|SENSATA TECHNOLOGIES HOLDING N.V.|
CORPORATE GOVERNANCE GUIDELINES
The Company is committed to developing effective, transparent and accountable corporate governance practices. These Corporate Governance Guidelines (“Guidelines”) were approved by the Board of Directors (the “Board”) of Sensata Technologies Holding N.V. (the “Company”) as a set of guiding principles by which the affairs of the Company will be governed. The Guidelines are subject to regular review by the Nominating and Governance Committee which may recommend to the Board that they be modified or updated, when appropriate.
I. Board Responsibilities
(a) Responsibilities of the Board
The business of the Company is conducted by management under the direction of the Chief Executive Officer. The Board’s responsibility is to oversee, on behalf of shareholders and other stakeholders, the conduct of the Company’s business, to provide advice and counsel to the Chief Executive Officer and senior management, to protect the Company’s best interests and to foster the creation of long-term value for shareholders, taking into account the interests of other stakeholders, such as creditors, employees and contract counterparties.
Among other things, the Board’s oversight responsibilities include monitoring and/or making inquiries concerning:
Among other things, the Board’s decision-making responsibilities include:
i) review and approval of the Company’s mission, strategies, objectives and policies, as developed by the Chief Executive Officer and senior management;
ii) approval of director candidates recommended by the Nominating and Governance Committee to be nominated for election by shareholders at the general meeting of shareholders; and
iii) approval of material investments or divestitures, strategic transactions, related party transactions and other significant transactions not in the ordinary course of the Company’s business.1
In carrying out their responsibilities, Board members shall exercise their business judgment and act in ways that they reasonably believe will serve the best interests of the Company, its shareholders and other stakeholders, including employees, customers, lenders and the members of the communities in which the Company operates.
i) the Company’s performance in relation to its mission, strategies and financial and
ii) the performance and effectiveness of the Company’s management team;
iii) succession and development plans for the Board and key Company executives, including the Chief Executive Officer (with the April board meeting used annually for this purpose);
iv) the Company’s financial reporting processes, internal controls and risk management processes; and
v) the Company’s compliance with legal and regulatory requirements.
(b) Expectations of Board Members
Board members are expected to:
II. Board Operations
Subject to the conditions outlined in the Company’s articles of association, the number of directors which shall constitute the Board shall be fixed from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office.
The Board holds at least four regular meetings each year and may hold additional or special meetings whenever necessary. Regular Board meetings will be one-day in duration, except for the July meeting which, beginning in 2015, will be two-days. Committee meetings will typically take place the day before the regular meetings. Regular Board meetings are generally held in person, although Board members may participate by conference call, if necessary. Special meetings may be held either in person or by conference call. The Board may also act by unanimous written consent. The Board will hold executive sessions at each board meeting, a portion of which will exclude the Chief Executive Officer and non-independent directors.
The Chairman of the Board, if one shall have been elected, will establish the agenda for each Board meeting and distribute it to directors in advance of the meeting. If a Chairman has not been elected, the Chief Executive Officer, if a member of the Board, will establish the agenda for each Board meeting and distribute it to directors in advance of the meeting. If the Chief Executive Officer is not a member of the Board, the Board shall elect one of its members to establish the agenda for each Board meeting and distribute it to directors in advance of the meeting. Any director may request that a subject be included on the agenda and may raise a subject that is not on the agenda at any Board meeting.
Pre-reading materials for the Board and committee meetings are distributed to directors sufficiently in advance of each meeting to permit meaningful review. Materials should be as concise as possible while still providing the information necessary for directors to make an informed judgment on the agenda items. However, it is recognized that certain exigent circumstances may cause the materials to be late or incomplete.
i) become and remain informed about the Company, its business and its industry;
ii) attend all meetings of the Board and of Board committees on which they serve, having read and considered the pre-reading materials in advance of the meeting; and
iii) participate constructively in Board and committee meetings, drawing upon their individual experience, knowledge and background, as appropriate, to provide perspectives and insights.
The Board has three standing committees: The Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. The committees’ charters are posted on the Company’s website. The committee should consist of three members at a minimum. The Nominating and Governance Committee regularly reviews the Board’s committee structure and charters in conjunction with the committee chairmen. Committee charters shall be updated where necessary to ensure compliance with the NYSE rules, and any other applicable laws or regulations.
The Nominating and Governance Committee makes recommendations to the Board relative to committee members and chairmen consistent with the membership criteria outlined in the applicable committee charter. Committee appointments are subject to approval of a majority of the full Board. The Board may replace any committee chairs or members or add additional members to a Board committee at any time during the year.
III. Director Qualifications and Board Composition
The Company seeks to align Board composition with the Company’s strategic direction so that the Board members bring skills, experience and backgrounds that are relevant to the key strategic and operational issues that they will oversee and approve. Director candidates are typically selected based upon their character, track record of accomplishment in leadership roles, as well as their professional and corporate expertise, skills and experience. Criteria that are typically considered by the Board in the selection of directors include:
i) the independence, judgment, strength of character, reputation in the business
community, ethics and integrity of the individual;
ii) the business or other relevant experience, skills and knowledge that the individual may have that will enable him/her to provide effective oversight of the Company’s business;
iii) the fit of the individual’s skill set and personality with those of the other Board members so as to build a Board that works together effectively and constructively; and
iv) the individual’s ability to devote sufficient time to carry out his or her responsibilities as a director in light of his/her occupation and the number of boards of directors of other public companies on which he or she serves.
(b) Regulatory Requirements
Certain rules of the New York Stock Exchang (“NYSE”) require that a majority of the members of the Board of Directors be “independent directors,”, and that the committees be comprised entirely of independent directors.
The nominating process outlined herein applies only with respect to the nomination of director candidates who will be presented to the Company’s shareholders for election at the general meeting. Where a third party has the right to nominate one or more directors to the Company’s Board, the selection and nomination of such directors need not be subject to this process.
In addition, one of the independent directors serving on the Audit Committee must qualify as a “financial expert” as defined by the Sarbanes-Oxley Act.
The Nominating and Governance Committee reviews Board and committee composition at least annually to ensure compliance with NYSE rules and other applicable regulatory requirements. In so doing, the Nominating and Governance Committee conducts a review of the independence of all members of the Board for the purposes of determining which Board members are deemed independent and which are not. Board members must notify the Chairman of the Nominating and Governance Committee, as soon as practicable, in the event that their circumstances change in a manner that may impact the committee’s view of their independence.
The Nominating and Governance Committee is responsible for the identification and recruitment of director candidates for election by the shareholders and makes recommendations with respect to the nomination of new Board members, which are subject to a vote of the full Board. In developing recommendations for new Board candidates, the nominating process used by the committee consists of the following steps:
i) The Nominating and Governance Committee reviews current Board composition to determine particular skills or experience to be added or replaced through the recruitment of new Board members. The committee informs members of the Board, members of senior management and any search firm retained by the committee to assist in director recruitment in light of these needs and asks for their help in identifying strong Board candidates who would meet these requirements and the broader director criteria outlined above.
ii) Any potential Board candidates identified by the search firm, the network of contacts of the current Board and senior management and any director candidates recommended by shareholders will be reviewed by the Nominating and Governance Committee against these needs and the broader director criteria and a “short list” of candidates will be prepared from this preliminary review.
iii) Reference checks on “short listed” who have strong references will be interviewed by one or more members of the Nominating and Governance Committee, by the Chief Executive Officer and, if appropriate, other Board members or other members of senior management. The Chairman of the Nominating and Governance Committee will gather feedback from the interviews.
iv) Leading candidates from the “short list” who have strong references will be
interviewed by one or more members of the Nominating and Governance
Committee, by the Chief Executive Officer and, if appropriate, other Board
members or other members of senior management. The Chairman of the
Nominating and Governance Committee will gather feedback from the
v) The Nominating and Governance Committee will meet in person or by conference call to discuss and make recommendations to the Board with respect to the candidates. The full Board will then vote on the committee’s recommendations. Those candidates approved by a majority of the Board shall be shall be put on a list of candidates, which list shall be presented to the Company’s shareholders for election at the general meeting.
The Chairman or Chief Executive Officer of the Company will contact any candidate(s) so approved, invite them to attend the Company’s general meeting of shareholders and to join the Board at its first meeting thereafter, if they are elected by the Company’s shareholders at the general meeting of shareholders.
d) Director Terms and Time Limits
Directors shall be elected every year and shall serve for an annual term, subject to re-nomination on the recommendation of the Nominating and Governance Committee, the approval by a majority of the Board and approval by the general meeting of shareholders.
Directors shall no longer be eligible for nomination if, as of the date of the general meeting of shareholders, the director has reached the age of 75 years or has served 12 years, whichever comes sooner. The Board may, however, waive these limitations at its discretion.
Any director whose primary employment changes from the position that he or she held when becoming a member of the Board will promptly notify the Chairman of the Nominating and Governance Committee of this change and submit a written resignation from the Board. The director’s resignation shall not become effective unless accepted by the Board.
(f) Limitations on Board Service
The Board believes a limitation on the number of directorships held by an individual director better enables directors to devote proper attention and time to their duties. Any director who is a current Chief Executive Officer should serve on no more than two other public company boards (in addition to the Company board). Other directors should serve on no more than four other public company boards (in addition to the Company board). The Board recognizes that directors who are associated with private equity firms may not be able to so limit their participation and so the Board may waive the requirement in such cases.
The Chief Executive Officer and other executive officers of the Company must receive the Board’s prior approval before accepting any invitation to serve as a director of any other public or private company.
At the request of the Chairman or Chief Executive Officer, members of senior management may be invited to attend meetings of the Board to present information concerning the Company's business within their areas of responsibility.
Prior to becoming a director of another public company, a director shall notify the Chairman of the Nominating and Governance Committee and the Chairman of the Board, or if one has not been elected, the Chief Executive Officer, in order to avoid potential conflicts of interest and to address whether the aggregate number of directorships held by such director would interfere with his or her ability to carry out his or her responsibilities as a director of the Company. In the event that the Board determines that the additional directorship constitutes a conflict of interest or interferes with such director's ability to carry out his or her responsibilities as a director of the Company, such director, upon the request of the Board, shall either offer his or her resignation or not accept the other directorship
IV. Director Access to Management and Independent Advisors
Directors shall have full and unrestricted access to any relevant Company records and may request that any officer or other employee of the Company or the Company’s outside counsel or accountants meet with any members of, or consultants to the Board or any committee. As a courtesy, directors will exercise their judgment to ensure that this access does not impede or interfere with the conduct of the Company’s business and is coordinated, where possible, through the Chief Executive Officer so as not to undermine normal lines of management authority.
(b) Access to Independent Advisors
In their sole discretion, the Board and each of its committees shall have the sole authority and responsibility to select, employ, retain and terminate any financial, legal, executive search, consulting and other professional advisors as they deem necessary or appropriate to assist in the discharge of their responsibilities. The Company shall provide funding to cover the professional fees and reasonable expenses of any such independent advisors retained by the Board or any of its committees.
V. Director Compensation
The Compensation Committee shall recommend to the full Board for its approval the amount and form of compensation to be paid to Company directors. The Board shall then recommend to the shareholders for approval the amount and form of compensation to be paid to Company directors. The remuneration policy shall at least include the subjects referred to in Sections 2:383c through 2:383e of the Dutch Civil Code. The remuneration policy shall be presented to the works council (if any) for examination as referred to in Section 2:135 subsection 2 of the Dutch Civil Code, which shall be done in writing and simultaneously with the presentation to the general meeting of shareholders.
In making its recommendations, the Compensation Committee shall consider the director compensation policies and practices at the Company’s principal competitors and other comparable companies to ensure that the compensation (both direct and indirect forms) paid to the Company's directors is reasonable. The Board shall review its directors’ compensation practices and levels annually. Members of management who are also members of the Board shall not receive any additional compensation for their service as directors, committee members or committee chairmen.
VI. Director Orientation and Continuing Education
Upon election to the Board by shareholders or appointment by any third party having the right to appoint directors to the Company’s Board, new directors participate in an orientation session designed jointly by the Nominating and Governance Committee, the Chairman and Chief Executive Officer and the Company’s senior management.
Management shall make presentations to or arrange educational programs for the Board on different aspects of the business of the Company, which may include business strategy, risk management, financial reporting, products and services, industry trends and developments, corporate governance and other relevant topics. Such presentations or sessions may be provided by management on its own initiative or at the request of, or in conjunction with, the Nominating and Governance Committee. Directors are also encouraged to take advantage of any other available educational opportunities that would further their understanding of the business of the Company and enhance their performance on the Board.
VII. Executive Succession Planning
The Board receives regular updates and recommendations from the Chief Executive Officer regarding succession planning for the Chief Executive Officer and other key members of the Company’s senior management team. The plan of succession includes an assessment of the experience, performance, skills and planned career paths for possible successors for the Chief Executive Officer position and other key executive roles. The Compensation Committee ensures this process occurs annually at a minimum. The Compensation Committee leads the annual review of Chief Executive Officer performance, in which all Board members provide input, and oversees the Chief Executive Officer’s performance review of senior executives for purposes of compensation decisions, succession planning and leadership development.
VIII. Board and Committee Assessment
The Board is committed to continuous improvement and conducts an annual self-assessment of the performance of the Board and each of the Board committees. The assessment process is led and coordinated by the Nominating and Governance Committee. The self-assessment is designed to identify areas where the Board and its committees are particularly effective and to surface opportunities for further enhancement. When the self-assessments have been completed, the results and any recommendations made by the Nominating and Governance Committee to further enhance the Board’s functioning are discussed by the full Board.
IX. Shareholder Access to the Board
(a) Communications with Non-Management Directors
Any interested parties who have concerns that they wish to make known to the Company’s non-management directors, should send any such communication to the Chairman of the Audit Committee in
care of the Company’s executive offices at Kolthofsingel 8, 7602 EM Almelo, The Netherlands. All such shareholder communication will be reviewed by the Chairman of the Audit Committee and discussed with the committee, which will determine an appropriate response or course of action.
(b) Shareholder Recommendations for Board Candidates
Shareholders wishing to recommend candidates to be nominated for election to the Company’s Board by shareholders at the general meeting of shareholders may do so by sending to the attention of the Chairman of the Nominating and Governance Committee at the above address the following: The candidate’s name, a detailed biography outlining the candidate’s relevant background, professional and business experience and other significant accomplishments, an acknowledgement from the candidate that he or she would be willing to serve on the Board, if elected, a statement by the shareholder outlining the reasons why this candidate’s skills, experience and background would make a valuable contribution to the Board and a minimum of two references who have either worked with the candidate, served on a board of directors or board of trustees with the candidate, or can otherwise provide relevant perspective on the candidate’s capabilities as a potential Board member.
The number of seats that are subject to shareholder election and the deadline by which such recommendations must be received by the Chairman of the Nominating and Governance Committee will be published in the Company’s annual proxy circular each year. Shareholder recommendations provided to the Chairman of the Nominating and Governance Committee within this timeframe will be reviewed using the nominating process outlined in the Nominating and Governance Committee charter.
1 With respect to related party transactions causing a potential conflict of interest between an executive director and the Company, the general meeting of shareholders shall have the right to designate one or more other persons to represent the Company.
Adopted effective as of March 8, 2010; amended and restated as of April 9, 2013; amended and restated as of April 21, 2014.