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Arkansas Best Corporation
Corporate Governance Guidelines
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Table Of Contents
- Introduction
- Board of Directors
- Board Composition
- Selection of Chairman and Chief Executive Officer
- Selection of Directors
- Election Term
- Retirement of Directors
- Expectations for Directors
- Commitment and Attendance
- Participation in Meetings
- Loyalty and Ethics
- Conflicts of Interest and Related Party Transactions
- Other Directorships
- Contact with Management
- Reliance on Management and Outside Advice
- Contact with Other Constituencies
- Stockholder Communication with the Board
- Trading in Company Securities
- Confidentiality
- Company Stock Ownership
- Meetings
- Board Meetings
- Executive Sessions
- Committees of the Board
- Standing Committees
- Management Succession
- Executive Compensation
- Board Compensation
Appendix A Director Independence
I. Introduction
The Board of Directors of Arkansas Best Corporation (the “Company”), acting on the
recommendation of its Nominating/Corporate Governance Committee, has developed and
adopted a set of corporate governance guidelines (the “Guidelines”) to promote the
functioning of the Board and its committees and to set forth a common set of
expectations as to how the Board should perform its functions.
II. Board of Directors
A. Board Composition
The composition of the Board should balance the following goals:
- The size of the Board is specified in the Company’s Bylaws and should facilitate
substantive discussions of the whole Board in which each director can participate
meaningfully, divided into three classes of directors of as nearly equal size as
possible. Beginning in 2012, the Board will be declassified and Directors will be
elected annually;
- The composition of the Board should encompass a broad range of skills,
expertise, industry knowledge, diversity of opinion and contacts relevant to the
Company’s business;
- A majority of the Board shall consist of Independent Directors as defined in
Appendix A.
- The Nominating/Corporate Governance Committee reviews and assesses
directors’ independence.
- The Lead Independent Director shall be appointed by the Board and preside over
executive sessions of Independent Directors, if the Chairman is not “independent”
or if otherwise necessary.
B. Selection of Chairman of the Board and Chief Executive Officer
The Board is free to select its Chairman and the Company’s Chief Executive Officer in
the manner it considers in the best interests of the Company at any given point in time.
These positions may be filled by one individual or by two different individuals.
C. Selection of Directors
Nominations. The Nominating/Corporate Governance Committee is responsible for
selecting, or recommending for the Board’s selection, the slate of director nominees for
election to the Company’s Board of Directors and for selection of nominees for director
between annual meetings of stockholders.
Criteria. A majority of the Independent Directors, or the Nominating/Corporate
Governance Committee, shall determine new nominees for the position of Independent
Director who satisfy the requirements of the NASDAQ Stock Market, Inc. and shall
consider other criteria including:
- Any special training or skill, experience with businesses and other organizations
of comparable size and scope;
- Experience with businesses or organizations that are particularly relevant to the
Company’s current or future business plans;
- Financial expertise;
- The candidate’s experience compared to the experience of the other directors;
- Sufficient time to devote to the responsibilities of a director;
- Freedom from conflicts of interest or legal issues; and
- The extent to which, in the Nominating/Corporate Governance Committee’s
opinion, the candidate would be a desirable addition to the Board.
The Nominating/Corporate Governance Committee shall periodically review the criteria
and modify them as appropriate.
Invitation. The invitation to join the Board should be extended by the Board itself via the
Chairman of the Board and CEO of the Company, together with an independent director,
when deemed appropriate.
Orientation and Continuing Education. Management, working with the Board, will
provide an orientation process for new Directors, including background material on the
Company, its business plan and its risk profile, and meetings with senior management.
Periodically, management educational sessions for Directors on matters relevant to the
Company, its business plan and risk profile. The Board encourages each Director to
participate in continuing education programs. The Nominating/Corporate Governance
Committee and other Directors may make recommendations to Directors regarding needs
for Continuing Education on subjects that would assist them in discharging their duties
including leading-edge corporation governance issues.
D. Election Term
The Board does not believe it should establish term limits. The absence of term limits
allows the Company to retain directors who have been able to develop, over a period of
time, increasing insight into the Company and its operation.
E. Retirement of Directors
On April 1, 2012, any Director who has reached the age of 75 shall submit his or her
resignation from the Board effective on the date of the 2012 annual meeting of
shareholders. Thereafter a Director reaching 75 years of age shall submit his or her
resignation from the Board effective on the date of the annual meeting of shareholders
following his or her 75th birthday.
F. Expectations for Directors
The business and affairs of the Company shall be managed by or under the direction of
the Board in accordance with Delaware law. In performing their duties, the primary
responsibility of the directors is to exercise business judgment in the best interests of the
Company and its shareholders. The Board has developed a number of specific
expectations of directors to promote the discharge of this responsibility and the efficient
conduct of the Board’s business.
1. Commitment and Attendance. All independent and management directors should make
every effort to attend meetings of the Board and meetings of committees of which they
are members. Members may attend by telephone infrequently when necessary. It is the
Company’s policy that all directors attend each annual meeting of its stockholders, except
when illness or other personal matters prevent such attendance.
2. Participation in Meetings. Each director should be sufficiently familiar with the
business of the Company, including its financial statements and capital structure, and the
risks and competition it faces, to facilitate active and effective participation in the
deliberations of the Board and of each committee on which he or she serves. Upon
request, management will make appropriate personnel available to answer any questions
a director may have about any aspect of the Company’s business. Directors should also
review the materials provided by management and advisors in advance of the meetings of
the Board and its committees and should arrive prepared to discuss the issues presented.
3. Loyalty and Ethics. In their roles as directors, all directors owe a duty of loyalty to the
Company. This duty of loyalty mandates that the best interests of the Company take
precedence over any interests of a director.
The Company has adopted a Code of Conduct, including a compliance program to
enforce the Code. Certain portions of the Code deal with activities of directors,
particularly with respect to transactions in the securities of the Company, potential
conflicts of interest, the taking of corporate opportunities for personal use, and competing
with the Company. Directors should be familiar with the Code’s provisions in these areas
and should consult with the Company’s counsel in the event of any issues.
4. Conflicts of Interest and Related Party Transactions. If a director develops an actual
or potential conflict of interest with the Company, he should immediately notify the Vice
President - General Counsel and Corporate Secretary or his designee of all material facts
and circumstances.
5. Other Directorships. The Company values the experience directors bring from other
boards on which they serve, but recognizes that those boards may also present demands
on a director’s time and availability and may present conflicts or legal issues. Directors
should advise the Chair of the Nominating/Corporate Governance Committee and the
CEO before accepting membership on other boards of directors or other significant
commitments involving affiliation with other businesses or governmental units.
6. Contact with Management. All directors are invited to contact the CEO at any time to
discuss any aspect of the Company’s business. Directors also have complete access to
other members of management. The Board expects that there will be frequent
opportunities for directors to meet with the CEO and other members of management in
Board and committee meetings and in other formal or informal settings.
Further, the Board encourages management to, from time to time, bring managers into
Board meetings who: (a) can provide additional insight into the items being discussed
because of personal involvement and substantial knowledge in those areas, and/or (b) are
managers with future potential that the senior management believes should be given
exposure to the Board.
7. Reliance on Management and Outside Advice. In performing its functions, the Board
is entitled to rely on the advice, reports and opinions of management, counsel,
accountants, auditors and other expert advisors. The Board shall have the authority to
retain and approve the fees and retention terms of its outside advisors.
8. Contact with Other Constituencies. It is important that the Company speak to
employees, institutional investors, analysts, press, customers and other outside
constituencies, with a single voice, and that management serve as the primary
spokesperson.
Any reports of concerns regarding accounting, internal auditing controls, or other
irregularities or concerns whether financial or otherwise are required to be brought to the
attention of the Chairman of the Audit Committee and certain executive officers,
including the General Counsel. These reports are confidential and may be anonymous if
made using the anonymous reporting hotline overseen by the Audit Committee. The
General Counsel will provide reports concerning hotline submissions and other concerns
at regularly scheduled Board meetings or sooner, if necessary.
9. Stockholder Communication with the Board. Company stockholders may
communicate with the Company’s Board of Directors, or any individual member of the
Board, by sending the communication as follows: Board of Directors (or Individual
Member’s Name), c/o Corporate Secretary, P.O. Box 10048, Fort Smith, AR 72917-
0048.
All communications to the Board, or an individual member, will be opened and reviewed
by the Corporate Secretary prior to forwarding to the Board or individual Board member.
This review will facilitate a timely review of any matters contained in the communication
if, for any reason the Board member is unavailable to timely review the communication.
10. Trading in Company Securities. Directors will comply with all applicable stock
trading regulations - Securities and Exchange Commission, Nasdaq Stock Market, and
State of Delaware - regarding their transactions in Company stock as well as the Company’s Insider Trading Policy.
11. Confidentiality. The proceedings and deliberations of the Board and its committees
are confidential. Each director shall maintain the confidentiality of information received
in connection with his or her service as a director.
12. Company Stock Ownership. In the interest of aligning the interests of the Company’s
Directors, executives and shareholders, Directors are subject to the Stock Ownership
Policy for Directors and Executives. The Policy requires Directors to own a minimum
number of shares as specified in the Policy in order to receive Company stock granted
under any Company award agreement.
III. Meetings
A. Board Meetings
The Board currently plans at least five meetings each year, with further meetings to occur
(or action to be taken by unanimous consent) at the discretion of the Board. The meetings
will usually consist of committee meetings and the Board meeting.
The agenda for each Board meeting will be prepared by the Office of the Corporate
Secretary in consultation with the Chairman of the Board, the CEO (if separate) and the
Lead Independent Director, if applicable. Management will seek to provide all directors
with an agenda and appropriate materials in advance of meetings, although the Board
recognizes that this will not always be consistent with the timing of transactions and the
operations of the business and that in certain cases it may not be possible. Each Board
member may suggest the inclusion of additional items on the agenda.
The Board will also review, from time to time, the Company’s long-term strategic
direction.
Materials presented to the Board or its committees should be as concise as possible,
while still providing the desired information needed for the directors to make an informed
judgment.
B. Executive Sessions
To ensure free and open discussion and communication among the independent directors
of the Board, the independent directors will have at least two regularly scheduled
executive sessions each year, and more frequently as necessary or desirable, in
conjunction with regularly scheduled meetings of the Board, at which only independent
directors are present. The Chairman (if eligible) or, otherwise, the Lead Independent
Director or a director of his selection will preside at the executive sessions.
IV. Committees of the Board
A. Standing Committees
The Company shall have at least the committees required by the rules of the NASDAQ
Stock Market, Inc. Currently the Audit Committee is required, and the Compensation
Committee and a nominations committee which the Company calls the
Nominating/Corporate Governance Committee, must conform to the requirements of
those rules. Each of these three committees must have a written charter satisfying the
rules of the NASDAQ Stock Market, Inc. The Audit Committee must also satisfy the
requirements of SEC Rule 10A-3.
All directors, whether members of a committee or not, are invited to make suggestions to
a committee chair for additions to the agenda of his or her committee or to request that an
item from a committee agenda be considered by the Board. Each committee chair will
give a periodic report of his or her committee’s activities on the Board.
Except as permitted by Nasdaq Rule 4350(c), each of the Nominations/Corporate
Governance, the Audit Committee and the Compensation Committee shall be composed
of directors who are not officers or employees of the Company or its subsidiaries (and
have not been officers or employees within the previous three years), who do not have
relationships which, in the opinion of the Board, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director, and who are
otherwise “independent” under the rules of Nasdaq Stock Market, Inc. The required
qualifications for the members of each committee shall be set out in the respective
committees’ charter. A director may serve on more than one committee for which he or
she qualifies.
B. Management Succession
The Nominating/Corporate Governance Committee makes recommendations to the Board
regarding succession planning for the Chief Executive Officer.
C. Executive Compensation
1. Evaluating and Approving Salary for the CEO. The Board, acting through a majority
of the independent directors meeting in executive session, or through action of the
Compensation Committee comprised solely of independent directors meeting in
executive session, evaluates the performance of the CEO and the Company against the
Company’s goals and objectives and determines the compensation of the CEO. This
determination is subject to the Company’s “Granting of Equity Based Compensation
Policy” and “Stock Ownership Policy for Directors and Executives”.
2. Evaluating and Approving Compensation of Management. The Compensation
Committee comprised solely of the independent directors evaluates and determines the
proposals for overall compensation policies applicable to, and compensation for,
executive officers. This determination is subject to the Company’s “Granting of Equity
Based Compensation Policy” and “Stock Ownership Policy for Directors and
Executives”. In the event that certain conditions lead to restatement of a financial
statement, an executive officer is also subject to the “Guidelines for Recoupment of
Incentive Compensation.”
The primary objectives of the Company’s executive compensation program are to:
- Attract and retain highly qualified executives;
- Motivate the Company’s leaders to work together as a team to deliver superior
business performance;
- Balance rewards between short-term results and the long-term strategic decisions
needed to ensure sustained business performance over time; and
- Ensure that the interests and risk tolerance of the Company’s leaders are closely
aligned with those of the Company’s stockholders.
D. Board Compensation
The Nominating/Corporate Governance Committee comprised solely of the independent
directors evaluates and recommends to the Board, proposals for overall compensation
policies applicable to, and compensation for, directors. Directors who are also employees
of the Company receive no additional compensation for serving on the Board. This
determination is subject to the Company’s “Granting of Equity Based Compensation
Policy” and “Stock Ownership Policy for Directors and Executives.” In the event that
certain conditions lead to restatement of a financial statement, a director is also subject to
the “Guidelines for Recoupment of Incentive Compensation.”
The primary objectives of the Company’s non-employee director compensation program
are to:
- Balance rewards between cash compensation and the long-term strategic
decisions needed to ensure sustained business performance over time; and
- Ensure that the interests of the Company’s Non-Employee Directors are closely
aligned with those of the Company’s stockholders.
Appendix A
Director Independence
The term “independent” is defined in accordance with the independence requirements of
the Nasdaq Stock Market, the Securities and Exchange Commission and Internal
Revenue Code. A director is deemed to be independent if he or she is not currently and
has not been for a period of three (3) years been an executive 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 Company Director.
Pursuant to Nasdaq Regulation 5605(a)(2), the following persons shall not be
considered independent:
- Employee provision — a director who is, or at any time during the past three years
was, employed by the Company or subsidiary of the Company;
- Payments provision — a director who “accepted” or who has a “Family Member”
who “accepted” any compensation from the Company in excess of $120,000
during any period of 12 consecutive months within the three years preceding the
determination of independence, with these exceptions:
- Compensation for board or board committee service;
- Compensation paid to a Family Member who is an employee (other than
an executive officer) of the company; or
- Benefits under a tax-qualified retirement plan, or non-discretionary
compensation.
“Family Member” includes a person’s spouse, parents, children and siblings, whether by blood,
marriage or adoption, or anyone residing in such person’s home.
“Accepted” includes the acceptance of payments by an Other Entity in which the Director or any
Family Member is a partner, a member or an officer such as a managing director occupying a
comparable position or executive officer, and that provides accounting, consulting, legal,
investment banking, financial advisory or other services or goods to the Company or its
subsidiaries.
- Family of executive officer provision — 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 as an executive officer;
- Business relationship provision — 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 a few limited situations;
- Interlocking directorate provision — a director of the issuer 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 issuer serve on
a compensation committee of such other entity; or
- Auditor relationship provision — 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 the past three years.
Summary of SEC additional Audit Committee Independence Requirements:
Audit Committee Independence Rule [Exchange Act Section 10A-3(b)(1)(ii)
“independence” requirements] – A member of an audit committee…may not other than in
his or her capacity as a member of the audit committee, the Board or any other Board
committee:
- Accept directly or indirectly any consulting, advisory, or other compensatory
fee from the issuer or any subsidiary…; or
- Be an “affiliated” person of the issuer or any subsidiary of the issuer.
"Affiliate" Definition [10A-3(e)(1)] –
- The term “affiliate” means a person that directly, or indirectly, controls, or
is controlled by, or is under the control with, the specified person.
- [Safe Harbor Rule] – A director will not be deemed an affiliate of the
Company if: (1) he owns 10% or less, beneficially, directly or indirectly of
any class of the issuer’s voting equity securities; and (2) he is not an
executive officer of the Company.
Under Section 162(m) of the Internal Revenue Code, as amended, a director is an outside
director if the director:
- is not a current employee of the Company;
- is not a former employee of the Company who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year;
- has not been an officer of the Company; and
- does not receive remuneration from the Company, either directly or indirectly, in
any capacity other than as a director.
Under SEC Rule 16b-3, a director who has a "Related Party Transaction" pursuant to SEC
Regulation S-K Item 404(a), is deemed to be an "employee director" and thus, not independent
for purposes of approving compensation.
A "Related Party Transaction" is defined as:
- A transaction, relationship, arrangement or series of related transactions;
- In which the Company is one participant; and
- A Company board director, director nominee, executive officer or immediate family
member is also a participant and who had, has or will have a direct or indirect material interest;
- In which the transaction amount exceeds $120,000; and
- Which occurred during or since the last fiscal year (or is currently proposed)
Approved by the
Arkansas Best Corporation Board of Directors
and its Nominating/Corporate Governance Committee
as of July 22, 2011.
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