Corporate Governance Guidelines
The following incorporates our best
current thinking on CNO Board governance - what we do and how we go about doing
it. Our goal as a Board is to build a model of best corporate governance
practices which allows us to:
- create real value for our shareholders,
- assure our policyholders receive the full value
promised in their contracts, and
- make CNO a good place to work and do business for our
associates and distributors.
Board members have a critical role
in helping set the culture and values of the company by their actions or
inactions as to matters of performance, ethics, integrity, legal compliance,
transparency and responsiveness to shareholder and policyholder interests. A
good corporate governance structure is a working system for principled goal
setting, effective decision making, and appropriate monitoring of compliance
and performance. These guidelines are to be updated periodically to maintain an
exemplary model for Board governance.
First and foremost, the Board
oversees management and operating performance on behalf of the shareholders.
This includes selection, compensation, evaluation and retention of a
well-qualified and ethical CEO and other members of senior management and
monitoring management’s performance and adherence to corporate standards.
Corporate directors are to be diligent monitors, but NOT managers of day-to-day
business operations. Directors are to assure that there are checks and balances
against excessive power and compensation abuses within CNO.
Second, directors are to represent a
range of experience, knowledge, and judgment but should NOT represent the
interests of particular constituencies. Independent directors should at least
annually examine their independence and any potential conflicts. Effective
directors maintain an attitude of constructive skepticism; they ask incisive,
probing questions and require accurate, honest answers. They act with
integrity, and they exercise independent judgment on behalf of shareholders and
policyholders. They are willing to disagree with management when necessary, as
well as working jointly to build a successful company.
Third, while the Board is entitled
to rely upon the advice, reports and opinions of management, counsel, auditors
and expert advisors, directors are to assess the qualifications of those upon
whom they rely and hold managers and advisors accountable. Directors are to ask
questions about the processes used to reach decisions or recommendations and
about the substance of advice and reports to the Board.
Fourth, the Board’s oversight
function includes a number of specific responsibilities:
- Regularly and formally evaluating the performance and
compensation of the CEO and other senior managers. Adopting performance
goals that align the pay of managers with the long-term interests of the
- Understanding, reviewing, and monitoring implementation
of the corporation’s strategic plans, capital plans, operating plans, and
budgets to assure effective:
Focusing on the integrity, quality and clarity of the
corporation’s financial reports and public disclosures and the processes
that produce them. At least annually review the adequacy of the
corporation’s compliance and reporting systems. The Audit Committee should
have a broad understanding of the corporation’s financial statements
including why accounting principles critical to the business were chosen,
what key judgments and estimates were made by management, and how the
choice of principles, judgments and estimates impacts the financial
results. Ensuring management pays strict attention to ethical behavior and
compliance with laws and regulations, approved auditing and accounting
principles, and internal controls and governing documents. Internal
controls include practices that promote operating effectiveness and
efficiency, the safeguarding of assets, and the integrity of information
and communication systems.
Engaging outside auditors and considering performance,
qualification, independence and tenure issues. Evaluating the performance
of the internal audit function.
Advising management on significant issues facing the
Reviewing and approving significant corporate actions
such as election or termination of executive officers, declaration of
dividends, and appropriate major transactions. The Board and senior
management should have a clear understanding of what level or types of
decisions require specific Board approval.
Setting Board performance goals. Regularly and formally
evaluating the performance of the Board as a whole and the individual
directors. Nominating directors and Committee members with the
qualifications and time to meet the performance goals. Overseeing
effective corporate governance. Providing objective independent judgment
is at the core of the Board’s oversight function.
- Capital allocation
- Debt levels and structure
- Investment policies and practices
- Risk and vulnerability assessment and management
- Growth opportunities
- Engagement on central issues facing company
- Grasp of tradeoffs at the heart of the company
Serving on a Board requires
significant time and attention on the part of directors. Directors are to
actively participate in the Board meetings, review relevant materials, serve on
Board Committees, and prepare for meetings and for discussions with management.
They are to spend the time needed and meet as frequently as necessary to
properly discharge their responsibilities. Directors are to be incentivized to
focus on long-term stockholder value.
- The Board is to be comprised of a substantial majority
of “independent directors.” Each member of the Governance and
Nominating Committee, the Human Resources and Compensation Committee
and the Audit and Enterprise Risk Committee shall be “independent” in
accordance with any applicable rules and regulations of the Securities and
Exchange Commission and the listing standards of the New York Stock
Exchange and shall have no material connection with the Company other than
the member’s seat on the Board of Directors. For the purposes of the
preceding sentence, “material” shall mean a standard or relationship
(personal, financial or otherwise) that a reasonable person might conclude
could potentially influence a member’s objectivity in the boardroom in a
manner that would have a meaningful impact on the member’s ability to
satisfy his or her fiduciary duties. A member’s “independence” and
“material connection with the Company” shall be determined by the full
Board. Committees include: (1) Audit and Enterprise Risk, (2) Executive,
(3) Governance and Nominating, (4) Human Resources and Compensation, and
(5) Investment. Each Committee is to have a board-approved charter. There
will be a management liaison for each Committee.
- The Board will endeavor to operate on a planned agenda
flexible enough with regard to time and topics to accommodate emergencies
and unexpected developments. The agenda will include sessions of
independent directors only to provide opportunity to raise issues or
concerns or react to management proposals or actions in an environment
free of constraints.
- While certain responsibilities are to be delegated to
the Committees, the full Board is to be kept informed of Committee
activities by the Committee Chairs. Corporations generally benefit from
the collective wisdom of the entire Board acting as a deliberative body.
- Management presentations will be scheduled to allow for
question and answer sessions with open discussion of key policies and
practices. Board members are to have full access to senior management, but
the CEO should be advised of significant contacts between Board members
and senior management. On general Board matters, the Director of Board
Relations will be the primary liaison between CNO’s Board and the senior
management team. A sense of the driving force behind the corporation’s
strategy will provide critical, often unwritten information that is
instrumental to fulfilling director oversight responsibilities. Directors
are encouraged to actually participate in determining the drivers of CNO’s
businesses (for instance, customer satisfaction, profit, fulfilling its
- The Board is to have accurate, timely and complete
information to do its job as the quality of information directly affects
its ability to perform its oversight function. Directors are to review
information from a variety of sources including management, Board
Committees, outside experts, auditor presentations, as well as rating
agency, insurance department, investment analyst and media reports.
Directors are to have sufficient time to review information prior to Board
and Committee meetings.
- It may be appropriate from time-to-time for the Board
and Board Committees to seek advice from outside experts, independent of
management with respect to matters within their responsibility. Examples
might include: risk assessment and risk management or compensation
- New directors are to be provided materials and
briefings to permit them to become familiar with the corporation’s
business, industry, competitors, risks and corporate governance practices.
The Board is to ensure that directors are also continually updated on
these matters. Directors are to be encouraged to find out a great deal abut CNO’s business and risks and how the corporation
and its companies work beyond what can be gleaned in the boardroom.
Directors should consider: meeting the employees, meeting the
policyholders and distributors, visiting the company facilities,
interacting with senior and mid-level staff, attending a training session
for new associates or distributors, or also discussing issues with major
shareholders periodically. In all such contacts, management should be
- In addition to meeting the current requirements for
disclosure of management compensation, the Board will disclose the total
value of each director’s compensation including the total value of any
stock options or grants awarded during the year. Directors and managers
are to be encouraged to own stock.
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