Corporate Governance Guidelines
|Corporate Governance Guidelines|
Amended April 25, 2017
The Board of Directors (the “Board”) of Stepan Company (“Stepan”) has adopted the following Corporate Governance Guidelines (the “Guidelines”) to assist the Board in the exercise of its responsibilities and to serve the interests of Stepan and its stockholders. These Guidelines should be interpreted in the context of all applicable laws and Stepan’s restated certificate of incorporation, amended and restated by-laws (the “By-laws”) and other corporate governance documents. These Guidelines acknowledge the leadership exercised by the Board’s standing committees and their chairs and are intended to serve as a flexible framework within which the Board may conduct its business and not as a set of legally binding obligations. These Guidelines are subject to modification from time to time by the Board as the Board may deem appropriate and in the best interests of Stepan and its stockholders or as required by applicable laws and regulations.
Stepan has three standing committees: Audit, Compensation and Development, and Nominating and Corporate Governance, each composed entirely of Independent Directors. Pursuant to the By-laws, the Board may, by resolution of the Board, create or discharge additional committees at any time, subject to the rules and regulations of the NYSE, the Sarbanes-Oxley Act and the SEC.
The Nominating and Corporate Governance Committee, after consultation with the CEO and with consideration of the desires of individual Board members, recommends committee assignments including the chairmanships to the full Board for approval.
The membership of the Audit Committee, the Compensation and Development Committee and the Nominating and Corporate Governance Committee fully comply with the requirements established by the NYSE, the Sarbanes-Oxley Act and the SEC. Each of these committees has its own charter which sets forth the purposes and responsibilities of such committee. The charters also provide that each committee will annually evaluate its performance.
Prior to each committee meeting, the committee members receive an agenda for the meeting, along with advance copies (when possible) of any written materials to be discussed.
Each committee chairman convenes, as appropriate, Executive Sessions of the committee to discuss its activities.
The Nominating and Corporate Governance Committee, from time to time as it deems appropriate, reviews and reassesses the adequacy of these Guidelines and recommends any proposed changes to the Board for approval.
The Nominating and Corporate Governance Committee reports annually to the Board on an assessment of the Board’s performance. The Board discusses this at first with the Chairman in attendance; then, if desired by any director, it is discussed in an Executive Session. This assessment is of the Board’s contribution as a whole and reviews areas in which the Board and/or the management believes a better contribution could be made. The Nominating and Corporate Governance Committee is responsible for evaluating the performance of current Board members at the time they are considered for re-nomination to the Board.
Directors are retained and compensated for their service to Stepan. Directors who chair committees receive additional annual compensation in recognition of their leadership position. In addition to the on-going work of the Board, this service includes participation at regularly scheduled meetings of the Board and its committees, special Board or committee meetings and informal work with management as the Board or any individual Board member deems necessary and appropriate.
The Nominating and Corporate Governance Committee is responsible for reviewing performance of the Board as a whole and the performance of individual Board members. The Compensation and Development Committee makes recommendations to the Board concerning directors’ compensation, including benefits. In undertaking its review, the Compensation and Development Committee may receive advice from the CEO and internal staff and engage outside consultants to provide reports on trends in director compensation, including compensation paid to outside directors of other companies.
The Board seeks to avoid compensation elements that may compromise the independence of directors, such as consulting contracts, advisory fees or other indirect forms of compensation to a director or an organization with which the director is affiliated.
The Board expects directors, as well as officers and employees, to acknowledge their adherence to the policies comprising the Code. Certain portions of the Code deal with activities of directors, particularly with respect to potential conflicts of interests. Directors should be familiar with the Code’s provisions in these areas and should consult with Stepan’s General Counsel or Assistant General Counsel in the event of any questions or issues.
The Board takes appropriate steps to identify potential conflicts of interest and assures that all directors voting on an issue are disinterested with respect to that issue. The Board, after consultation with counsel, determines whether such a potential conflict of interest exists on a case-by-case basis.
The full Board makes an annual evaluation of the CEO’s performance, taking into account both the financial performance of the business and the qualitative performance of the CEO, including, for example, vision and leadership, accomplishment of long-term strategic objectives, and development of management. The results are used to identify strengths and areas needing improvements and to provide input to the Compensation and Development Committee’s evaluation of the CEO for compensation purposes.
The CEO reviews annually with the Board the current goals of the other senior officers and the extent to which these officers have accomplished their previous goals.
The Compensation and Development Committee annually evaluates the performance of the CEO and other senior officers for compensation purposes and makes compensation recommendations to the Board. The Board reviews these evaluations and recommendations and determines the compensation, including incentive pay.
Members of Stepan’s Operating Committee are the only Stepan employees who may serve on the board of directors of a public company other than Stepan or on the board of any private company that would represent a material commitment of time (each an “Outside Board”). The CEO obtains the approval of the Nominating and Corporate Governance Committee prior to accepting an invitation to serve on an Outside Board. Other senior officers obtain the approval of the CEO prior to accepting an invitation to serve on an Outside Board. The CEO and other senior officers may serve on no more than one Outside Board. The CEO and other senior officers of Stepan do not serve on the board of a company for which a Stepan non-management director serves as an officer.