MARTHA STEWART LIVING OMNIMEDIA, INC.
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors of the Corporation has adopted the corporate governance guidelines set forth below as a framework for the governance of the Corporation. The Nominating and Corporate Governance Committee reviews the Guidelines annually and recommends changes to the Board of Directors as appropriate.
Role and Responsibilities of the Board of Directors
The Board of Directors, which is elected by the stockholders, is the ultimate decision-making body of the Corporation, except with respect to matters reserved to the stockholders. The Board oversees the management of the Corporation and its business on behalf of the stockholders. It elects the principal executive officer and certain other members of the executive management of the Corporation, who are charged with directing the Corporation’s business, and monitors the performance of executive management. Consistent with the oversight function of the Board, the primary responsibilities of the Board, either directly or through its committees, include:
- Evaluating the performance of the Corporation and its executive management, including selecting and fixing the compensation of executive management as the Board deems appropriate;
- Planning for management succession;
- Reviewing the Corporation’s strategic plans and objectives, and the principal risk exposures of the Corporation;
- Providing advice and counsel to the executive management of the Corporation;
- Overseeing compliance by the Corporation with applicable laws and regulations, including in connection with the public reporting obligations of the Corporation;
- Overseeing management’s safeguarding of the assets of the Corporation and maintenance of appropriate accounting, financial and other controls; and
- Nominating directors, appointing the members of and overseeing committees of the Board, and shaping effective corporate governance.
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Composition of the Board; Director Qualifications
The Board has a majority of independent directors. An “independent” director is a director who meets the independence criteria of the New York Stock Exchange (“NYSE”), as determined by the Board. The Board has adopted the standards set forth in Attachment A to these Guidelines to assist it in assessing the independence of directors. The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Nominating and Corporate Governance Committee.
TThe Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the skills and characteristics of Board members as well as the composition of the Board as a whole. This assessment includes members’ independence, age, skills, and experience in the context of the needs of the Board. The Committee considers the diversity of the members’ skills and experience in areas that are relevant to the Corporation’s businesses and activities. The invitation for a new director to join the Board is typically extended on behalf of the Board by the Chairman of the Nominating and Corporate Governance Committee and by the Chairman of the Board. Nominees for election as directors at the annual meeting of stockholders are recommended to the Board by the Nominating and Corporate Governance Committee. The Committee may also recommend candidates for appointment by the Board as necessary to fill vacancies or newly created directorships.
A director who changes his or her primary responsibility from that which he or she held when elected to the Board should volunteer to resign from the Board by tendering his or her resignation for consideration by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee reviews the continued appropriateness of Board membership under the circumstances and recommends to the Board the action, if any, to be taken with respect to the offer of resignation.
Directors are directed to advise the chair of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another for-profit company board. Directors who also serve as chief executive officers or in equivalent positions at public companies may not serve on the boards of directors of more than two other public companies in addition to the Corporation’s Board. Other directors may not serve on more than five other public company boards without prior approval by the Nominating and Corporate Governance Committee.
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The Board of Directors generally holds regularly scheduled meetings quarterly, with one annual meeting in which long-term strategic issues are the primary focus. Special meetings are held as appropriate. The Chairman of the Board, in consultation with the Lead Independent Director, generally prepares an annual schedule of meetings for the Board of Directors and the standing committees. The proposed annual schedule of meetings of the Board and its standing committees is presented to the Board of Directors for approval. The Chairman of the Board typically establishes an agenda for each meeting of the Board. Directors may suggest the addition of any matter to a meeting agenda. Each director may also raise at any meeting any subject that is not on the agenda for that meeting.
Directors are expected to attend Board meetings and meetings of committees on which they serve (as well as the Annual Meeting of the Stockholders), and to spend such time and take such action as may be reasonably necessary to properly discharge their responsibilities. Information relevant to the business to be conducted at a Board or committee meeting generally is distributed in writing to the directors before the meeting, and directors should review these materials in advance of the meeting.
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Board Leadership; Executive Sessions
The Board is free to select its Chairman and the Corporation’s Chief Executive Officer in the manner it considers to be in the best interests of the Corporation at the time of selection. The Chairman and the Chief Executive Officer may be filled by one individual or two different individuals. When the positions of the Chairman and Chief Executive Officer are combined, or when the positions are separate and the Chairman is not an independent director under the NYSE listing standards, the Board designates an independent director as the Lead Independent Director. The Lead Independent Director’s responsibilities include presiding over and setting the agendas for executive sessions of the independent directors, consulting with the Chairman regarding scheduling for Board meetings, overseeing the appropriate flow of information to the Board, acting as a liaison between the independent directors and management with respect to scheduling and agendas for Board meetings, and being available for consultation and communication with stockholders as appropriate.
The non-management directors meet in executive session at least three times per year. In addition, the independent directors meet in executive session at least once per year. The Lead Independent Director also has the authority to call additional executive sessions as appropriate. Each director may also raise at any executive session any subject that is not on the agenda for that executive session.
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The Board has four standing committees: an Audit Committee, a Compensation Committee, a Finance Committee and a Nominating and Corporate Governance Committee. All of the members of these committees are independent directors under the NYSE listing standards, as determined by the Board, except for the Finance Committee, which is only required to have a majority of independent directors. In addition, directors who serve on the Audit Committee meet additional, heightened independence criteria applicable to audit committee members under the NYSE listing standards. Committee members are appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee with consideration of the qualifications of individual directors. Consideration is given to rotating committee members periodically, but such rotation is not mandated.
Each standing committee operates under a written charter. The charters set forth the purposes, goals 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 also provide that each committee annually evaluates its performance. The committees assess the adequacy of their charters annually and recommend changes to the Board as appropriate.
The chairman of each committee, in consultation with the committee members and Company management, as appropriate, determines when to call additional committee meetings consistent with the committee’s charter. The chairman of each committee, in consultation with members of the committee and appropriate members of management, develops the committee’s agenda. The schedule for each committee is furnished to all directors.
The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.
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Director Access to Officers, Employees and Advisors
Directors have full and free access to officers and employees of the Corporation. Any
meetings or contacts that a director wishes to initiate may be arranged through the Chairman of the Board or the Secretary or directly by the director. Directors should use their judgment to see that any such contact is not disruptive to the business operations of the Corporation.
The Board of Directors, its committees, and the Lead Independent Director (on behalf of the non-management directors as a group), have the authority, at the expense of the Corporation, to engage such outside legal, financial or other advisors as they deem appropriate, without consulting or obtaining the approval of any officer of the Corporation, with respect to any matters subject to their respective authority.
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The Compensation Committee conducts an annual review of director compensation. Director compensation is set by the Board based upon the recommendation of the Committee. Non-management directors receive a combination of cash and equity compensation for service on the Board, except in cases where such compensation is waived. Management directors do not receive additional compensation for service on the Board.
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Stock Ownership Guidelines
To encourage Section 16 officers and directors to have an equity interest in the Corporation and to help further align their interests with the interests of stockholders, the Compensation Committee adopted stock ownership guidelines for directors and Section 16 officers. Each Section 16 officer and director, as applicable, must attain the following ownership requirements within a five-year period, except for those non-management directors who have waived compensation. The targets apply to shares owned outright.
Chief Executive Officer: 60,000 shares
All other Section 16 officers: 20,000 shares
All other Directors: 5,000 shares
Officers and directors who do not meet the ownership test are required to hold 75% of vested shares (net of shares withheld for tax obligations) until such time as the applicable target is achieved. This requirement does not, however, apply to shares granted as part of a bonus payment.
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Director Orientation and Continuing Education
All new directors are expected to participate in an orientation program within several months of the time a new director is elected. This orientation includes presentations by senior management to familiarize new directors with the Corporation’s strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct and Ethics, its principal officers, its internal and independent auditors, and its corporate governance practices. In addition, the orientation program includes visits to the Corporation’s headquarters and, to the extent practical, certain of the Corporation’s significant facilities. All other directors are also invited to attend the orientation program.
The Board encourages directors to participate in education programs to assist them in performing their responsibilities.
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Management Succession and Development
The Nominating and Corporate Governance Committee generally makes an annual report to the Board on succession planning. The full Board works with the Nominating and Corporate Governance Committee to evaluate potential successors to the principal executive officer(s) (i.e. Executive Chairperson, Chief Executive Officer and/or President), and such principal executive officer makes available to the Board on an ongoing basis recommendations and evaluations of potential successors, along with a review of development plans for such individuals.
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Annual Performance Evaluations
The Board of Directors conducts an annual self-evaluation to assess its performance under the oversight of the Nominating and Corporate Governance Committee, which reports annually to the Board on the results of the assessment. The report is discussed with the full Board following the end of each fiscal year.
The Audit, Compensation, and Nominating and Corporate Governance Committees also evaluate their performance annually based on criteria developed by the respective committees. The contributions of incumbent directors are considered in connection with the renomination process.
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An “ independent” director is a director whom the Board of Directors has determined has no material relationship with Martha Stewart Living Omnimedia, Inc. or any of its consolidated subsidiaries (collectively, the “Corporation”), either directly, or as a partner, shareholder or officer of an organization that has a relationship with the Corporation. For purposes of this definition, the Board has determined that a director is not independent if:
- The director is, or has been within the last three years, an employee of the Corporation, or an immediate family member of the director is, or has been within the last three years, an executive officer of the Corporation.
- The director has received, or has an immediate family member who has received, during any consecutive 12-month period during the last three years, more than $120,000 in direct compensation from the Corporation (other than Board and committee fees, and pension or other forms of deferred compensation for prior service). Compensation received by an immediate family member for service as an employee (other than an executive officer) of the Corporation is not considered for purposes of this standard.
- (a) The director, or an immediate family member of the director, is a current partner of the Corporation’s internal or external auditor; (b) the director is a current employee of the Corporation’s internal or external auditor; (c) an immediate family member of the director is a current employee of the Corporation’s internal or external auditor and personally works on the Corporation’s audit; or (d) the director, or an immediate family member of the director, was within the last three years (but is no longer) a partner or employee of the Corporation’s internal or external auditor and personally worked on the Corporation’s audit within that time.
- The director, or an immediate family member of the director, is, or has been within the last three years, employed as an executive officer of another company where any of the Corporation’s present executive officers serves or served at the same time on that company's compensation committee; or or
- The director is a current employee, or an immediate family member of the director is a current executive officer, of a company that has made payments to, or received payments from, the Corporation for property or services in an amount that, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of the other company’s consolidated gross revenues.
In addition, the Nominating and Corporate Governance Committee must approve any contribution of $25,000 or more to a non-profit organization where a director or a director’s spouse is an employee, and a director is presumed not to be independent if the director, or the director’s spouse, is an employee of a non-profit organization to which the Corporation has made contributions in an amount that exceeded $100,000 in any of the last three fiscal years, although the Board may determine that a director who does not meet this standard nonetheless is independent based on all the facts and circumstances.
An “immediate family” member includes a director’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in- law, brothers- and sisters- in-law, and anyone (other than a domestic employee) who shares the director’s home.
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