CHS Corporate Governance Guidelines
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    CHS Corporate Governance Guidelines CHS Corporate Governance Guidelines Document Transcript

    • CHICO’S FAS, INC. CORPORATE GOVERNANCE GUIDELINES Introduction The Board of Directors (the “Board”) of Chico’ FAS, Inc. (the “Company”) has developed corporate governance guidelines to help fulfill its responsibility to the Company’s stockholders and provide it with the necessary authority and practices to review and evaluate the Company's business operations and to make decisions that are independent of the Company's management. The Board may review and revise these guidelines from time to time as necessary. Role of the Board The Board’s primary responsibility is to oversee the integrity and major business affairs of the Company, to determine the Company's mission, long-term strategy and objectives, and to manage the Company's major risks. In the course of carrying out their responsibilities, the directors are to exercise their business judgment and to act in a manner they reasonably believe is in the best interests of the Company and its stockholders and in a manner consistent with their fiduciary duties. The Board is also tasked with evaluating and directing implementation of company controls and procedures. Finally, the Board is responsible for the succession planning for the position of the Chief Executive Officer of the Company (“CEO”), periodically reviewing the succession plan and identifying potential successors. In fulfilling these responsibilities, directors may ask questions and conduct such investigations as they deem appropriate, and may reasonably rely on the information provided to them by the company’s senior executives and its outside advisors and auditors. The Board is authorized to delegate some of its responsibilities to committees of the Board. Composition and Qualifications of the Board of Directors (a) Size of the Board. As provided by the Company's Bylaws and by resolution of the Board, the current number of Board members can vary between three and twelve. The Corporate Governance and Nominating Committee and the Board will periodically evaluate the appropriate size of the Board and make any changes it deems appropriate, acting in accordance with the Company’s Bylaws. (b) Mix of Management Directors and Independent Directors. The Board believes that, as a matter of policy, at least 75% of the Board should be independent directors as defined under SEC and NYSE rules (“Independent” directors). In order for a nominee to be considered an Independent director, the Board must also affirmatively determine that the director has no material relationship with the Company or its subsidiaries. Page 1
    • Any director who is also an officer of the Company is considered a management director (“Management Director”). The Board may also consist of directors who are not officers of the Company but who are also not considered independent (these directors along with the Independent directors are considered “Non-Management” directors). The Board shall review annually the relationships that each director has with the Company. Following such annual review, only those directors who the Board affirmatively determines have no material relationship with the Company will be considered Independent directors, subject to additional qualifications prescribed under the listing standards of the NYSE or under applicable law. The Board has established the following guidelines to assist in making their independence determination: 1. A director shall not be independent if: (i) the director is employed by the Company or was employed by the Company at any time within the preceding three years; (ii) an immediate family member of the director is employed by the Company as an executive officer or was employed by the Company as an executive officer at any time within the preceding three years; (iii) the director received, during any twelve month period within the preceding three years, more than $100,000 in direct compensation from the Company, other than director and committee fees, pension, or other deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); (iv) the director is a current partner or employee of the Company’s then current independent internal or external auditor; (v) an immediate family member of the director is employed by the Company’s then current independent internal or external auditor and participates in such auditor’s audit, assurance or tax compliance (but not tax planning) practice; (vi) the director or an immediate family member of the director was, within the preceding three years (but is no longer), a partner or employee of the Company’s independent internal or external auditor and personally worked on the Company’s audit during such time; or (vii) the director or an immediate family member of the director is, or has been within the preceding three years, employed as an executive officer of another company where any of the Company’s then present executive officers at the same time serves or served on that other company’s compensation committee. 2. The following business or charitable relationships shall not be considered to be material relationships that would impair a director’s independence: (i) if a director is an executive officer or employee, or if the immediate family member of the director is an executive officer, of another company that does business with the Company and the annual sales to, or purchases from, the Company are less than the greater of $1 million or two percent of the consolidated annual gross revenues of the company for which he or she serves as an executive officer or employee; (ii) if a director is an executive officer of another company which is indebted to the Company, or to which the Company is indebted, and the total amount of either Page 2
    • company’s indebtedness to the other is less than one percent of the total consolidated assets of the company for which he or she serves as an executive officer; (iii) if a director is an officer of a charitable organization, and the Company’s discretionary charitable contributions to the organization are less than $1 million or two percent of that organization’s total annual charitable receipts; and (iv) if a director serves as a director or trustee of a charitable organization, and the Company’s discretionary annual charitable contributions to the organization do not exceed the greater of $200,000 or 5% of that organization’s total annual charitable receipts. (Any automatic matching of employee charitable contributions will not be included in the amount of the Company’s contributions for the purpose of items (iii) and (iv)). Items (iii) and (iv) above recognize the Board’s view that its members should not avoid volunteering as directors or trustees of charitable organizations and that the Company should not cease ordinary course contributions to organizations for which a director has volunteered. 3. For relationships the character of which are not included in the categories in paragraphs 1 and 2 above, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, shall be made by the directors who satisfy the independence guidelines set forth in paragraphs 1 and 2 above. 4. The Board shall annually review all business and charitable relationships of directors, and whether directors meet these categorical independence tests shall be made public annually. The Company shall make appropriate disclosure of the basis for any Board determination that a relationship was immaterial despite the fact that it did not meet the categorical standards of immateriality in paragraph 2 above. (c) Qualifications of Board Members. All Board members are expected to possess certain core competencies, some of which may include one or more of the following: experience in retail, consumer products, international business/markets, real estate, store operations, logistics, product design, merchandising, marketing, general operations, strategy, human resources, technology, media or public relations, finance or accounting, or experience as a chief executive officer or a chief financial officer. In addition to having one or more of these core competencies, Board member nominees are to be identified and considered on the basis of knowledge, experience, integrity, diversity, leadership, reputation, and ability to understand the Company's business. Nominees are to be screened to ensure each candidate has qualifications that compliment the overall core competencies of the Board and will help to create an outstanding, dynamic and effective Board. The screening process includes conducting a background evaluation and an independence determination. (d) Selection of Board Members. The Corporate Governance and Nominating Committee, has the responsibility to identify, screen, and recommend qualified candidates to the Board. Qualified new candidates are to be interviewed by the chair of the Corporate Page 3
    • Governance and Nominating Committee, by at least one of the other Independent directors, as well as by the Chief Executive Officer and/or the President of the Company. Certain other directors and members of management will interview each candidate as requested by the chair of the Corporate Governance and Nominating Committee. The selection of any person to fill a vacancy on the Board or to be nominated for election at a meeting of the Company’s stockholders shall be voted upon by the full Board. Training and Evaluation of the Board of Directors (a) Orientation for New Directors. The Company will provide access to appropriate orientation programs, sessions and/or materials for new directors of the Company for their benefit either prior to or within a reasonable period of time after their nomination or election as a director. This orientation will include written materials, meetings with key management, visits to Company headquarters and, to the extent appropriate, visits to other significant facilities and stores. All other directors are also invited to attend any such orientation sessions. (b) Performance Evaluation. The Board, led by the Corporate Governance and Nominating Committee, will at least once per year conduct a self-evaluation to determine whether the Board and its committees are functioning effectively. The full Board will discuss the evaluation to determine what action, if any, could improve Board and committee performance. (c) Continuing Education. Board members are encouraged to attend appropriate continuing education seminars or programs that would be beneficial to the Company and the directors' service on the Board. Board of Directors Guidelines (a) Retirement Age; Director Emeritus. Although the Board is not establishing a mandatory retirement age for its Non-Management directors, the Board believes that 75 may be an appropriate age for Non-Management directors to consider retirement. Accordingly, a Non-Management director who has turned 75 prior to the end of a fiscal year will meet with the Corporate Governance and Nominating Committee at least four months prior to the next Annual Meeting at which the director’s seat is next up for election to consider retirement from the Board and to discuss with the Board whether the Board wishes to consider appointment of such director to the capacity of a director emeritus upon the expiration of such director’s term of office. The designation is made only by the Board and is reserved for directors with the ability to make a unique contribution to the Board in the role of director emeritus. A director emeritus would serve at the pleasure of the Board, without compensation other than reimbursement of expenses. A director emeritus may be invited to attend regular board meetings but would have no vote on any Board matters. (b) Change of Status. Directors are expected to report changes in their primary business or professional status, including retirement, to the Chairman of the Board and the chair of Page 4
    • the Corporate Governance and Nominating Committee. In the event a Non-Management director experiences a significant change in his or her employment status, the director shall advise the Board and submit to the Board an offer letter of resignation, subject to Board acceptance. The Corporate Governance and Nominating Committee will consider the Non-Management director’s offer of resignation and will recommend to the Board the action to be taken. The Board shall act promptly with respect to each such letter of resignation and shall promptly notify the director concerned of its decision. Management directors are also expected to tender their resignation from the Board at the time they cease to be an executive officer of the Company. (c) Term Limits. There will be no specific term limits for directors, given the normal process of annual elections of Board members by the stockholders. Directors who have served on the Board for an extended period of time are in a position to provide valuable insight into the operations and future of the Company based on their experience with and understanding of the Company's history, policies, and objectives. The Board believes that, as an alternative to term limits, it can ensure that the Board continues to evolve and adopt new viewpoints through the evaluation and selection process described in these guidelines. (d) Stock Ownership. The Board encourages each board member to achieve within three (3) years of first being elected an ownership level in the stock of the Company worth at least three (3) times the annual base retainer then in effect pursuant to the Company’s Stock Ownership Guidelines. (e) Other Public Company Directorships. The Company does not have a specific policy as to the number of other public company boards a director may sit on, given that individual circumstances may vary. A director that is a member of the Audit Committee cannot sit on more than three public company audit committees, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Company’s Audit Committee. However, when a director has been invited to join another public company board, he or she is expected to inform the Chairman and the Chair of the Corporate Governance and Nominating Committee and consider the nature of and time commitment of such an appointment. Board members may not serve on boards of the Company's competitors, unless approved by the Board. The Corporate Governance and Nominating Committee considers these matters when evaluating and nominating directors for reelection. The Chairman, the Chief Executive Officer, the President, and the Chief Financial Officer must obtain approval from the Board to serve as a director on any other for-profit board. (f) Independent Advisors. The Board and each committee of the Board shall have the power to hire independent legal, financial, or other advisors at any time, as they deem necessary and appropriate to fulfill their board and committee responsibilities with due regard for cost, without the need to obtain the prior approval of any officer of the Company. The Secretary or Treasurer of the Company will arrange for payment of the invoices of any such third party. Page 5
    • (g) Board Access to Senior Management. Board members have complete access to the Company's management and employees. It is assumed that Board members will use judgment to ensure that contacts with management outside of Board meetings are not distracting to the business operations of the Company. Board members should also feel free to request the attendance at Board meetings of management or employees who can provide additional insight into items being discussed. Compensation of the Board of Directors (a) Board Compensation Review. The Company believes that compensation for Non- Management directors should be competitive and should encourage increased ownership of the Company’s stock through the payment of a portion of director compensation in Company stock, options to purchase Company stock, or similar compensation. The Compensation and Benefits Committee will periodically review the level and form of the Company’s director compensation, including how such compensation relates to director compensation of companies of comparable size, industry and complexity. Changes to director compensation must be submitted to the full Board for approval. (b) Director Compensation. A Non-Management Chair of the Board shall receive a base retainer of $80,000 per annum and all other Non-Management directors shall receive al base retainer of $40,000 per annum. All Non-Management directors shall also receive an attendance fee of $1,000 for each board meeting and each committee meeting attended, whether in person or by telephone, and an additional $1,000 for each additional day of any such meeting. Each Committee Chair receives an additional retainer of $10,000 per annum; except that the Chairs for the Audit Committee and Compensation and Benefits Committee shall receive an additional retainer of $20,000 per annum. The Lead Director, if there is one, receives an additional retainer of $20,000 per annum. In addition, pursuant to the 2002 Omnibus Stock and Incentive Plan, non-employee directors (i) receive stock options according to a pre-determined formula as follows: (1) each new non-employee director receives an option to purchase 10,000 shares upon appointment; and (2) each continuing non-employee director receives annually an option to purchase 10,000 shares immediately following the annual meeting of stockholders, and (ii) are eligible to receive restricted stock and/or additional stock options as determined by the Board from time to time. (c) Travel. All Non-Management directors are reimbursed for their travel expenses related to attending board, committee or Company business meetings. Alternatively, the Company can make the travel arrangements. (d) Discount. All directors and their immediate families are eligible to receive associate discounts on Chico’s, Soma Intimates, and White House|Black Market merchandise in accordance with the Company’s then existing employee discount for headquarters employees. (e) Insurance. The directors shall be entitled to have the Company purchase directors’ and officers’ liability insurance on their behalf and receive the benefits of indemnification and Page 6
    • exculpation to the fullest extent permitted by law, the Company’s charter and Bylaws and any indemnification agreements, as applicable. Board Committees (a) Existing Committees. The current committees are: (1) Audit; (2) Compensation and Benefits; (3) Corporate and Nominating Governance; (4) Merchant; and (5) Executive. The Audit, Compensation and Benefits, Corporate Governance and Nominating, and Merchant Committees are each composed entirely of independent directors. The Executive Committee is composed of Management and Non-Management directors. The Board will appoint Committee members and chairs, upon the recommendation of the Corporate Governance and Nominating Committee. (b) Audit. The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the integrity of the financial statements, compliance with legal and regulatory requirements, the independent auditor's qualifications and independence, the performance of the internal audit function and the performance of the independent auditor, and such other matters as formalized in the Audit Committee Charter. In particular, the Audit Committee is responsible for the hiring, oversight, and compensation of the independent certified public accountants that audit the Company’s financial statements, and for monitoring the effectiveness of the Company’s internal financial and accounting organization and controls and financial reporting. (c) Compensation and Benefits. The Compensation and Benefits Committee evaluates and determines compensation policies, including level and form, for all corporate and divisional officers and certain other employees, recommends compensation for Non- Management directors, advises the Board and senior management on policy and strategy regarding succession planning and the development and retention of senior executives and management teams, and handles such other matters as formalized in the Compensation and Benefits Committee Charter. (d) Corporate Governance. The Corporate Governance and Nominating Committee makes recommendations to the Board on all matters concerning corporate governance and directorship practices as formalized in the Corporate Governance and Nominating Committee Charter, including development of corporate governance guidelines, evaluation of the board, committees and directors, and identification and selection of new board nominees. (e) Executive Committee. The Executive Committee consults with and advises the officers of the Company in the management of its business and may exercise such powers of the Board as can be lawfully delegated by the Board. (f) Merchant Committee. The Merchant Committee consults with and advises the Company on matters concerning the Company’s products for each of its brands. Page 7
    • (g) Additional Committees. The Board may, from time to time, establish or maintain additional standing or single-purpose committees as it deems appropriate. The Board may delegate to such committees all necessary authority, to the fullest extent and as permitted by applicable laws and the Company’s Bylaws, as the Board sees fit. Board and Committee Meetings (a) Meeting Schedules and Agendas. Currently there are four to six regularly scheduled Board meetings during each fiscal year. Additional meetings may be scheduled as necessary. The Board may increase or decrease the number of regularly scheduled meetings as it deems reasonably appropriate. The chair of each committee, in consultation with the committee members and senior management, will determine the frequency and length of the committee meetings consistent with any requirements set forth in the respective committee’s charter. The Chairman, CEO, President, Lead Director, and corporate Secretary shall establish the agenda for each board meeting. The chair of each committee, in consultation with the appropriate members of the committee and management, will determine the agendas for the meetings of the committees. Each Board member is encouraged to suggest agenda items for Board and committee meetings in advance. (b) Strategic Planning Sessions. At least once each year, the Board and invited management employees meet to review and approve the company's overall strategic and long range plans as well as the strategic and long range plans of each of the corporate functions and brands. (c) Approval of Annual Budgets and Operating Plans. Senior management regularly updates the Board on its performance relative to the Company's budget and plan. The Board also approves the annual operating and financial plan for each fiscal year. (d) Distribution and Review of Materials; Staying Abreast. Detailed and updated financial and business information is distributed in writing to the Board every month. During those months when there is a scheduled Board or committee meeting, these materials are distributed approximately one week prior to the meeting along with written materials regarding each planned presentation. The presentation materials allow for proper preparation and consideration of the subject matter before the Board or committee meeting. Board members are expected to have read the material in advance of the meeting. On those occasions in which the subject matter is very sensitive or unavoidable time constraints do not allow for prior preparation of written materials, the subject will be presented at the meeting. In addition, directors should stay abreast of the Company’s business and markets, and as appropriate, attend events or take other actions they deem appropriate to enhance Chico’s business and their effectiveness as directors. (e) Attendance of Directors and Non-Directors at Board and Committee Meetings. Board members are expected to attend all meetings of the Board and committees on which they sit, in their entirety, to spend the time needed in preparation for such meetings and to meet as frequently as they deem necessary to properly discharge their responsibilities. In Page 8
    • the event a Board member is not able to attend a meeting in person, he or she may attend the meeting by videoconference or teleconference. As the Board deems appropriate, non- Board members who are employed by the Company may be invited to attend portions of each Board or committee meeting. The members of the Audit Committee shall set aside a portion of the meeting time at least twice a year to meet separately without any representative of management present. The members of the Compensation and Benefits Committee shall set aside a portion of the meeting time at least twice a year to meet separately without any representative of management present. (f) Meetings of Independent Directors. The Independent directors shall meet in regular executive sessions, without the presence of management. (g) Conflicts of Interest. With respect to any matter under discussion by the Board, directors must disclose to the Board any potential conflicts of interest they may have, and, if appropriate, refrain from voting on a matter in which they may have a conflict. (h) Boardroom Confidentiality. The Board believes that confidentiality is essential for an effective Board process. Each director has the responsibility to respect the confidentiality of all discussions that take place in the boardroom during all Board and Board committee meetings. Directors shall not engage in discussions with outsiders regarding matters discussed at Board or Board committee meetings unless specifically requested to do so by the Chief Executive Officer or the Board. Where it is necessary for independent directors to speak on behalf of themselves or the Company on matters discussed during Board or Board committee meetings, the Board shall designate one or more independent director as spokesperson(s). In all cases regarding suspected breaches of the obligation of boardroom confidentiality, the Board shall decide, with the advice of counsel, on an appropriate course of action. Leadership (a) Chairman and CEO Selection. The Board, taking into account the recommendation of the Corporate Governance and Nominating Committee and the Compensation and Benefits Committee, selects the CEO and Chairman in the manner that it determines to be in the best interests of the Company. (b) Lead Director at Independent Sessions. When the Board Chair is not an independent director, the Board endorses the role of a lead outside director, to be elected by the Independent Directors. The lead outside director (the “Lead Director”) shall serve as the focal point for outside directors regarding resolving conflicts with the CEO, or other outside directors, and coordinating feedback to the CEO on behalf of outside directors regarding business issues and board management. At every Independent session of the Board, the Lead Director will lead the session. The Lead Director shall be elected for a one-year term promptly following each annual meeting of the Board and Lead Directors may succeed themselves and there shall be no limit on the number of successive terms. Page 9
    • (c) Job Duties of Chairman, CEO, and other Officers. The Board shall develop and approve formal job descriptions for the Chairman, CEO, and brand/function heads. The performance of these officers shall be reviewed annually with respect to their stated duties and with respect to pre-determined company and divisional objectives. (d) Succession Planning. Periodically, the Compensation and Benefits Committee reports to the Board on succession planning matters. The CEO also reports periodically to the Board on succession plans for certain key officers and makes recommendations to the Board regarding the CEO's succession. Miscellaneous The Board, with the assistance of the Corporate Governance and Nominating Committee, as appropriate, shall periodically review these Corporate Governance Guidelines to determine whether any changes are appropriate. Page 10