective performance on an annual basis, with a
report on the results to the full Board.
Code of Business Conduct
The Board has adopted a Code of Business Conduct applicable to officers,
directors and employees of the Company covering such matters as conflicts of
interest, insider trading, handling of confidential information, compliance
with laws and protection and proper use of corporate assets.
The Code of Business Conduct does not permit waivers and may be amended only by
the Board of Directors.
Ratification of Accounting Firm
Ratification of Accounting Firm
The Company will submit the Audit Committee's selection of a registered public
accounting firm to shareholder ratification at each year's Annual Meeting of
Modification and Explanation
These corporate governance guidelines are subject to modification at any time
and from time to time by the Board of Directors and to any more complete
standards as may be set forth in resolutions of the Board and to the articles
of incorporation and by-laws of the Company. The Board plans to review this
list periodically and to update it whenever appropriate.