EFECTOS ADVERSOS GRAVES

CalPERS Principles CII Policies TIAA-CREF Policy Statement AFL-CIO Voting Guidelines ISS

Committees who perform the audit, director nomina- tion and executive compensation functions should consist entirely of independent directors. (III.B.1.8) Should the board decide to have other committees (e.g. executive committee) in addition to those re- quired by law, the duties and membership of such committees should be fully disclosed. (III.B.1.9) The independent chairperson [or lead director should] [r]ecommend to the full board the member- ship of the various board committees, as well as se- lection of the committee chairs. (Appendix C)

Companies should have audit, nominating and com- pensation committees, and all members of these committees should be independent. (§ 2.5)

Boards should establish at least three standing com- mittees — an audit committee, a compensation com- mittee and a nominating and governance committee — all composed exclusively of independent directors. The credibility of the board will depend in large part on the vigorous demonstration of independence by these standing committees. (p. 18)

In addition to the three primary standing committees established through laws and listing standards, boards should also establish additional committees as needed to fulfill their duties. These may include executive, corporate governance, finance, technology, invest- ment, customers and product, operations, human re- sources, public affairs, sustainability and risk commit- tees. (p. 20)

TIAA-CREF will generally vote against shareholder resolutions asking the company to establish specific board committees unless we believe specific circum- stances dictate otherwise. (p. 30)

Companies listed on U.S. stock exchanges are gen- erally required to have audit, nominating and com- pensation committees . . . . (Guideline IV.A.1.6)

Proxy Voting Guidelines

Generally vote AGAINST shareholder proposals to es- tablish a new board committee, as such proposals seek a specific oversight mechanism/structure that potentially limits a company’s flexibility to determine an appropri- ate oversight mechanism for itself. However, the follow- ing factors will be considered:

 Existing oversight mechanisms (including current committee structure) regarding the issue for which board oversight is sought;

 Level of disclosure regarding the issue for which board oversight is sought;

 Company performance related to the issue for which board oversight is sought;

 Board committee structure compared to that of other companies in its industry sector; and/or

 The scope and structure of the proposal. (p. 19) QuickScore

Not covered directly, but see Topic Heading IV.F, above.

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IV.F. Independence/Qualifications of Committee Members26

ALI Principles/Recommendations BRT Principles NACD Report Conference Board Recommendations OECD Principles/Millstein Report The audit committee . . . should be composed exclu-

sively of directors who are neither employed by the corporation nor were so employed within the two pre- ceding years, including at least a majority of members who have no significant relationship with the corpora- tion’s senior executives. (§ 3.05)

[The] nominating committee [should be] composed exclusively of directors who are not officers or em- ployees of the corporation, including at least a majori- ty of members who have no significant relationship with the corporation’s senior executives. (§ 3A.04(a)) The [compensation] committee should be composed exclusively of directors who are not officers or em- ployees of the corporation, including at least a majori- ty of members who have no significant relationship with the corporation’s senior executives. (§ 3A.05(a)) [T]he executive committee of a large publicly held corporation should include a majority of directors who are free of any significant relationship with the senior executives, and the executive committee of other publicly held corporations should include enough such directors to approximate the proportion of such directors on the full board. (§ 3A.01, Com- ment e)

[Q]ualifications required for committee membership should be clearly defined and set out in a written char- ter . . . Every publicly-owned corporation should have an audit committee of at least three members, who should all be independent directors. . . . The listing standards of the major securities markets require that all members of the audit committee qualify as inde- pendent directors under applicable listing standards . . . and that they meet additional, heightened independ- ence criteria. Audit committee members should meet minimum financial literacy standards, as required by the listing standards of the major securities markets, and at least one member of the audit committee should be an audit committee financial expert, as de- termined by the board in accordance with regulations of the Securities and Exchange Commission. (p. 17) Every publicly owned corporation should have a committee composed solely of independent directors that addresses director nominations and corporate governance matters. (p. 20)

Every publicly owned corporation should have a committee composed solely of independent directors that addresses compensation issues. . . . All commit- tee members should have and maintain sufficient knowledge of executive compensation and related is- sues to perform their duties effectively. (p. 23)

Boards should require that key committees–– compensation, audit, and nominating or governance–– include only independent directors . . . . (p. 5)

The Compensation Committee should be comprised solely of directors who are free of any relationships with the company (except for compensation re- ceived in their role as directors) and its manage- ment and who can act independently of manage- ment in carrying out their responsibilities. (Part 1, Principle I, Best Practice 2)

The nominating/governance committee should be composed entirely of independent directors. (Part 2, Principle IV)

Members of the audit committee must be independ- ent and have both knowledge and experience in au- diting financial matters. The [Sarbanes-Oxley] Act also requires that the company disclose whether or not the audit committee has a member who is a “fi- nancial expert”. . . . (Part 3, Principle I)

[Board] committees may require a minimum number or be composed entirely of nonexecutive members. In some countries, shareholders have direct responsibility for nominating and electing nonexecutive directors to specialised functions. (Annotation to Principle VI.E.1) It is increasingly regarded as good practice in many countries for independent board members to have a key role on [the nominating/corporate governance] commit- tee. (Annotation to Principle II.C.3)

Stock exchange listing requirements that address a min- imal threshold for . . . audit committee independence have proved useful, while not unduly restrictive or bur- densome. (Millstein Report, Perspective 15)

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Under NYSE listing rules, domestic listed companies (subject to certain exemptions for “controlled companies”) are required to have an audit committee, a nominating/corporate governance committee and a compensation committee, and all three committees must consist exclu- sively of “independent” directors. Nasdaq-listed companies (subject to certain exemptions for “controlled companies”) are required to have an audit committee and, from the earlier of the company’s first annual meeting after January 15, 2014 or October 31, 2014, a compensation committee, and both committees must be comprised of “independent directors,” and must have board nomination decisions or recommendations made by “independent directors.” Audit committee members of NYSE-listed companies must be financially literate or become so within a reasonable period of time, and the audit committee must include at least one director with accounting or related financial management expertise. Audit committee members of Nasdaq-listed companies must be able to read and understand fundamental financial statements at the time of appointment, and the audit committee must include at least one financially sophisticated director. The Sarbanes-Oxley Act requires that companies disclose whether or not the audit committee includes at least one member who is an “audit committee financial expert” and, if not, the reasons. See Appendix. See also 2011 ABA Guidebook at 63-64 (“The board should select committee members using criteria appropriate to the committee’s purpose and in compliance with any applicable legal and stock exchange requirements…. Committee membership criteria may include: experience relevant to committee responsibilities; subject matter expertise that will assist the committee in its work; committee members’ ability to meet requisite time commitments; disinterest in the committee’s subject matter; and independence from man- agement, as appropriate.”); id. at 102 (“[T]he nominating and governance committee should . . . recommend qualifications for membership on committees.”).

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