tesoro Governance Guidelines


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tesoro Governance Guidelines

  1. 1. TESORO CORPORATION CORPORATE GOVERNANCE GUIDELINES The Governance Committee of the Board of Directors (the “Board”) of Tesoro Corporation (the “Company”) has recommended to the Board, and the Board has adopted, these Corporate Governance Guidelines to guide the Board. A. AUTHORITY AND RESPONSIBILITY All corporate authority resides in the Board as the representative of the shareholders. The Board delegates authority to management to pursue the Company’s mission. Management, not the Board, is responsible for managing the day-to-day operations of the Company and all external communication to investors, shareholders, the media, customers, etc. B. COMPOSITION OF BOARD OF DIRECTORS 1. Board Majority Non-Employee Directors The majority of the Board shall consist of independent directors. 2. Size Of The Board The Board should have a minimum of five members. However, the Board would be willing to increase its membership in order to accommodate outstanding candidates, but should have an objective to not exceed twelve members. 3. Board Membership Criteria The Governance Committee is responsible for reviewing with the Board on an annual basis the appropriate skills and characteristics required of Board directors in the context of the current makeup of the Board. This assessment should include issues of diversity, age, and skills, all in the context of an assessment of the perceived needs of the Board at that point in time. Board members should have a broad perspective, experience, knowledge, independence of judgment, and business backgrounds to bring different experiences and perspectives to the Board. 4. Lead Director The Governance Committee will recommend to the Board on an annual basis the appointment of a Lead Director. The Lead Director shall be an independent director and shall be responsible for the following: (a) Providing the Chairman of the Board with input on agendas for all Board and committee meetings. (b) Maintaining regular contact with the Chairman of the Board, President and Chief Executive Officer and acting as the principal liaison between the non-employee directors and the Chairman of the Board. (c) Setting the agenda for, presiding over, and leading deliberations at meetings of the non-employee directors. Revised – February 12, 2007 1
  2. 2. (d) Assisting in assuring compliance with the Corporate Governance Guidelines and recommending to the Governance Committee revisions to the policies. 5. Board Compensation Review The Governance Committee of the Board is charged with the responsibility to recommend to the Board all compensation plans for the Board. The Governance Committee review will be conducted periodically with input from the Compensation Committee in consultation with its independent compensation consultant. Changes in Board compensation, if any, should come at the suggestion of the Governance Committee, but with discussion and approval by the full Board. 6. Director Orientation And Continuing Education The Governance Committee is responsible for ensuring that new directors are provided material and information concerning the operations and philosophy of the Company and for the continuing education of directors. 7. Selection Of New Director Candidates The ultimate responsibility for selection of new director candidates resides in the Board. The screening process for that responsibility is delegated to the Governance Committee, which reviews candidates for election as directors and, as required, recommends a slate of directors for approval by the Board and election by the shareholders. In addition, the Governance Committee will periodically review and recommend the composition, organization and responsibilities of the Board and its committees. 8. Extending An Invitation To A Potential New Director To Join The Board The Chief Executive Officer and the Governance Committee or its delegate, will conduct preliminary interviews with candidates for nomination to the Board. The Governance Committee will then meet as appropriate to consider such candidates and a potential candidate will then be invited to meet the entire Board at a meeting. A formal invitation to join the Company as a Board director will be extended by the Chairman of the Board only after approval by the Governance Committee and the Board. C. DIRECTOR RESPONSIBILITIES 1. Attendance At Annual Meetings Each Director is expected to attend the annual meeting of the stockholders. 2. Attendance At Board Meetings Each director is expected to attend every meeting but, at a minimum shall attend at least 75 percent of the meetings of the Board and Committees on which such director serves, during each fiscal year. 3. Selection Of Agenda Items For Board Meetings The Company shall, prior to year end of each year, prepare and distribute to the Board a Master Agenda and schedule of meetings for the following year for approval by the Board. This Master Revised – February 12, 2007 2
  3. 3. Agenda will set forth an agenda of items to be considered by the Board at each of its specified meetings during the year. The Chairman of the Board, in consultation with the Lead Director, may adjust the agenda to include special items not contemplated on the annual Master Agenda. The Chairman of the Board and the Chief Executive Officer (if the Chairman is not the Chief Executive Officer) will establish the agenda for each Board meeting. As a general rule, directors who wish to have a major agenda item placed on an agenda for a Board meeting should notify the Chief Executive Officer. 4. Board Materials Distributed In Advance The Board must be fully informed in advance of all major proposals and shall have an opportunity to make a meaningful and deliberate contribution to the decision-making process. In pursuance of that policy, information and data that is deemed important to the Board’s understanding of the business should be distributed to the Board prior to the Board meeting at which such matters will be considered and the Board is expected to review the materials in advance. As a general rule, materials will be provided in advance, except in cases involving urgency or extreme confidentiality. 5. Executive Sessions Of Non-Employee Directors The non-employee directors should schedule an executive session at each regularly scheduled in- person Board or committee meeting. The Lead Director, in the case of Board meetings, or the committee chair will appoint a secretary of the executive session who will be responsible for recording the proceedings in the meeting minutes. 6. Coordination Of The Board’s Performance Evaluation The Governance Committee is responsible for coordinating annually a self-evaluation by the Board of its performance. 7. Regular Attendance Of Non-Directors At Board Meetings Members of management may be invited to Board meetings by the Chairman, when appropriate. Furthermore, the Board encourages management, from time to time, to bring managers into Board meetings who (i) can provide additional insight into the items being discussed because of personal involvement in these areas, and/or (ii) present managers with future potential that the senior management believes should be given exposure to the Board. D. DIRECTOR QUALIFICATION STANDARDS 1. Director Independence A majority of the Board and each member of the Audit, Compensation and Governance Committees are intended to be an independent, non-employee director. The term “independent, non-employee” director shall mean a director of the Company who is independent of management and free from any relationship with the Company or otherwise that, in the opinion of the Board of Directors, would interfere in the exercise of independent judgment as a director, and who is not an officer, employee, agent or affiliate (except as a director) of the Company, in compliance with the definition of an Revised – February 12, 2007 3
  4. 4. “independent” director in regulations promulgated by the SEC and listing standards issued by the New York Stock Exchange. 2. Directors Who Change Their Primary Affiliation Any director (including management directors) whose primary affiliation changes substantially after election to the Board will be expected to promptly submit a resignation as a director for consideration by the Board. 3. Conflicts Of Interest Each director shall disclose to the Board and other business and personal relationships that could create an appearance of a conflict of interest, even if there is no actual conflict. Each director shall update his or her curriculum vitae with any material new information, and in any event, no less frequently than annually. 4. Service On Other Boards No director shall serve on the board of directors of more than five (5) public companies (including the Company), and no member of the Audit Committee shall serve on an audit committee of more than four (4) public companies (including the Company). The Company’s Chief Executive Officer shall not serve on the board of directors of more than two (2) public companies, including the Board of the Company. 5. Retirement Unless specifically waived by the Board, all directors must retire at the next annual meeting after reaching the age of 75. E. BOARD OVERSIGHT OF MANAGEMENT 1. Formal Evaluation of The Chief Executive Officer The Governance Committee will annually initiate a formal evaluation of the Chief Executive Officer by all non-employee directors, and such evaluation should be communicated to the Chief Executive Officer and to the Board. The evaluation should have the purpose of reinforcing the Board’s confidence in the Chief Executive Officer and should be based on a variety of criteria, including performance of the business, accomplishment of long-term strategic objectives, development of management, etc. This evaluation will also be used by the Compensation Committee in the course of its deliberations when considering the compensation of the Chief Executive Officer. 2. Succession Planning The Chief Executive Officer shall report to the Governance Committee, and, subsequently to the Board on succession planning, no less frequently than annually. There should also be available, on a continuing basis, the Chief Executive Officer’s recommendation as to his successor should he be unexpectedly disabled. The Chief Executive Officer will keep the Board informed as to who is in charge of the Company’s affairs in the event he is temporarily incapacitated or in the event he is unable to be reached during an emergency. Revised – February 12, 2007 4
  5. 5. 3. Board Access to Senior Management And Independent Advice Directors have complete access to the Company’s management. The directors may also seek legal or other expert advice from a source independent of management at any time. It is assumed that directors will use their judgment to be sure that this contact is not distracting to the business operation of the Company and that a director shall report such contact to the Chief Executive Officer. F. COMMITTEES OF THE BOARD 1. Number of Committees The committees are Audit, Executive, Compensation, Environmental, Health & Safety, and Governance. There will, from time to time, be occasions when the Board may want to form a new committee or disband a current committee depending upon the circumstances. 2. Assignment and Rotation of Committee Members The Board shall appoint members of the committees on an annual basis. The Governance Committee is responsible for reviewing and recommending to the Board the composition, organization and responsibilities of the Board’s committees. The ultimate responsibility for determining eligibility and appointment to committees is that of the Board of Directors as a whole. Committee assignments are rotated periodically at about a five-year interval. Before a Board member can become chair of a committee, it is desirable that the member shall have served on the Board for at least one year. 3. Frequency and Length of Committee Meetings The chair of the committee, in consultation with committee members, will determine the frequency and length of the meetings of the committee. 4. Committee Agenda The chair of the committee, in consultation with the appropriate members of management and staff, will develop the committee’s agenda. Each committee will issue a schedule of agenda subjects to be discussed for the ensuing year at the beginning of each year (to the degree these can be foreseen). This forward agenda will also be shared with the Board. Revised – February 12, 2007 5
  6. 6. G. COMMUNICATION WITH SHAREHOLDERS AND EXTERNAL ENTITIES 1. Written Communication Between Board And Shareholders The Board believes that the shareholders should have the ability to send written communications to directors. The Board will establish, and the Governance Committee will administer, a policy that all written communications from shareholder be sent to the Chairman of the Board at the Company’s principal executive office, who will review all relevant communications with the Board. 2. Board Interaction with Bankers, the Press, Customers, etc. The Board believes that management speaks for the Company and all such interaction and requests should be referred to the appropriate member of management. H. MAJORITY VOTE In an uncontested election of directors (i.e. an election where the only nominees are those recommended by the Board), any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election (a “Majority Withheld Vote”) shall promptly tender his or her resignation to the Board following certification of the shareholder vote. The Governance Committee will promptly consider the resignation offer and a range of possible responses based on the circumstances that led to the Majority Withheld Vote, if known, and make a recommendation to the Board. The Board will act on the Governance Committee's recommendation taking into account the Governance Committee’s recommendation and will publicly disclose its decision regarding whether to accept the director's resignation offer, or, if applicable, the reason(s) for rejecting the resignation offer, in a Form 8-K or 10-Q furnished to the Securities and Exchange Commission within ninety (90) days from the date of the certification of the shareholder vote. The Governance Committee in making its recommendation, and the Board in making its decision, may each consider any factors or other information that it considers appropriate or relevant, including, without limitation, the stated reasons why shareholders “withheld”, or third parties recommended that shareholders withhold, votes for election from such director, the reasonableness and accuracy of the bases for such reasons and recommendation, the length of service and qualifications of such director, the director’s contributions to the Company, and the Company’s Corporate Governance Guidelines. If the resignation of a director tendering his or her resignation pursuant to this policy is accepted by the Board, then the Governance Committee will recommend to the Board whether to fill such vacancy or to reduce the size of the Board. Any director who tenders his or her resignation pursuant to this provision shall not participate in the Governance Committee recommendation or Board action regarding whether to accept the resignation offer. However, if each member of the Governance Committee received a Majority Withheld Vote at the same election, then the independent directors who did not receive a Majority Withheld Vote shall appoint a committee amongst themselves solely for the purpose of considering the resignation offers and recommend to the Board whether to accept them. Revised – February 12, 2007 6
  7. 7. This corporate governance policy will be summarized or included in each proxy statement relating to an election of directors of the Company. Revised – February 12, 2007 7