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Wegener’s Board of Directors is elected by the stockholders to govern the affairs of the Company. The Board selects the Chief Executive Officer and approves the appointment of the senior executive management team, who collectively are charged with the conduct of the Company’s business.
The Board sets the direction of Wegener by reviewing and approving the Company’s strategies, financial objectives and operating plans and assuring compliance with all statutory requirements. The Board acts as an advisor to senior executive management, evaluates and assures its compliance with such strategic and operating plans and evaluates its overall performance. The Board also plans for management succession of the Chief Executive Officer, as well as other senior management positions.
To discharge its responsibilities, the Wegener Board of Directors has adopted the following guidelines on significant corporate governance issues.
Size, Composition, and Independence of the Board
1. Size of the Board
The Board periodically reviews its size and determines whether any changes are appropriate. However, regardless of the then existing number of members, the Board would be willing to adjust the size of the Board in order to accommodate the availability of an outstanding candidate or otherwise as may be needed to fulfill the Company’s corporate objectives.
2. Membership Qualifications and Board Balance
The Board, with input from the Corporate Governance and Nominating Committee (the “Governance Committee”), is responsible for periodically determining the appropriate skills, perspectives, experiences, and characteristics required of Board candidates. Nominees for the Board should be committed to enhancing long-term shareholder value and must possess a high level of personal and professional ethics, sound business judgment and integrity. The Board’s policy is to encourage selection of directors who will contribute to the Company’s overall corporate goals: profitability, responsibility to its shareholders, technology leadership, effective execution, high customer satisfaction and superior employee working environment. The Governance Committee may from time to time review the appropriate skills and characteristics required of Board members, including such factors as business experience, diversity, and personal skills in technology, finance, marketing, business, financial reporting and other areas that are expected to contribute to an effective Board. In evaluating potential candidates for the Board, the Governance Committee will consider these factors in the light of the specific needs of the Board at that time.
Each Board member is expected to ensure that other existing and planned future commitments do not materially interfere with the member’s service as a director and that he or she devotes the time necessary to discharge his or her duties to the Company.
The Governance Committee is responsible for periodically reviewing and modifying, as appropriate, these qualification guidelines.
3. Director Selection
The Board is responsible for selecting its members and nominating them for election by the stockholders and for filling vacancies on the Board. The Governance Committee will recommend to the Board nominees for election, based on the need for new Board members identified by the Committee, the Chairman or other Board members, as well as incumbent directors for re-election, as appropriate. In selecting individuals for nomination, the Committee will seek the input of the Chairman and will consider individuals recommended for Board membership by the Company’s stockholders in accordance with the Company’s Bylaws and applicable law.
The Governance Committee will evaluate all nominee candidates. The Governance Committee will determine if any Board members have relationships with preferred candidates who can help initiate contact with such candidates. The Governance Committee may, in its sole discretion, also use a third-party search firm to assist in identifying and contacting preferred candidates.
Prospective nominee candidates will be interviewed by the Chairman and at least one member of the Governance Committee. During the selection process, all members of the Board shall be given the opportunity to interview all prospective nominee candidates and will be informally kept informed of progress. The Governance Committee will meet to consider and approve final candidate(s) and seek Board endorsement of the selected candidate.
Once a candidate is selected to join the Board, the Chairman and/or the Chair of the Governance Committee will extend the invitation to join the Board on the Board’s behalf.
4. Independent Directors
The Board believes that a substantial majority of the directors should be independent and the Board adopts the definition of independence prescribed under the Nasdaq Marketplace Rules, Rule 4200(a)(15), as set forth on Exhibit A, and the Securities Exchange Act of 1934, as amended. The Board may amend this definition in the future; if it does, it will disclose the revised definition.
In addition, the Board may consider such other subjective considerations deemed relevant from time to time that may, in its discretion, be examined in ensuring that each director is free of any relationship or interest that would interfere with the exercise of independent judgment or the appearance of a lack of independence as a member of the Board or one of its Committees.
On an annual basis, on recommendation from the Governance Committee, the Board will determine whether each outside director meets the definition of independence set forth herein and will disclose its determination in the Company’s annual proxy statement.
5. Term Limits
The Board does not believe it should establish term limits. While term limits could help ensure fresh ideas, they also would force the Board to lose the contributions of directors who have developed an insight into the Company. This insight and continuity of directors is an advantage, not a disadvantage.
6. Retirement Age
The Board has no policy on the mandatory retirement of a director. The Board does, however, believe that any management director who ceases to be a member of management of the Company should retire from the Board effective at the end of his or her then current full term, unless he or she is re-nominated for election.
7. Change in Professional Responsibilities
A director who experiences a significant change in his or her business or professional affiliation or responsibilities should bring this change to the attention of the Board at her/his earliest opportunity. The Board does not believe that each non-employee director who retires from his or her business position or has a significant change in position or responsibilities should necessarily leave the Board. The Governance Committee will, however, review the continued appropriateness of Board membership under these circumstances and make a recommendation to the Board.
8. Conflicts of Interest
Each director will advise the Board of any situation that could potentially be a conflict of interest. The Board will ultimately determine, on a case-by-case basis, whether a conflict of interest exists.
Board Leadership
9. Chairman; Lead Independent Director
The Board will periodically appoint a Chairman. Both independent and management directors, including the Chief Executive Officer, are eligible for appointment as the Chairman.
The Board will select a Lead Director from among the independent directors serving on the Company’s Board. The Lead Director will act as a liaison between the non-management directors and the Company’s senior executive management and other constituencies, chair the executive sessions of non-management directors and consult with the Chairman on agendas for Board meetings and other matters pertinent to the Company and the Board.
Board Roles and Responsibilities
10. General Description of Board Responsibilities
The Board is the ultimate decision-making body of the Company except with respect to those matters reserved to its stockholders. The principal responsibilities of the Board are to lead the Company with respect to matters of corporate governance and to oversee Company operations and, in so doing, serve the best interests of the Company and its stockholders.
The Board approves the selection of the senior executive management team, which is charged with conducting the day-to-day affairs and business of the Company.
The duties and responsibilities of the Board are largely defined by Delaware corporate law, federal securities laws and regulations and the Nasdaq listing standards, however, the Board believes the following core responsibilities should be the focus of its priorities:
a) reviewing and approving the Company’s fundamental strategic, operating, financial and other corporate plans (including budgets, financings and capital expenditures), strategies and objectives and monitoring their implementation and results;
b) monitoring the Company’s operating results and financial condition;
c) reviewing and approving major corporate plans and actions;
d) understanding and assessing risks to the Company and monitoring the management of those risks; advising and counseling management regarding significant issues facing the Company;
e) selecting, evaluating and fixing the compensation of the CEO and executive officers;
f) overseeing CEO succession planning and management development;
g) overseeing the Company’s integrity and ethics and compliance with laws and financial reporting; and
h) performing such other functions as the Board believes appropriate or necessary, or as otherwise prescribed by applicable rules or regulations.
In addition, directors will receive periodic reviews of the Company’s business and may as appropriate arrange through the chief executive officer to visit Company facilities as part of their ongoing oversight of the Company and its operations.
11. Assessing the Board’s Performance
The Board believes that annual evaluations of the overall performance of the Board should be conducted. This is best accomplished, in the Board’s view, by the entire Board under the leadership of the Chair of the Governance Committee. The Governance Committee, with input from the other directors, is responsible for determining the performance criteria and process to be used for the evaluation and for establishing a plan for the implementation of such evaluation process following the adoption of these guidelines.
The Governance Committee recommends the use of the “Board Self-Evaluation Interview Guide” attached hereto as Exhibit B as a suggested format for the evaluation, and recommends that the directors be interviewed by a third party who is not a director of the Company, such person or persons to be designated by the Governance Committee.
The purpose of these evaluations is to enhance the effectiveness of the Board as a whole. Additionally, each Committee of the Board will conduct an annual evaluation of its performance and report the results of the evaluation to the Chair of the Governance Committee.
12. Oversight of Management Evaluation
The Compensation Committee will have oversight of the performance evaluations of the Company’s executive officers, including the Chief Executive Officer.
13. Evaluating the CEO’s Performance
The Board will set and evaluate the performance objectives for the Chief Executive Officer and review the performance of the Chief Executive Officer against such objectives at least annually. This evaluation will be conducted by the Compensation Committee, under the leadership of the Committee Chair, and in consultation with the other members of the Board.
The evaluation criteria and the results of the evaluation will be discussed by the Committee with the entire Board in an executive session without the presence of any inside directors. The Board will consider whether the Chief Executive Officer is providing the best leadership for the Company in the short- and long-term. The results of the review and evaluation will be communicated to the Chief Executive Officer by the Chair of the Compensation Committee.
The Board, in its discretion, may conduct this evaluation in conjunction with the Compensation Committee’s annual review and setting of the Chief Executive Officer’s compensation. The Compensation Committee will use the evaluation results in establishing compensation of the Chief Executive Officer, with a portion of his or her compensation to be tied to performance against the agreed upon objectives.
14. Succession Planning and Leadership Development
Each year, the Chief Executive Officer will report to the Governance Committee on succession planning and his or her recommendation as to a potential successor, along with a review of any development plans recommended for such individuals. The Governance Committee will make an annual report to the Board on succession planning, and the Board will work with the Committee to designate and evaluate potential successors to the Chief Executive Officer.
When the Governance Committee and the Board review management succession plans for the Chief Executive Officer, they will consider succession in the event of an emergency or retirement of the Chief Executive Officer. In addition, the Governance Committee, with input from the Chief Executive Officer and other members of management as appropriate, will periodically review the Company’s program for management development and succession planning for executive officers other than the Chief Executive Officer. The Board will also review succession candidates for executive officers other than the Chief Executive Officer and other senior managers as it deems appropriate.
15. Board Interaction with Press, Investors and Customers
The Board believes that in the normal course of operations and events management should solely speak for or on behalf of the Company. The Board believes that, absent extraordinary circumstances or as contemplated by Committee charters, unless specifically directed by the Board with the knowledge and assent of the Chief Executive Officer or the Lead Director, individual directors should:
(a) defer all press inquiries to management; and
(b) refrain from disclosure of material non-public information concerning the Company to investors, current or potential strategic business partners, or other third parties with whom the Company is or may be conducting business of any nature.
However, such communications engaged in from time to time by individual directors, at the request or with the advance knowledge of or in coordination with the Chief Executive Officer or the Lead Director, is appropriate. In engaging in such permitted communications directors will be mindful of their duty of confidentiality with respect to Company information and their duty of candor to disclose the nature of such communications to the Board.
The Board will give appropriate attention to written communications to the Board that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the Committee charters, the Chairman of the Board, or otherwise the Chairman of the Governance Committee shall, subject to advice and assistance from Company counsel, (1) be primarily responsible for monitoring communications from stockholders and other interested parties, and (2) contemporaneously provide copies or summaries of such communications to the other directors.
Director Compensation and Stock Ownership
16. Compensation Philosophy and Setting of Compensation
Respecting ownership of Company stock generally, Directors of the Company are encouraged to invest in the Company’s stock, subject to compliance with the Company’s Insider Trading Policy.
The Board believes that only cash and equity compensation should be provided to nonemployee directors. The Compensation Committee shall consult with appropriate external advisors and periodically review market data for director compensation to ensure that the compensation of directors is reasonable and competitive in relation to other similar companies.
The Compensation Committee, following consultation with the Chief Executive Officer, should make an annual recommendation of whether any changes in the director compensation package are desirable and the portion of the directors’ total compensation that should be provided in equity, e.g., stock options, stock grants or other awards of stock or stock units. The full Board shall review, discuss and approve any such recommendations. Further, the Board believes that the different components of director compensation should be disclosed in the Company’s annual proxy statement.
Additionally, the Board believes that except for compensation received for service on the Board or a Committee of the Board, a nonemployee director or any family member, affiliate or associate of a nonemployee director (each as defined in the NASD or SEC Rules) should receive no other compensation in any form, directly or indirectly, from the Company, unless an exception to this guideline is specifically approved in advance by the Board.
Director Development
17. New Director Orientation
The Company shall establish an orientation process for new directors which include background material, visits to Company facilities, and meetings with senior management to familiarize the directors with the Company’s strategic plan, key issues, corporate governance, Code of Conduct, and the senior management team. All other directors shall be invited to attend any orientation program. In addition, new members to a Committee will be provided information relevant to the Committee and its roles and responsibilities.
18. Continuing Director Education
The Board believes it is appropriate for directors, at their discretion, to have access to educational programs related to their duties as directors on an ongoing basis to enable them to better perform their duties and to recognize and deal appropriately with issues that arise. The Company will provide appropriate reimbursement funding for these programs up to a maximum of $2,500 (including all out-of-pocket expenses) per director, per year.
Meetings
19. Preparation and Attendance
Directors are expected to attend Board meetings and meetings of Committees on which they serve, and to spend the time needed as necessary to prepare for such meetings and to properly discharge their responsibilities.
20. Frequency and Length of Meetings
The Board, at the beginning of each year, will determine the frequency of meetings, taking into consideration the recommendations of management and Board members. The Board believes that at least four regular meetings per fiscal year are appropriate; however, the Board and each Committee will meet as frequently as needed for the directors to properly discharge their responsibilities.
The Chairman (and with respect to executive sessions, the Lead Director) will determine the place, time, and length of meetings and may, depending upon the circumstances, call additional Board meetings.
21. Meeting Agenda
The Chairman, in consultation with the Lead Director, will establish and circulate to all directors the specific agenda for each Board meeting, with each director being free to suggest items for inclusion on the agenda as well as raise at any Board meeting subjects that are not specifically on the agenda for that meeting.
22. Meeting Materials
Meeting materials, including presentations on specific subjects, will be sent to the directors in advance, except where the subject matter is too sensitive to be put on paper. The meeting materials should be readily understandable and concise, while still providing the necessary information to enable directors to make informed decisions. Where feasible, for regularly scheduled Board meetings the materials will be sent by electronic mail or overnight courier one week, but in no event later than three (3) days, in advance and preferably in a manner so as to give the directors a weekend over which to review the materials. For special or extraordinary meetings of the Board, where feasible, materials will be provided sufficiently in advance to permit review prior to the meeting.
23. Attendance of Senior Management at Meetings
The Board encourages the Chief Executive Officer to bring senior managers into Board meetings who can provide additional insight into items being discussed or who have future potential that the Chief Executive Officer believes should be given exposure to the Board.
24. Board Access to Senior Management and Information
Directors have full and free access to the Company’s senior executive management. In order to ensure operational efficiency, any individual meetings or contacts that a director wishes to initiate with senior executive management should be arranged through the Chief Executive Officer. The directors will use their judgment to ensure that any such contact is not disruptive to the Company’s business operations and will, to the extent not inappropriate, copy the Chief Executive Officer on any written communications between a director and an executive officer of the Company.
25. Retention of Independent Advisors
The Board and each standing Committee has the power to hire, at its discretion, independent legal, financial or other advisors as they may deem necessary to support it in fulfilling its responsibilities, without consulting with or obtaining the approval of any officer of the Company in advance. The retention of any such independent advisors by a committee shall be promptly communicated to the Chairman of the Board.
26. Executive Sessions
The Board will conduct an executive session of only independent directors not less than two times per fiscal year. All such meetings shall be chaired by the Lead Director. Independent directors may hold additional executive sessions from time to time, as desired. The format of these meetings will include, if necessary and appropriate to implement an action taken or decision made at such session, a discussion afterwards by the Lead Director of the executive session with the Chief Executive Officer and, to the extent there are matters to be minuted, the Secretary.
Committees
27. Number of Committees
Currently there are three standing Committees of the Board: Audit, Compensation and Incentive Plan, and Corporate Governance and Nominating Committee. From time to time, depending upon the circumstances, the Board may form a new Committee or disband a current Committee.
28. Assignment of Committee Members
The Board appoints members of the Committees on an annual basis. The Governance Committee, with consideration of the desires of individual directors, will recommend to the Board the assignment of directors to various Committees. Vacancies in the Committees will be filled by the Board, upon the recommendation of the Governance Committee.
In making assignments to the Committees, only independent directors may serve on the Audit Committee, the Compensation Committee, or the Governance Committee, and at least one member of the Audit Committee must have accounting or financial management experience, as defined by the U.S. Securities and Exchange Commission rules or as required under applicable Nasdaq Marketplace Rules or listing requirements. Additionally, a member of the Audit Committee may not sit on more than three other Audit Committees of other public companies, unless the Board determines that such commitments would not impair his or her effective service to the Company.
29. Committee Charters, Authority and Executive Sessions
Each Committee will have a written charter, which has also been approved by the Board. The charter may delegate, as appropriate, certain responsibilities to the Committee. Unless delegated to the Committee either in the Charter, the Bylaws or a resolution of the Board, each Committee shall make recommendations to the Board and the Board will consider and approve the recommendations. The Committee charters may be changed from time to time by approval of the Board.
Each Committee will meet in executive sessions as circumstances warrant. At the Committee’s discretion, outside advisors or members of management may meet with the Committee during these executive sessions.
Interpretation
30. Amendment and Interpretation
These Guidelines are in addition to and are not intended to change or interpret any federal or state law or regulation, including the General Corporation Law of the State of Delaware, or the Company’s Charter or Bylaws or any Committee charter reviewed and approved by the Board. The Guidelines are subject to modification from time to time by the Board.
To
Wegener Corporation
Board of Directors Corporate Governance Guidelines
Nasdaq Market Place Rules, Rule 4200(a)(15)
Definition of Independent director
“Independent director” means a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The following persons shall not be considered independent:
(A) a director who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company;
(B) a director who accepted or who has a Family Member who accepted any payments from the company or any parent or subsidiary of the company in excess of $60,000 during the current or any of the past three fiscal years, other than the following:
(i) compensation for board or board committee service;
(ii) payments arising solely from investments in the company’s securities;
(iii) compensation paid to a Family Member who is a non-executive employee of the company or a parent or subsidiary of the company;
(iv) benefits under a tax-qualified retirement plan, or nondiscretionary compensation; or
(v) loans permitted under Section 13(k) of the Act.
Provided, however, that audit committee members are subject to additional, more stringent requirements under Rule 4350(d).
(C) a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by the company or by any parent or subsidiary of the company as an executive officer;
(D) a director who is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the company made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:
(i) payments arising solely from investments in the company’s securities; or
(ii) payments under non-discretionary charitable contribution matching programs.
(E) a director of the listed company who is, or has a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the listed company serve on the compensation committee of such other entity; or
(F) a director who is, or has a Family Member who is, a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.
(G) In the case of an investment company, in lieu of paragraphs (A)-(F), a director who is an “interested person” of the company as defined in section 2(a)(19) of the Investment Company Act of 1940, other than in his or her capacity as a member of the board of directors or any board committee.
A “family member” is defined in Marketplace Rule 4200(a)(14) as a person’s spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home.
To Wegener Corporation Board of Directors Corporate Governance Guidelines
Board Self-Evaluation Interview Guide
1) What are the most pressing board priorities for the coming year?
2) What is your assessment of the conduct of the board’s functions and how the board can be improved?
a) Its strengths?
b) Its weaknesses?
c) How can it improve?
3) Does the board possess the right skills (and enough of each) to properly carry out its various responsibilities? If not, what skills does the board need?
4) What is your assessment of the effectiveness of the standing committees?
a) Audit/Finance
b) Compensation
c) Nominating and Corporate Governance
5) How can each of the standing committees better assist the board?
a) Audit/Finance
b) Compensation
c) Nominating and Corporate Governance
6) How can board and committee meetings be conducted more effectively?
a) Is the board focused on the most important issues? If not, what should they be?
b) Is the board sufficiently transparent in its processes? If not, where should improvements be made?
7) Is the process for selecting new members appropriate? If not, how should it be changed?
8) Are written materials distributed in a timely fashion? Are they adequate to enable the board to fulfill its responsibilities? If not, what improvements should be made?
9) How can the board achieve better collaboration with management?
10) Are there any other issues that you believe should be addressed by the board?
11) Any further comments?
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