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Relates to Charter goal and responsibility to identify, review and recommend to the Board, in timely fashion, qualified candidates for nomination as Directors to fill any existing or anticipated vacancy in the Board.
A. Review annually the Board of Directors’ retirement schedule, the results of the review of the Board’s overall performance, and the impact of the strategy of the company to determine future requirements for Board members over the next year or two.
B. Assign responsibility to identify candidates to fill the requirements identified in (A.) above through direct contact, database research, and the use of outside resources.
C. Identify specific candidates referencing the criteria for nominees shown later in this procedure. Assign responsibility to contact these individuals and, after coordination, identify candidates to be interviewed by the Committee.
D. Conduct interviews and determine if it will recommend to the Board, a candidate for Board membership. If so, the Board will act on the recommendation, and if the nomination is approved, will also act on administrative matters including assigning the new member to a Board class, approval of a stock grant, and fix the size of the Board.
E. After Board approval, the Chairman of the Committee or the Chairman and Chief Executive Officer will extend an invitation to the potential director to join the Board.
BACKGROUND GUIDANCE
Information the Committee should consider in fulfilling this responsibility is:
Class Assignment
The Board is divided into three classes (I, II, and III) with the term of one class expiring each year. (Reference Certificate of Incorporation, Paragraph 10 (b))
Size of Board
Little fluctuation from the historical range of 12 to 14. (Reference Corporate Governance Guideline, #14)
Mix of Inside and Outside Directors
No more than three “inside” directors. (Reference Guideline #15)
Age Limit
No director can be elected to the Board after reaching age 72. (Reference By-Laws, Paragraph 3.02)
Independence Standards for Directors
New York Stock Exchange (“NYSE”) listing standards require listed companies to have a majority of independent directors and each member of the Audit, Nominating and Corporate Governance, and Organization and Compensation Committee to be independent. Under the NYSE standards, no director qualifies as “independent” unless the Board of Directors affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company). In addition, the NYSE standards provide that:
(a) a Director who received, or whose immediate family members receive, more than $100,000 per year in direct compensation from the Company, other than director fees or pension payments, is presumed not to be independent until five years after he or she ceases to receive more than $100,000 per year in such compensation, unless the Board deems otherwise with no independent Director dissenting;
(b) a Director who is affiliated with or employed by, or whose immediate family member is affiliated with or employed in a professional capacity by, a present or former auditor of the Company is not independent until five years after the end of either the affiliation or auditing relationship; and
(c) a Director who is an executive officer or employee, or whose immediate family member is an executive officer of another company that accounts for at least 2 percent of the company’s consolidated gross revenues, or for which the company accounts for at least 2 percent or $1 million (whichever is greater) of such other company’s consolidated gross revenues, in each case is not independent until five years after such threshold is no longer met.
Also, under NYSE and Securities Exchange Commission requirements, Board members must meet enhanced independence requirements for Audit Committee membership.
Criteria For Nominees
(a) Nominees shall be recommended to the Board by the Committee solely on the basis of merit;
(b) Nominees shall have unquestioned personal ethics and integrity;
(c) Nominees shall possess specific skills and experience aligned with the Company’s strategic direction and operating challenges;
(d) Nominees shall possess the following core business competencies:
i. high achiever and record of success,
ii. financial literacy, and
iii. history of making good business decisions and exposure to best practices.
(e) Nominees shall possess interpersonal skills that maximize group dynamics, including respect for others, strong communication skills and confidence to ask the tough questions.
(f) Nominees shall be enthusiastic about the Company and have sufficient available time to become fully engaged; and
(g) Non-employee nominees shall satisfy the independence standards established by the NYSE and SEC.
Relates to Charter goal and responsibility to review annually the Board and Committees’ over all performance.
A. Annually, after reviewing the results of the prior year review, the Committee shall develop and conduct or, in the case of the other Committees, coordinate a self-review of the Board’s overall 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.
B. The process of conducting the review shall be determined by the Committee.
(See Process and Timetable attached to these guidelines as Exhibit I)
Relates to Charter goal and responsibility to annually review the Board’s committee structure, charters and membership and recommend changes, if any, to the Board.
A. The Committee shall annually review the structure, charters and membership of each of the Board’s committees. The Committee shall develop the appropriate process which shall generally include the following:
- Review the results of each committee’s review of its performance to identify suggestions for change in committee structure, charters or membership.
- Review “peer” proxies as a benchmarking exercise to determine committee structure and responsibilities of other large diversified companies.
- Review literature for trends in corporate governance and Board structure.
- In consultation with the Chairman of the Board and Chairs of the other committees, determine changes, if any, the Committee will recommend to the Board.
- The Chairman of the Committee and the Chairman of the Board will report to the Board of Directors on the results of the review, issues identified and recommended changes.
- The Board of Directors and the respective Committees will review and act on such recommendations.
Relates to Charter goal and responsibility to annually review Board Compensation.
Principles of Board Compensation
In determining compensation and benefits for non-employee directors, the committee will be guided by the following goals: compensation should fairly pay directors for work required in a company of Textron’s size and scope; compensation should align directors’ interests with the long-term interests shareowners; and the structure of the compensation should be simple, transparent and easy for shareowners to understand.
Relates to charter goal and responsibility to recommend to the Board of Directors whether resignations tendered by members who were not elected by the vote of the majority of the voters cast at the annual meeting of the shareholders, should be accepted
If at a meeting of the stockholders for the election of a Director, a Director is not elected by the vote of the majority of the vote cast as provided in section 3.03 of the By-laws, the Director shall tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation or whether other actions should be taken. The Board will act on the Committees recommendation and publicly disclose its decision within 90 days from the date of the ratification of the election results.
The above recommended procedures is substantially identical to the process for tendering resignations previously set forth in the By-laws
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