Governance
The Board of Directors has adopted the following
guidelines on corporate governance issues. (Amended 3-3-06)
Board Mission and Responsibilities
Mission
Statement. Tollgrade’s Board of Directors represents the shareholders’ interest in perpetuating a successful business, including optimizing long-term financial returns. The Board is responsible for determining that the Corporation is managed in such a way as to ensure this result. This is an active, not a passive, responsibility. The Board has the responsibility to ensure that in good times, as well as in difficult ones, management is capably executing its responsibilities. The Board’s responsibility is to regularly monitor the effectiveness of management policies and decisions including the execution of its strategies.
Corporate
Authority and Responsibility. All corporate authority resides in the Board of Directors as fiduciaries on behalf of the Shareholders. The Board delegates authority to management to pursue the Corporation’s mission. Management, not the Board, is responsible for managing the Corporation. The Board retains responsibility to recommend candidates to the Shareholders for election to the Board of Directors. The Board retains responsibility for selection and evaluation of the Chief Executive Officer, oversight of succession plans, determination of senior management compensation, approval of the annual budget, and review of systems, procedures and controls. The Board also advises management with respect to strategic plans.
Board Leadership and Structure
Selection
of Chairman and Chief Executive Officer. The Board does not have a policy, one way or the other, as to whether the role of the Chairman and Chief Executive Officer should be separate or combined and if it is separate, whether the Chairman should be selected from the non-employee Directors. The Board should be free to determine, in its discretion, what is in the best interests of the Corporation at a given time.
Board
Composition/Independent Directors. Independent Directors shall constitute a majority of the Board. An “Independent Director” is a person who meets the criteria for independence of Board members as defined in the applicable securities and stock exchange laws and requirements, and is otherwise free from any relationship with the Corporation that, in the opinion of the Board of Directors, would interfere in the exercise of independent judgment as a Director. No officer or employee of the Corporation or its subsidiaries shall be qualified as an Independent Director. It is also presumed that no former officer or employee of the Corporation may qualify as an Independent Director, provided that this presumption is rebuttable upon an affirmative determination by the Board.
Number
of Directors. The Board’s philosophy is that smaller Boards are most effective. The Board currently consists of seven directors. Consistent with this philosophy, the Board shall consist of such number of Directors, not to exceed nine, as may be determined from time to time by resolution of the Board.
Committees. From time to time, the Board may want to form a new committee or disband a current committee depending upon the circumstances. The current committees are Audit, Compensation, Corporate Governance, Investment, Nominating Sub-Committee of the Corporate Governance Committee and Stock Compensation Sub-Committee of the Compensation Committee. Committee membership will consist only of Independent Directors. Audit Committee membership will consist only of persons meeting the requirements for independence of such Committee members as provided in applicable securities and stock exchange laws and standards.
Directors
Nominees
for the Election to the Board. The Nominating Sub-Committee of the Corporate Governance Committee shall recommend nominees to the full Board for annual elections of Directors. The Sub-Committee shall welcome input from all Directors and Shareholders.
Election of Directors. In an uncontested election of Directors, any nominee for Director who receives a greater number of votes "withheld" from his or her election than votes "for" such election (a "Majority Withheld Vote") shall promptly tender to the Board his or her resignation from the Board following certification of the shareholder vote. The Corporate Governance Committee shall consider the resignation offer and recommend to the Board whether or not to accept it. The Board will act on the Corporate Governance Committee's recommendation within 90 days following certification of the shareholder vote. In determining whether or not to recommend that the Board accept any resignation offer, the Committee will consider all factors deemed relevant by Committee members, including the stated reasons for shareholders "withhold" or "against" votes, whether the underlying cause or causes of the "withhold" or "against" votes are curable, the length of service and qualifications of such director, and such director's contributions to the Corporation. In considering the Committee's recommendation, the Board will consider the factors considered by the Committee and such additional information and factors the Board believes to be appropriate. Thereafter, the Board will promptly disclose its decision whether to accept the Director's resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a press release to be disseminated in the manner that Corporation press releases typically are distributed. The Board may also elect to delay acceptance of a resignation for a specified period to provide it with an opportunity to address the underlying shareholder concerns, to recruit a new Director or for any other reason it believes appropriate. To the extent that one or more Directors' resignations are accepted by the Board, the Nominating Sub-Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board. If the Board does not accept one or more such resignations, it may elect to address any stated reasons why shareholders "withheld" votes for the election of one or more Directors or take such other actions that the Board deems appropriate and in the best interests of the Corporation and its shareholders. Any Director who tenders his or her resignation pursuant to this provision shall not participate in the Corporate Governance Committee recommendation or Board action regarding whether to accept the resignation offer. If a majority of Committee members tender their resignations, then the remaining Independent Directors will consider such resignations and recommend action to the disinterested members of the Board.
Director
Compensation and Stock Ownership. From time to time, the compensation of non-employee Directors shall be reviewed by the Compensation Committee, which shall make recommendations to the full Board. The Board’s philosophy is that an ownership stake in the Corporation helps to align the interests of its members with the interests of the shareholders, and encourages all Board members to have and maintain an appropriate equity ownership in the Corporation.
Chief
Executive Officer Evaluation. The Compensation Committee shall be responsible for coordinating an annual evaluation of the Chief Executive Officer by the Independent Directors. The Independent Directors will also determine guidance for the Compensation Committee with respect to Chief Executive Officer’s compensation. The Chairman of the Compensation Committee shall be the liaison with the Chief Executive Officer.
Management
Succession. The Board shall coordinate with the Chief Executive Officer to ensure that a successor for emergencies is designated at all times and that a process governs long-term management development and succession. The Chief Executive Officer shall report to the Board annually about development of senior management personnel and succession plans, which shall be approved by the Board.
Outside
Corporate Board Memberships. The Chairman of the Board in coordination with the Chief Executive Officer shall set the agenda for each Board meeting, taking into account input and suggestions from members of the Board. In the event that the positions of Chairman of the Board and Chief Executive Officer are held by the same individual, the agenda shall be set by the Chief Executive Officer in coordination with the Chairman of the Corporate Governance Committee.
Board Operations
Board
Agenda. The Chairman
of the Board in coordination with the Chief Executive
Officer shall set the agenda for each Board meeting,
taking into account input and suggestions from
members of the Board. In the event that the positions
of Chairman of the Board and Chief Executive
Officer are held by the same individual, the
agenda shall be set by the Chief Executive
Officer in coordination with the Chairman of
the Corporate Governance Committee.
Executive
Meetings of Independent Directors. The Independent Directors shall meet in Executive Session two or three times each year. Such Executive Sessions will be chaired by the Chairman of the Board; provided that the Chairman of the Board is an Independent Director. If the Chairman of the Board is not an Independent Director, such Executive Sessions shall be chaired by the Chairman of the Corporate Governance Committee.
Access to Top Management. Board members are free to contact members of senior management at any time. Additionally, regular attendance and participation in Board meetings by senior management is encouraged as appropriate.
Board Evaluation. The Corporate Governance Committee shall be responsible for coordinating an annual evaluation by the Directors of the Board’s performance and procedures. This assessment should be of the Board’s contribution as a whole and specifically review areas in which the Board and/or management believes a better contribution could be made. Its purpose is to increase the effectiveness of the Board, not to target individual Board members.
Independent
Advice. The Board (or with the Board’s approval, a committee) may seek legal or other expert advice from a source independent of management, and the Corporation shall compensate such experts for their services. Generally, this would be with the knowledge of the Chief Executive Officer/Chairman of the Board. Nothing herein shall limit the authority of the Audit Committee to retain outside advisors to assist it in carrying out its duties, as specified in the Audit Committee Charter.
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