THE REYNOLDS AND REYNOLDS COMPANY
AMENDED AND RESTATED CORPORATE GOVERNANCE GUIDELINES
The Articles of Incorporation set Board size at not fewer than nine and not more than twelve. The Nominating and Governance Committee should annually review the size of the Board and determine if a change is appropriate.
2. Number of Independent Directors
The Board believes that as a matter of policy a substantial majority of the Directors should be independent Directors. The definition of "independent" shall be defined as directors who qualify as independent under the applicable provisions of the Securities Exchange Act of 1934 and the proposed New York Stock Exchange listing standards submitted to the Securities and Exchange Commission on October 8, 2003, as the same may be adopted, amended or modified from time to time. To be considered independent under the proposed NYSE rules, the board must determine that a director does not have any direct or indirect material relationship with the company (directly or as a partner, shareholder or officer of an organization that has a relationship with the company). Exhibit A contains the guidelines the Board has established to assist it in determining director independence in accordance with the proposed listing standards and applicable law.
3. Member Qualifications
Pursuant to the charter of the Nominating and Governance Committee, the Nominating and Governance Committee is responsible for periodically reviewing the appropriate skills, perspectives, experiences and characteristics required of Board members or candidates in the context of the perceived needs of the Board at that time. In addition to the company’s Board, directors should not serve on more than three other boards of public companies without the affirmative determination by the Board that service on such additional boards will not impair the effectiveness of the director in serving on the company's board. The Board shall consider annually whether Board members or candidates can maintain their effectiveness on the company’s Board taking into account, among other things, the other directorships held by its members and candidates.
4. Former CEO as Board Member
The Board believes that is a matter to be decided in each individual case. It is assumed the Chief Executive Officer ("CEO") will offer his/her resignation from the Board at the time of resigning as CEO. Whether the individual continues to serve on the Board is a matter for discussion at that time with the new CEO and the Board.
A former CEO serving on the Board will not be an independent Director.
5. Director Selection and Orientation
The Nominating and Governance Committee is responsible for selecting prospective Board members for recommendation to the Board. The Board shall be responsible for nominating candidates for election by the shareholders. The Nominating and Governance Committee will recommend to the Board all nominees for election using the qualification guidelines specified in these Corporate Governance Guidelines and such qualification criteria as the board may establish from time to time. In establishing such criteria, the board will consider the qualifications and experience of the existing directors, relevant areas of subject matter and /or business experience and the Board's commitment to diversity. The Nominating and Governance Committee will implement a formal periodic skills and needs assessment process to assist in the evaluation of current directors and the establishment and modification of qualification guidelines. The Nominating and Governance Committee will recommend the qualification guidelines for approval by the Board.
Once a candidate is selected to join the Board, the Chairman will extend the invitation to join the Board on the Board's behalf.
The Board and the company will have a complete orientation process for new Directors.
The Board believes it is appropriate for Directors, at their discretion, to have access to educational programs related to their duties as Directors on an ongoing basis to enable them to better perform their duties and to recognize and deal appropriately with issues that arise. Each director shall attend at least one qualifying educational program during each three year term, beginning with the three year term commencing in February 2004. The Nominating and Governance Committee shall determine which programs are qualified. The company will provide appropriate funding to attend these programs. In addition, Directors will receive periodic reviews of the company’s business and visit company facilities as part of their ongoing review of the company and its operations.
6. Term Limits/Retirement Age
The Board does not believe that there should be term limits. While term limits could help ensure fresh ideas, they also would force the Board to lose the contributions of Directors who have developed an insight into the Company. The Board believes that this insight and continuity of Directors is an advantage, not a disadvantage and that proactive programs such as annual assessment and continuing education are preferred alternatives to arbitrary term limits. As an alternative to term limits, the Nominating and Governance Committee will review a Director’s continuation on the Board whenever the Director experiences a change in professional responsibilities, as a way to assure that the Director’s skills and experience continue to match the needs of the Board. The Board will not enforce a mandatory retirement age per se; however, the Board will not nominate an incumbent director for re-election or a new director for initial election if that individual is age 70 or greater at the time of nomination; provided, however, that the Board may waive this provision in its sole discretion if the Board determines it is in the best interest of the company to do so.
7. Change in Professional
Responsibility, Conflicts of Interest and Certain Other Events
The Board believes that individual Directors who have a change in their professional or business responsibility should notify the Board of this change and should offer to resign. The Board does not believe that each Director who retires or has a change in position or responsibilities should necessarily leave the Board. The Nominating and Governance Committee will, however, review the continued appropriateness of Board membership under these circumstances and make a recommendation to the Board. This same guideline applies to any employee Directors, including the Chief Executive Officer of the Company, in the event he or she no longer serves in that position.
The Board determines on a case-by-case basis whether a conflict of interest exists. Each Director will advise the Board of any situation that could potentially be a conflict of interest and will not vote on an issue in which he or she has an interest. Directors should also notify the Board of events that could potentially require public disclosure (e.g., personal or business bankruptcy) or generate inquiries (e.g., allegations of criminal misconduct). None of the matters requiring notice to the Board under this paragraph will be deemed an automatic grounds for removal from the Board; provided, that the Board reserves its right to take all actions it believes appropriate and in the interest of the shareholders (potentially including removal), and all such matters should be considered by the Nominating and Governance Committee in its evaluation processes.
8. Selection of Chairman and CEO
The Board may select, as it deems best for the company, the Chairman. The Board does not have a specific policy on whether the Chairman should be a non-employee Director or if the Chairman/CEO positions should be separate. If the Chairman is the CEO of the company, then one of the independent members of the Board will be named as Lead Director. The Lead Director will act as a key liaison with the CEO, will assist the Chairman in setting the Board agenda, will chair the executive sessions described below, and will communicate Board member feedback to the CEO. The Lead Director will be chosen annually (or at any time there is a vacancy) by a majority of the non-employee Directors present at a duly constituted meeting after consultation with the Nominating and Governance Committee. The name of, and a means of directly contacting, the Lead Director will be made public. The Lead Director may be removed at any time by action of a majority of the non-employee Directors.
Roles, Responsibilities and Performance
9. Review of CEO Performance
The Board will review annually the performance of the CEO. The Compensation Committee will conduct this review. The evaluation criteria and the results of the evaluation will be discussed with the entire non-employee Board.
The Compensation Committee will use the evaluation results in determining the CEO's compensation, with a portion of his/her compensation tied to performance.
10. Review the Board's Performance
The Board will discuss annually the Nominating and Governance Committee’s periodic evaluation (which shall be conducted at least annually) of the overall performance of the Board, the committees, and of individual Directors. The discussion will include any remedial or other actions deemed necessary or appropriate by the Nominating and Governance Committee and any other areas in which the Board and/or Management believes a better contribution could be made to improve the effectiveness of the Board.
11. Leadership Development/Succession
The CEO will report annually to the Compensation Committee on succession planning and his/her recommendation as to a successor. The Compensation Committee will regularly review and approve a CEO succession plan, including succession in the event of an emergency or retirement. In addition, the Compensation Committee will review, with the CEO, the company's program for Leadership Development and succession planning for executive officers other than the CEO.
12. Review of Business Strategy and
The Board will periodically review the company's strategy and operating plan and provide input to Management.
13. Board Interaction with Investors or
The Board believes that Management speaks for the company. If comments from the Board are appropriate, they should come from the Chairman. Individual Board members may be asked by Management to meet with or communicate to various company shareholders.
14. Access to
Management and Advisors
BBoard members have complete access to company Management and advisors. If such access is in writing it will be copied to the Chairman and CEO.
Board Compensation and Stock Ownership
15. Setting Board Compensation
Using an outside consultant, the Nominating and Governance Committee will periodically review Board compensation in relation to other similar companies to ensure that compensation is fair and reasonable in form and amount, and recommend any appropriate changes.
16. Stock Ownership
All Directors are encouraged to own company stock soon after he/she is elected to the Board. It is desired that all outside Directors own company stock equivalent to one year's Director compensation within five years of joining the Board.
Stock-based compensation will be a significant component of director compensation. Major components of Director compensation will be disclosed in the company's annual proxy statement.
17. Number of Committees
At a minimum, the Board shall maintain the following committees: Audit, Compensation and Nominating and Governance.
18. Assignment and Rotation of
The Nominating and Governance Committee will recommend to the Board the assignment of Directors to the various committees. These assignments will be reviewed annually and Directors' committee assignments will be rotated at that time, if deemed appropriate.
In making assignments to the committees, only independent Directors may serve on the Audit and Compensation and Nominating and Governance Committees.
19. Committee Agendas
The Chairman of each Committee, in consultation with the appropriate members of management/staff, will develop the committee's agenda.
20. Frequency and Length of Committee
The Committee Chairman, in conjunction with the committee members, will determine the frequency and length of committee meetings.
Each of the Committees shall have the authority to retain outside experts to facilitate the performance of their responsibilities. The Board does not believe a policy of mandatory rotation of experts (including the independent auditors) is required. The Committees shall periodically assess their experts and evaluate rotation and report the results of their assessments to the Board.
22. Frequency and Length of Meetings
The Chairman will determine frequency, place, time and length of regular Board meetings. Four regular meetings per year are deemed appropriate. Attendance will be a material consideration in the annual evaluation of director's performance. The company does not believe a specific minimum attendance criteria should be established - it is expected that Board members will make every reasonable effort to attend all meetings.
The Chairman may, depending on circumstances, call additional Board meetings.
23. Meeting Agenda
The Chairman, or if applicable, the Lead Director, and the CEO will establish the agenda for each Board meeting.
Each Board member is free to recommend the inclusion of additional agenda items.
24. Meeting Materials and Presentations
Information and meeting materials will be sent to Directors in advance where important to the Board's understanding or to facilitate discussion. Board members are expected to review such materials in advance of the meetings.
25. Attendance of Non-Directors at
Non-Directors may attend Board meetings, from time to time, at the request of the Chairman. In addition, the company Secretary will attend all regular Board meetings.
26. Executive Sessions
The independent Directors will meet in executive session at every regular Board meeting and the committee members will meet in executive sessions at every regular committee meeting. Executive sessions will be led by the Chairman, if the Chairman is an independent member of the Board, or otherwise by the Lead Director. Committee executive sessions will be led by the applicable chair.
In addition, the Board may, as deemed necessary, spend a portion of the regular Board meeting without the presence of any non-Directors.
Exhibit A to Corporate Governance Guidelines
of Directors of The Reynolds and Reynolds Company shall affirmatively determine
that a Director does not have a material relationship with the Company (either directly, or as a partner, shareholder or officer of
an organization that has a relationship with the Company), taking into account
the following factors, in addition to those other factors it may deem relevant.
An independent Director: