Corporate Governance Guidelines of Fedders Corporation
The following Corporate
Governance Guidelines have been adopted by the Board of Directors (the "Board")
of Fedders Corporation (the "Company") to assist the Board in the
exercise of its responsibilities. These Corporate Governance Guidelines reflect
the Board's commitment to monitor the effectiveness of policy and decision making
both at the Board and management level, with a view to enhancing long-term
stockholder value. These Corporate Governance Guidelines are not intended to
change or interpret any Federal or state law or regulation, including the laws
of the State of
Role of Directors
The business and affairs of the Company shall be managed by or under the direction of the Board. A director is expected to spend the time and effort necessary to properly discharge his or her responsibilities. Accordingly, a director is expected to regularly attend meetings of the Board and committees on which he or she sits, and to review prior to meetings material distributed in advance for such meetings. A director who is unable to attend a meeting (which it is understood will occur on occasion) is expected to notify the Chairman of the Board or the Chairman of the appropriate committee in advance of such meeting.
The Board's Goals
The Board's goals are to build long-term value for the Company's stockholders and to assure the vitality of the Company for its customers, employees and the other individuals and organizations who depend on the Company.
To achieve these goals the Board will monitor both the performance of the Company (in relation to its goals, strategy and competitors) and the performance of the Chief Executive Officer, and offer him or her constructive advice and feedback. When it is appropriate or necessary, it is the Board's responsibility to remove the Chief Executive Officer and to select his or her successor.
Selection of the Chairman of the Board
The Board does not require the separation of the offices of the Chairman of the Board and the Chief Executive Officer. The Board shall be free to choose its Chairman in any way that it deems best for the Company at any given point in time.
Size of the Board
The Board believes that it should generally have no fewer than six and no more than twelve directors. This range permits diversity of experience without hindering effective discussion or diminishing individual accountability. The size of the Board may, however, be increased or decreased if determined to be appropriate by the Board. For example, it may be desirable to increase the size of the Board in order to accommodate the availability of an outstanding candidate for director.
Selection of New Directors
The Board shall be responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of stockholders. The Nominating and Corporate Governance Committee is responsible for identifying, screening and recommending candidates to the Board for Board membership. When formulating its Board membership recommendations, the Nominating and Corporate Governance Committee may also consider advice and recommendations from others as it deems appropriate.
Board Membership Criteria
Nominees for director shall be selected on the basis of, among other things, experience, knowledge, skills, expertise, integrity, diversity, ability to make independent analytical inquiries, understanding of the Company's business environment and willingness to devote adequate time and effort to Board responsibilities.
The Nominating and Corporate Governance Committee shall be responsible for assessing the appropriate balance of criteria required of Board members.
Other Public Company Directorships
The Company does not have a policy limiting the number of other public company boards of directors upon which a director may sit. However, the Nominating and Corporate Governance Committee shall consider the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee is a member.
Independence of the Board
The Board shall be comprised of a majority of directors who qualify as independent directors ("Independent Directors") under the listing standards of the New York Stock Exchange (the "NYSE"). The Board shall review annually the relationships that each director has with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). Following such annual review, only those directors who the Board affirmatively determines have no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company) will be considered Independent Directors, subject to additional qualifications prescribed under the listing standards of the NYSE or under applicable law. The Board may adopt and disclose categorical standards to assist it in determining director independence.
Directors Who Change Their Present Job Responsibility
The Board does not believe that directors who retire or change the position they held when they became a member of the Board should necessarily leave the Board. Promptly following such event, the director must notify the Nominating and Corporate Governance Committee, which shall review the continued appropriateness of the affected director remaining on the Board under the circumstances. The affected director is expected to act in accordance with the Nominating and Corporate Governance Committee's recommendation following such review.
It is the policy of the Board that members shall retire from the Board at the annual meeting of stockholders in the year following the year in which they reach the age of 78.
In connection with each director nomination recommendation, the Nominating and Corporate Governance Committee shall consider the issue of continuing director tenure and take steps as may be appropriate to ensure that the Board maintains an openness to new ideas and a willingness to critically re-examine the status quo.
A director who is also an officer of the Company shall not receive additional compensation for such service as a director.
The Company believes that compensation for non-employee directors should be competitive and should encourage increased ownership of the Company's stock through the payment of a portion of director compensation in Company stock, options to purchase Company stock or similar compensation. The Compensation Committee will periodically review the level and form of the Company's director compensation, including how such compensation relates to director compensation of companies of comparable size, industry and complexity. Such review will also include a review of both direct and indirect forms of compensation to the Company's directors, including any charitable contributions by the Company to organizations with which a director is affiliated and consulting or other similar arrangements between the Company and a director. Changes to director compensation will be proposed to the full Board for consideration.
Director's fees (including any additional amounts paid to chairs of committees and to members of committees of the Board) are the only compensation a member of the Audit Committee may receive from the Company; provided, however, that a member of the Audit Committee may also receive pension or other forms of deferred compensation from the Company for prior service so long as such compensation is not contingent in any way on continued service.
Separate Sessions of Non-Management Directors
The non-management directors of the Company shall meet in executive session without management after each regularly scheduled Board meeting, except the Board meeting following the annual meeting of stockholders. The Chairpersons of the Audit Committee, the Compensation Committee, the Finance Committee and the Nominating and Corporate Governance Committee shall preside as chairperson of the executive session on a rotating basis.
Any interested parties desiring to communicate with the non-management directors regarding the Company may directly contact such directors by electronic mail through the Company's website at www.fedders.com.
Self-Evaluation by the Board
The Nominating and Corporate Governance Committee will sponsor an annual self-evaluation of the Board's performance as well as the performance of each committee of the Board, the results of which will be discussed with the full Board and each committee. The evaluation should include a review of any areas in which the Board or management believes the Board can make a better contribution to the Company. The Nominating and Corporate Governance Committee will utilize the results of this self-evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and making recommendations to the Board with respect to assignments of Board members to various committees.
Strategic Direction of the Company
Normally it is management's job to formalize, propose and implement strategic choices and the Board's role to approve strategic direction and evaluate strategic results. However, as a practical matter, the Board and management will be better able to carry out their respective strategic responsibilities if there is an ongoing dialogue among the Chief Executive Officer, other members of top management and other Board members. To facilitate such discussions, members of senior management who are not directors may be invited to participate in Board meetings when appropriate, at the discretion of the Chairman.
Board Access to Management
Board members shall have access to the Company's management and, as appropriate, to the Company's outside advisors. Board members shall coordinate such access through the Chief Executive Officer and Board members will use judgment to assure that this access is not distracting to the business operation of the Company.
Board Interaction with Institutional Investors, Analysts, Press and Customers
The Board believes that management generally should speak for the Company. It is suggested that each director refer all inquiries from institutional investors, analysts, the press or customers to the Chief Executive Officer or his or her designee.
Board Orientation and Continuing Education
The Company shall provide new directors with a director orientation program to familiarize such directors with, among other things, the Company's business, strategic plans, significant financial, accounting and risk management issues, compliance programs, conflicts policies, code of business conduct and ethics, corporate governance guidelines, principal officers, internal auditors and independent auditors. Each director shall be encouraged to participate in such continuing education programs as may be advisable to maintain the level of expertise necessary to perform his or her responsibilities as a director.
Frequency of Meetings
There shall be five regularly scheduled meetings of the Board each year. At least one regularly scheduled meeting of the Board shall be held quarterly.
Selection of Agenda Items for Board Meetings
The Chairman of the Board shall prepare an agenda for each meeting, which will be distributed with relevant meeting materials. Board members may request discussion of matters at the meeting, which are not included on the agenda.
Board Materials Distributed in Advance
Information and materials that are important to the Board's understanding of the agenda items and other topics to be considered at a Board meeting should, to the extent practicable, be distributed sufficiently in advance of the meeting to permit prior review by the directors. In the event of a pressing need for the Board to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting.
Attendance of Management Personnel at Board Meetings
The Board encourages the Chief Executive Officer to bring members of management from time to time into Board meetings to (i) provide management insight into items being discussed by the Board which involve the manager; (ii) make presentations to the Board on matters which involve the manager; and (iii) bring managers with significant potential into contact with the Board. Attendance of such management personnel at Board meetings is at the discretion of the Chairman of the Board.
Number and Names of Board Committees
The Company shall have five standing committees: Audit, Compensation, Executive, Finance and Nominating and Corporate Governance. The purpose and responsibilities for at least the Audit, Compensation and Nominating and Corporate Governance committees shall be outlined in committee charters adopted by the Board. The Board may, from time to time, form a new committee or disband a current committee, depending on circumstances. In addition, the Board may determine to form ad hoc committees from time to time, and determine the composition and areas of competence of such committees.
Independence of Board Committees
Each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee shall be composed entirely of Independent Directors satisfying applicable legal, regulatory and stock exchange requirements necessary for an assignment to any such committee.
Assignment and Rotation of Committee Members
The Nominating and Corporate Governance Committee shall be responsible, after consultation with the Chairman of the Board, for making recommendations to the Board with respect to the assignment of Board members to various committees. After reviewing the Nominating and Corporate Governance Committee's recommendations, the Board shall be responsible for appointing the Chairperson and members to the committees on an annual basis.
The Nominating and Corporate Governance Committee shall annually review the Committee assignments and shall consider the rotation of the Chairpersons and members with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors. With regard to the Chairman of the Nominating and Corporate Governance Committee, such position shall rotate at least once every three years.
Selection of the Chief Executive Officer
The Board shall be responsible for identifying potential candidates for, and selecting, the Company's Chief Executive Officer. In identifying potential candidates for, and selecting, the Company's Chief Executive Officer, the Board shall consider, among other things, a candidate's experience, understanding of the Company's business environment, leadership qualities, knowledge, skills, expertise, integrity, and reputation in the business community.
Evaluation of Chief Executive Officer
The Compensation Committee, with the oversight of the Nominating and Corporate Governance Committee, shall be responsible for annually evaluating the performance of the Chief Executive Officer.
The Board shall plan for the succession to the position of the Chief Executive Officer. To assist the Board, the Chief Executive Officer shall prepare and distribute to the Board an annual report on succession planning for all senior officers of the Company with an assessment of senior managers and their potential to succeed the Chief Executive Officer and other senior management positions. The report shall include a short-term succession plan, which delineates a temporary delegation of authority to certain officers of the Company, if all or a portion of the senior officers should unexpectedly become unable to perform their duties.
The Board shall determine that a satisfactory system is in effect for education, development, and orderly succession of senior and mid-level managers throughout the Company.
Annex A - Excerpt From Rule Proposals
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9. Listed companies must adopt and disclose corporate governance guidelines.
Commentary: No single set of guidelines would be appropriate for every company, but certain key areas of universal importance include director qualifications and responsibilities, responsibilities of key board committees, and director compensation. Given the importance of corporate governance, each listed company's website must include its corporate governance guidelines, the charters of its most important committees (including at least the audit, compensation and nominating committees) and the company's code of business conduct and ethics (see subsection 10 below). Each company's annual report must state that the foregoing information is available on its website, and that the information is available in print to any shareholder who requests it. Making this information publicly available should promote better investor understanding of the company's policies and procedures, as well as more conscientious adherence to them by directors and management.
The following subjects must be addressed in the corporate governance guidelines:
· Director qualification standards. These standards should, at minimum, reflect the independence requirements set forth in subsections 1 and 2 of this Section 303A. Companies may also address other substantive qualification requirements, including policies limiting the number of boards on which a director may sit, and director tenure, retirement and succession.
· Director responsibilities. These responsibilities should clearly articulate what is expected from a director, including basic duties and responsibilities with respect to attendance at board meetings and advance review of meeting materials.
· Director access to management and, as necessary and appropriate, independent advisors.
· Director compensation. Director compensation guidelines should include general principles for determining the form and amount of director compensation (and for reviewing those principles, as appropriate). The board should be aware that questions as to directors' independence may be raised when directors' fees and emoluments exceed what is customary. Similar concerns may be raised when the company makes substantial charitable contributions to organizations in which a director is affiliated, or enters into consulting contracts with (or provides other indirect forms of compensation to) a director. The board should critically evaluate each of these matters when determining the form and amount of director compensation, and the independence of a director.
· Director orientation and continuing education.
· Management succession. Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO.
· Annual performance evaluation of the board. The board should conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively.