The Board of Directors of The
Sherwin-Williams Company has adopted the following corporate governance
guidelines to provide the framework for the governance of the Company.
The Board will review these guidelines at least annually and make such
revisions as it deems necessary and appropriate.
- Board Composition.
A majority of the Board shall be composed of independent directors.
In determining the independence of a director, the Board will observe the
requirements for an independent director under the applicable listing
standards of the New York Stock Exchange and the Director Independence
Standards adopted from time to time by the Board.
- Board Size.
The Board believes that an appropriate size for the Board is in the range
of 10 to 14. The Board periodically evaluates the appropriate size
for the Board.
- Selection of Directors. All directors are elected annually by the
Company's shareholders, except as noted below with respect to
vacancies. The Board recommends a slate of directors for election by
shareholders at the Company's annual meeting of shareholders. The
Board's recommendations are based on its determination of the
qualifications and abilities of each individual, and the slate as a whole,
taking into account the membership criteria discussed below.
The Board may fill vacancies in existing or new director positions.
Directors appointed by the Board to fill a vacancy shall serve an initial
term until the next annual meeting of shareholders.
- Board Membership Criteria. The Board seeks candidates with a diverse group
of experiences, qualifications, attributes and skills, including diversity
in gender, ethnicity and race, that the Board
believes enable each candidate to make a significant contribution to the
Board, the Company and its shareholders. Each director shall have
the highest personal and professional character and integrity, and shall
have demonstrated exceptional ability and judgment. The Board
evaluates each individual in the context of the Board as a whole, with the
objective of recommending a group of directors that can best perpetuate
the success of the Company and represent shareholders' interests through
the exercise of sound judgment using its diversity of experiences.
The Nominating and Corporate Governance Committee, with the input of the
Chief Executive Officer, will annually review the qualifications and
backgrounds of the directors, as well as the overall composition of the
Board, and recommend to the full Board the slate of directors to be
nominated for election at the annual meeting of shareholders. The
Nominating and Corporate Governance Committee will consider director
candidates recommended by shareholders on the same basis that it considers
all director candidates as set forth above.
- Positions of Chairman and Chief Executive Officer. The positions of Chairman of the Board and
Chief Executive Officer should be held by the same person, except in
unusual circumstances. The Board believes that this practice
provides the most efficient and effective leadership model for the Company,
and this combination has served the Company well over a great many
years. The function of the Board in monitoring the performance of
the Chief Executive Officer and senior management is fulfilled by
independent Directors having substantive knowledge of the Company and its
- Lead Director.
If the Chairman is not an independent director, the Board, after
considering the recommendation of the Nominating and Corporate Governance
Committee, annually will elect an independent director to serve as Lead
Director. The Lead Director shall be elected by the independent
directors. Although annually elected, the Lead Director is generally
expected to serve for more than one year.
The responsibilities of the Lead Director are as follows.
- Chair meetings of the Board at which the Chairman is
- Chair executive sessions of the non-management
directors. Meet separately with the Chairman after executive
sessions to review the matters discussed during the executive sessions.
- Review with the Chairman the schedule for meetings of
the non-management directors and set the agenda for such meetings.
- Facilitate communications and serve as the principal
liaison on Board related issues between the Chairman and the independent
directors. Each director, however, is free to communicate directly
with the Chairman.
- Review with the Chairman the schedule for meetings of
the Board to help assure that there is sufficient time allocated for
discussion of all agenda items.
- Suggest to the Chairman agenda items for meetings of
the Board and approve the agenda, as well as the substance and timeliness
of information sent to the Board.
- Authorize the retention of independent legal advisors,
or other independent consultants and advisors, as necessary, who report
directly to the Board on board related issues.
- Act as a resource for, and counsel to, the Chairman.
The Board does not believe it should limit the number of terms for which
an individual may serve as a director. Directors who have served on
the Board for an extended period of time are often able to provide
valuable contributions and insight into the operations of the Company
based on their experience with and understanding of the Company's business,
history and objectives. The process described above by which the
Nominating and Corporate Governance Committee annually reviews the
qualifications and backgrounds of the directors will be an important
determinant of board tenure.
- Retirement Policy.
Directors who are not employees of the Company shall resign as directors
at the annual meeting of shareholders next succeeding the date on which
they attain the age of 72 years. Directors who are employees of the
Company are expected to resign as directors at the same time that their
active service as an employee of the Company terminates. However, at
the discretion of the Board, directors who are employees of the Company
may remain on the Board following the date of termination of employment
and shall thereafter resign as a director at the annual meeting of
shareholders next succeeding the date on which he/she attains the age of
- Directors with Significant Job Changes. When a director retires from his or her present
employment, or a director's principal occupation or business association
changes substantially during his or her tenure as a director, that
director should tender his or her resignation. The Nominating and
Corporate Governance Committee, with the input of the Chief Executive
Officer, will evaluate whether the Board should accept the resignation or
whether the director should remain a director based on an assessment of
whether the director continues to meet the Board’s membership criteria
under the circumstances.
- Other Board Service. The Board does not believe that its members
should be prohibited from serving on boards of other public companies so
long as such service does not create any actual or potential material
conflict of interest and does not impair the director's ability to effectively
serve on the Board. Directors who are members of the Company's Audit
Committee, however, are prohibited from simultaneously serving on the
audit committees of more than two other public companies, unless the Board
(i) determines that such simultaneous service
would not impair the director's ability to effectively serve on the
Committee and (ii) discloses such determination in the Company’s annual
proxy statement. The Board will take into account the nature of and
time involved in a director's service on such other boards in evaluating
the qualifications of each director. To preserve independence and
avoid conflicts of interest, each director should advise the Chairman of
the Board prior to accepting an invitation to serve on boards of other public
- Majority Voting Policy for the Election of Directors. Any incumbent nominee for director in an
uncontested election (i.e., an election where the only nominees are those
recommended by the Board) who receives a greater number of votes
"against" his or her election than votes "for"
such election (a "Majority Against Vote") shall promptly
tender his or her resignation following certification of the shareholder
The Nominating and Corporate Governance Committee will promptly consider
the tendered resignation and will recommend to the Board whether to accept
the tendered resignation or to take some other action, such as rejecting
the tendered resignation and addressing the apparent underlying causes of
the Majority Against Vote. In
making this recommendation, the Committee will consider all factors deemed
relevant by its members including, without limitation, the underlying
reasons why shareholders voted against the director (if ascertainable),
the length of service and qualifications of the director whose resignation
has been tendered, the director's contributions to the Company, whether by
accepting such resignation the Company will no longer be in compliance
with any applicable law, rule, regulation or governing document, and
whether or not accepting the resignation is in the best interests of the
Company and its shareholders.
The Board will act on the Committee's recommendation no later than at its
first regularly scheduled meeting following certification of the
shareholder vote, but in any case, no later than 120 days following the
certification of the shareholder vote. In considering the
Committee's recommendation, the Board will consider the factors considered
by the Committee and such additional information and factors the Board believes
to be relevant. The Company will promptly publicly disclose the
Board's decision and process in a periodic or current report filed with or
furnished to the Securities and Exchange Commission.
Any director who tenders his or her resignation pursuant to this provision
will not participate in the Committee recommendation or Board
consideration regarding whether or not to accept the tendered
resignation. However, such director shall remain active and engaged
in all other Committee and Board activities, deliberations and decisions
during this Committee and Board process.
If a majority of the members of the Committee received a Majority Against
Vote at the same election, then the independent directors who are on the
Board who did not receive a Majority Against Vote will appoint a
Board committee amongst themselves solely for the purpose of considering
the tendered resignations and will recommend to the Board whether to
accept or reject them. This Board committee may, but need not,
consist of all of the independent directors who did not receive a
Majority Against Vote. If the only
directors who did not receive a Majority Against
Vote in the same election constitute four or fewer directors, then all
directors may participate in the Board consideration regarding whether or
not to accept the tendered resignations.
This corporate governance guideline will be summarized or included in each
proxy statement relating to an election of directors of the Company.
- Role of the Directors. The Board serves as representatives for and is
accountable to the Company's shareholders. The Board has oversight
responsibility of management. The Company's business is conducted by
officers, managers and employees under the direction of the Chief
Executive Officer and the oversight of the Board. The Board
delegates to the Chief Executive Officer, and
through him or her to other senior management, the authority and
responsibility for managing the day-to-day affairs of the Company.
In addition to its general oversight of management, the Board's oversight
function includes responsibility for:
- selecting, evaluating and compensating the Chief
Executive Officer, electing or appointing other senior management and
reviewing management succession planning (including Chief Executive
Officer succession planning);
- reviewing, monitoring implementation and, where
appropriate, approving the Company’s long-term strategic plan and
- reviewing, evaluating and, where appropriate,
approving the Company’s performance against broad financial objectives,
major strategies and plans;
- reviewing, evaluating and, where appropriate,
approving the establishment and maintenance of processes, procedures and
controls for maintaining the integrity and clarity of the Company’s
financial statements and financial reporting;
- reviewing, evaluating and, where appropriate,
approving the establishment and maintenance of processes and procedures
with respect to compliance with applicable laws and ethical business
- reviewing and evaluating the Company’s policies and
guidelines used by management to identify, assess and manage the
Company’s exposure to risk;
- providing advice and counsel to the Chief Executive
Officer and senior management;
- reviewing and, where appropriate, approving
significant corporate actions; and
- nominating directors and Board committee members, and overseeing
effective corporate governance.
performing its oversight function, the Board is entitled to rely upon advice,
reports and opinions of management, counsel, independent auditors and expert
- Attendance at Board and Shareholder Meetings. Absent unusual circumstances, each director is
expected to attend all meetings of the Board and all meetings of any
committee on which such director serves. Each director is also
expected to attend, absent unusual circumstances, all annual and special
meetings of shareholders.
- Board Agenda.
The Chairman of the Board, with input and approval from the Lead Director,
will establish the agenda for each Board meeting. Each director is
free to suggest that particular items be placed on the agenda. The
agenda will be distributed to each director in advance of each Board
- Board Materials Distributed in Advance. Information and data that is important to the
directors' understanding of the business and which will assist directors
to prepare for productive Board meetings will generally be distributed in
writing to the directors before each Board meeting. Management will
make every effort to provide materials that are brief and to the point,
while communicating all of the appropriate information.
- Executive Sessions of Non-management Directors. Non-management directors will meet at least
twice each year in regularly scheduled executive sessions. Other
executive sessions of the non-management directors may be scheduled and/or
called by the Lead Director or non-management directors as determined
appropriate. The Lead Director will chair such executive
sessions. Formal deliberations or decisions concerning the business
and affairs of the Company will occur only during regular or special meetings
of the full Board and not during executive sessions.
- Management Speaks for the Company. Management speaks for the Company.
Individual directors will only communicate with various constituencies
that are involved with the Company with the knowledge and concurrence of
the Chief Executive Officer. Following any such communication, the
director will advise the Chief Executive Officer of the nature and content
of such communications.
- Committees of the Board. Committees have been established to assist the
Board to effectively and efficiently fulfill its oversight
responsibilities. The Board has three standing Committees: the
Audit Committee, the Compensation and Management Development Committee,
and the Nominating and Corporate Governance Committee. Membership of
each Committee will be composed solely of independent directors and each
Committee shall have not less than three members. The Board has
adopted a charter for each Committee and will review and evaluate the
adequacy of these charters on an annual basis. Membership and the
appointment of a chairperson is reviewed and approved by the full Board,
with the input of the Chief Executive Officer, on an annual basis.
The Board may establish from time to time such other committees as it
to Management and Independent Advisors
- Board Access to Management. Directors have complete access to the Company's
management. Directors will use their judgment to be sure that any
such contact is not distracting to the business operations of the Company
and that such contact be communicated to the Chief Executive Officer.
- Attendance of Management at Board Meetings. The Board welcomes the attendance of members of
management from time to time in Board meetings to: (a) provide
management insight into items being discussed by the Board which involve
the manager; (b) make presentations to the Board on matters which involve
the manager; and (c) bring managers with high potential for advancement
into contact with the Board.
- Director Access to Independent Advisors. The Board or any Committee may retain, at such
times and on such terms as the Board or Committee determines in its sole
discretion and at the Company's expense, independent legal, financial or
other independent consultants and advisors, to advise and assist the Board
or Committee in discharging its responsibilities.
Orientation and Continuing Education
- Director Orientation. A thorough understanding of the Company's
industry, business and corporate governance practices is required to
enable a director to make a substantial contribution to the Board.
Accordingly, all new directors shall participate in an orientation program
developed by the Company after their election or appointment to the Board.
This orientation will include presentations by senior management to
familiarize new directors with the Company’s industry, business, strategic
plans, financial statements, corporate governance practices and its key
policies and practices.
- Director Continuing Education. The Board believes that each director should
participate in continuing education, through in-house presentations or
attendance at outside educational programs at Company expense, from time
to time to enable the directors to better perform their duties and to
recognize and deal appropriately with issues that arise.
Evaluations; Succession Planning
- Performance Evaluation of Board and Committees. The Board and each Committee shall conduct an
annual self-evaluation of the performance of the Board and each
Committee. Such evaluations should generally include an assessment
of the Board's and each Committee's structure and procedures, as well as
an assessment of the overall effectiveness of the Board and each
- Performance Evaluation of the Chief Executive Officer. The Board shall conduct an annual evaluation of
the performance of the Chief Executive Officer. The Compensation and
Management Development Committee will conduct an annual review of the
Chief Executive Officer’s compensation as set forth in its charter.
- Succession Planning. The Chief Executive Officer shall conduct an
annual evaluation of the performance of the senior management team.
The Chief Executive Officer will report the results of such evaluation to
the Board, along with the Chief Executive Officer's thoughts and
recommendations on management development and succession planning.
The Board will work with the Chief Executive Officer to plan for Chief
Executive Officer succession, as well as to
develop plans in the event of an unexpected occurrence resulting in a
temporary incapacity or a sudden departure of the Chief Executive
Officer. Succession planning may be reviewed more frequently by the
Board as either determines appropriate.
- Board Compensation. Non-employee directors receive compensation for
their Board service. Employee directors do not receive compensation
for their Board service.
- Director's Minimum Share Ownership Requirement. Director's Minimum Share Ownership Requirement.
The Board has established a minimum share ownership requirement to ensure
that the interests of each director is aligned
with the interests of the Company's shareholders. Each director who
has served on the Board for at least five years shall own shares of common
stock equal in value to a minimum of seven times the annual Board cash
retainer. For purposes of obtaining this minimum share ownership
requirement, each equivalent share of common stock held by a director
under the Company's Director Deferred Fee Plan shall be considered as a
share of common stock owned by such director.
- Interested parties may communicate with the
Chairpersons of the Audit Committee, the Compensation and Management
Development Committee or the Nominating and Corporate Governance
Committee, or the non-management directors as a group by regular
mail. Communications should be sent to the attention of the
Chairperson, Audit Committee, Chairperson, Compensation and Management
Development Committee, or Chairperson, Nominating and Corporate Governance
Committee, or to the outside directors as a group
to the Non-Management Directors, each c/o Corporate Secretary, The
Sherwin-Williams Company, 101 West Prospect Avenue, 12th Floor, Midland
Building, Cleveland, Ohio 44115.