CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the "Board") of 4Kids Entertainment, Inc. (the "Company") will have a majority of directors who meet the criteria for independence and any other requirement of the New York Stock Exchange and any other applicable law pertaining to directors. The Nominating and Corporate Governance Committee (the "Nominating Committee") is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics of Board members as well as the composition of the Board as a whole. This assessment will include members' qualification as independent, as well as consideration of the skills and experience of candidates in the context of the needs of the Board. Nominees for directorship will be recommended by the Nominating Committee in accordance with the policies and principles in its charter and the criteria established by it together with the Board.
2. Term Limits
The Board does not believe that fixed term limits for Directors are advisable, as they can interfere with the overall objective of maintaining the highest possible functionality and contribution from its members. The Board believes there is a benefit to maintaining a significant degree of continuity among Directors, as members are able to gain greater insight into the Company over time, increasing the value of their contributions. At the same time, however, the Nominating Committee has the responsibility to monitor and assess the contribution of every Director standing for re-election to assure that each such Director is meeting the expectations necessary for continued service on the Board.
3. Size of the
In recent years, the Board has ranged in size from four to six members. The Board believes that this is an appropriate size range, although the total membership of the Board may change if circumstances so warrant. The precise number of members will be determined from time to time by resolution adopted by a majority of Directors in office at the time of the vote, with the objective of achieving a size sufficiently large to encompass members with significant breadth in experience and skills, while still small enough to function efficiently.
The basic responsibility of the Directors is to exercise their business judgment to act in what they reasonably believe to be is the best interest of the Company and its shareholders. In discharging that obligation, Directors should be entitled to rely on the honesty and integrity of the Company's senior executives and its outside advisers and auditors.
Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities. Information and data that are important to the Board's understanding of the business to be conducted at a Board or committee meeting will generally be distributed in writing to the Directors before the meeting, and Directors should review these materials in advance of the meeting.
and Chief Executive Officer
The Board has no policy with respect to the separation of the offices of Chairman and the Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination when it elects a new chief executive officer or at such other times as it deems appropriate.
6. Agendas for
To the extent practicable, the Chairman will establish the agenda for each Board meeting. Each Board member is free to suggest the inclusion of items on the agenda. Each Board member is free to raise at any Board meeting subjects that are not on the agenda for that meeting.
Executive sessions of the non-management Directors will normally be scheduled for each regular meeting of the Board. The Board will determine during the course of the meeting whether an executive session is necessary, but believes that an executive session of non-management Directors should normally be held at least 3 times each year. At least one of the executive sessions will take place with only independent Directors in attendance.
The Board will have at all times an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. All of the members of these committees will be independent Directors under the criteria established by the New York Stock Exchange and the rules of the Securities and Exchange Commission. Committee members will be appointed by the Board upon recommendation of the Nominating Committee with consideration of the desires of individual Directors.
Each committee will have its own charter. The charters will set forth the purposes and responsibilities of the committees as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure and operations and committee reporting to the Board. The charters will also provide that each committee will annually evaluate its performance.
The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.
Access to Officers and Employees
Directors have full and free access to officers and employees of the Company. Any meetings or contacts that a Director wishes to initiate may be arranged through the CEO or the Secretary or directly by the Director. The Directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Company.
The Board may ask any Company employee to attend any Board or committee meeting. The Board may meet in executive session where appropriate without any officer or other Company employees present.
To the extent necessary and appropriate, the Board shall have full and free access to independent advisors. The Board shall have the authority to retain and approve the fees and retention terms of its independent advisors.
The form and amount of Director compensation will be determined by the Board upon recommendation by the Compensation Committee in accordance with the policies and principles set forth in its charter, and the Compensation Committee will conduct an annual review of Director compensation. The Compensation Committee will consider that Directors' independence may be compromised if Director compensation and perquisites exceed customary levels, if the Company makes substantial charitable contributions to organizations with which a Director is affiliated, or if the Company enters into consulting contracts with (or provides other indirect forms of compensation to) a Director or an organization with which the Director is affiliated. The Board will critically evaluate each of these matters when determining the form and amount of Director compensation, and the independence of a Director.
Orientation and Continuing Education
New Directors will attend presentations by senior management to familiarize them with the Company's strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Ethics and Business Conduct, its principal officers, and its internal and independent auditors. In addition, the Company encourages the participation of all Directors in continuing education programs with respect to their roles as directors, and shall reimburse any Director for all reasonable costs incurred in connection therewith.
Evaluation and Management Succession
The Compensation Committee will conduct an annual review of the CEO's performance, in accordance with the provisions of its charter and will present the results of its review to the Board.
The Board will periodically review and consider succession planning in the event of an emergency involving, or the retirement of, the CEO and will evaluate potential successors to the CEO. The CEO should at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
Interaction with Third Party Constituencies
The Board believes that management speaks for the Company, and therefore it will not normally be appropriate for Directors to speak on behalf of the Company to investors, employees, the press or other third parties. However, there may be instances in which selected Board members may be asked to participate in conversations with representatives of various constituencies, although those interactions will be coordinated with appropriate members of management. In addition, the Company has established a process for interested shareholders to contact the Board directly, on a confidential basis, c/o the Secretary of the Company, 4Kids Entertainment, Inc., 1414 Avenue of the Americas, New York, New York 10019.
14. Limits on
Service with Other Boards
The Board does not believe that there is a "one size fits all" approach to the issue of service by its members on other boards of directors. In most cases, the number of for-profit boards that a Director serves upon bears only a limited relationship to that Director's ability to devote sufficient time to his or her service on the Board. It is expected that each Director will devote the time and effort necessary to discharge his or her duties in an appropriate and diligent fashion, irrespective of other activities and commitments. In the event this is not occurring, whether because of service on other boards or for some other reason, the matter will be addressed by the Nominating Committee. The Nominating Committee or the Board as a whole will also make the necessary determination under the NYSE Governance Standards in the event that a member of the Audit Committee serves on the audit committee of more than three public companies.
Annual Performance Evaluation
The Board will conduct an annual performance self-evaluation to determine whether it and its committees are functioning effectively. The Nominating Committee will receive comments from all Directors and report annually to the Board with an assessment of the Board's performance. This will be discussed with the full Board following the end of each fiscal year. The assessment will focus on the Board's contribution to the Company and specifically focus on areas in which the Board or management believes that the Board and each committee could improve.