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The Clorox Company
Board of Directors Governance Guidelines

General

The Board of Directors of The Clorox Company represents the interests of stockholders, as owners of the Company, in perpetuating a successful business, including optimizing long-term financial returns.  The Board is responsible for determining that the Company is managed in such a way as to foster this result.  This is an active, not a passive responsibility.  The Board has the responsibility to see that in good times, as well as difficult times, management is capably executing its responsibilities.  The Board’s responsibility is to oversee management’s operation of the Company’s business, to monitor the effectiveness of management policies and decisions, including the execution of its strategies, and to provide for management succession.

Board Oversight

To optimize long-term financial returns, the Board must:

• Oversee that the Company operates in a legal, ethical, and socially responsible manner and the Company maintains a Code of Conduct that complies with New York Stock Exchange requirements;

• Select, evaluate, and offer advice and counsel to the Chief Executive Officer and work with the Chief Executive Officer to develop effective measurement systems that will evaluate and determine the Company’s degree of success in creating long-term economic value for its stockholders;

• Review, approve and monitor fundamental financial and business strategies and major corporate actions;
  Oversee the Company’s capital structure and financial policies and practices;

• Assess major risks facing the Company and review options for their mitigation;

• Provide counsel and oversight on the selection, evaluation, development and compensation of executive officers; and

• Nominate directors and oversee effective corporate governance.

Directors

1. Board Membership Criteria.  The Board seeks as members those individuals who can, on the basis of their knowledge and experience, make valuable contributions to the overall conduct of the business.  The Nominating and Governance Committee is responsible for developing and recommending Board membership criteria to the Board for approval and periodically reviewing these criteria.  In assessing potential new directors, the Nominating and Governance Committee will consider individuals from various disciplines and diverse backgrounds.  Board candidates are considered based upon various criteria, including their broad-based business skills and experiences, prominence and reputation in their professions, global business and social perspective, concern for the long-term interests of the stockholders and personal integrity and judgment - all in the context of an assessment of the perceived needs of the Board at that point in time.  The ability of incumbent directors to contribute to the Board is considered in connection with the re-nomination process.  The Nominating and Governance Committee reviews the qualifications of Board candidates in light of the criteria approved by the Board and recommends candidates to the Board for election by the Company’s stockholders at the Annual Meeting of Stockholders.  The Nominating and Governance Committee also recommends to the Board candidates to be elected by the Board as necessary to fill vacancies and newly created directorships.  In addition, the Nominating and Governance Committee considers suggestions from stockholders regarding possible Board candidates that are submitted to the Nominating and Governance Committee.  Such suggestions, together with biographical and business experience information regarding the nominee, should be submitted to The Clorox Company, c/o Secretary; 1221 Broadway; Oakland, CA 94612-1888. The Nominating and Governance Committee evaluates candidates suggested by stockholders in the same manner as other candidates.    

2. Size and Composition.  The Nominating and Governance Committee makes recommendations to the Board regarding the size and composition of the Board.  The size of the Board should be limited to a number that enables it to operate effectively in managing the activities of the Board and its Committees.  Ideally, the Board should have 9 - 15 directors, unless in an unusual situation, the Board believes that the interests of the Company suggest temporary deviation from this range.

3. Independence.  The Board consists of a substantial majority of independent members.  An independent director is a director who meets the New York Stock Exchange definition of independence, as determined by the Board.  The Board has adopted the standards set forth in Appendix A to assist it in assessing the independence of directors.  The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Nominating and Governance Committee.

4. Board Leadership.  The Board believes that it is in the best interests of the Company and its stockholders for the Board to make a determination on whether to separate or combine the roles of Chairman and Chief Executive Officer based upon the Company’s circumstances.  Currently, the positions of Chairman and Chief Executive Officer are combined, and an independent director has been designated as the Presiding Director of the Company.  The duties of the Presiding Director include coordinating the activities of the independent directors and serving as a liaison between the Chairman and the independent directors.  In addition, the Presiding Director: (a) assists the Board of Directors and Company officers in promoting compliance with and implementation of the Corporate Governance Guidelines; (b) moderates the executive sessions of the independent directors and has the authority to call additional executive sessions as appropriate; (c) presides at Board meetings in the Chairman’s absence; (d) oversees information sent to the Board; (e) consults with the Chairman on meeting agendas and schedules for the Board; (f) is available for consultation and communication with major stockholders as appropriate; and (g) evaluates, along with the members of the Management Development and Compensation Committee, the performance of the Chief Executive Officer.

5. Retirement; Change in Principal Occupation.  A non-management director must retire at the Annual Meeting of Stockholders next following attainment of age 70.  A management director must resign or retire concurrently with resignation or upon retirement from active management at that director’s normal or early retirement date under the Company’s retirement plan.  Non-management directors must offer their resignation to the Chair of the Nominating and Governance Committee in the event of any significant change in their personal circumstances, including a change in their primary job responsibilities, so that the Board, through the Nominating and Governance Committee, can consider the action, if any, to be taken with respect to the offer of resignation.

6. Outside Board and Audit Committee Service.  A director should engage in discussion with the Chair of the Nominating and Governance Committee prior to accepting an invitation to serve on an additional public company board or on the audit committee of another public company.  Directors generally should not serve on more than four other public company boards, and members of the Company’s Audit Committee generally should not serve on more than two other public company audit committees.

7. Code of Conduct and Conflicts of Interest.  The Board expects all directors to act ethically at all times and to adhere to the Company’s Code of Conduct.  If an actual or potential conflict of interest arises for a director, the director shall promptly inform the Chair of the Nominating and Governance Committee.  If a significant conflict exists and cannot be resolved, the director should offer to resign.  All directors must recuse themselves from any discussion or decision affecting their business or personal interests.

8. Director Orientation and Continuing Education.  New directors receive an orientation about the Company and director responsibilities.  The Board also encourages Board members to receive continuing education with respect to their responsibilities.  The Nominating and Governance Committee is responsible for oversight of the orientation and continuing education program.

9. Director Compensation.  Only non-management directors receive compensation for serving on the Board.  Non-management directors receive an annual retainer.  Committee Chairs receive an increased retainer.  Directors receive a deferred stock unit grant annually, which stock units may not be sold until after a director leaves the Board.  New directors also receive initial awards of options to purchase Company stock when they join the Board.  Director compensation is reviewed at least annually by the Nominating and Governance Committee, with input from the Management Development and Compensation Committee.  The Nominating and Governance Committee makes recommendations to the Board with respect to any changes.  The Board believes that its total compensation should be set at approximately the median compensation for directors of comparable organizations.

10. Meetings and Preparation.  The Board holds a minimum of six regularly scheduled meetings per year.  Directors are expected to attend Board and Committee meetings and are expected to participate actively in the work of the Board and Committees to which they are appointed and to prepare for Board and Committee meetings.  All directors are expected to attend the Annual Meeting of Stockholders.

11. Agendas and Information.  Information relevant to the issues to be considered at Board and Committee meetings generally is distributed in writing to directors before meetings, unless timing or the sensitivity of information dictates that information be presented only at a meeting.  The Chairman, in consultation with the Presiding Director, establishes the agenda for each Board meeting.  Directors are encouraged to suggest the inclusion of items on the agenda.  Directors are also free to raise subjects at a Board meeting that are not on the agenda for that meeting.

12. Executive Sessions.  The independent directors generally hold executive sessions at each regularly scheduled meeting.  The Presiding Director chairs the executive sessions.

13. Board Evaluations.  The Board annually conducts a self-evaluation of its performance.  The Audit, Nominating and Governance, Management Development and Compensation and Finance Committees conduct annual self-evaluations to assess their performance.  The Nominating and Governance Committee is responsible for oversight of the self-evaluation process.

14. Access to Employees.  Directors have free and open access to management and other employees.

15. Access to Outside Advisors.  The Board has the authority to retain such outside counsel, experts and other advisors as it determines necessary to conduct its duties.  Each of the Audit, Nominating and Governance, Management Development and Compensation and Finance Committees has similar authority to retain outside advisors as it determines necessary to conduct its duties.

16. Director Communications.  The Presiding Director of the Board and the Chief Executive Officer are responsible for establishing a process for the Board to receive communications from the Company’s stockholders, customers, employees, communities, suppliers, creditors and corporate partners.  Directors are not precluded from meeting with such parties, but any such meetings generally should be held with management present.  Stockholders, employees and other interested parties may direct communications to individual directors, to a Committee of the Board or to the Board of Directors as a whole, by addressing the communication to the named individual, the Committee or to the Board as a whole do The Clorox Company, attention Secretary, 1221 Broadway, Oakland , CA 94612-1888.  The Secretary will review communications directed to the Board and will forward to the addressee(s) as soon as practicable all communications determined to bear substantively on the business, management or governance of the Company.

Committees of the Board

1. Role; Committee Assignments.  The Board has established Committees of the Board and has delegated important responsibilities to them.  Committees of the Board may also appoint subcommittees from time to time.  All independent directors should take an active role in Committee activities with each serving on at least one and, in most cases, two or more Committees.  The Nominating and Governance Committee makes recommendations to the Board regarding Committee appointments and Chairs based on the interest and expertise of each director.  Committee members and Chairs are appointed by the full Board.

   All Committee Chairs are independent directors except for the Chair of the Executive Committee, who is the Chief Executive Officer.  Except for the Chief Executive Officer, all members of the Executive Committee are independent directors.  Participation on the various Committees should be rotated from time to time.  All directors are invited to attend all or part of any Committee meeting.

2. Standing Committees.  At present, the Board has the following Committees:
   • Executive Committee.
   • Audit Committee.
   • Finance Committee.
   • Management Development and Compensation Committee.
   • Nominating and Governance Committee.

The Audit Committee, the Management Development and Compensation Committee, the Nominating and Governance Committee and the Finance Committee consist entirely of directors who meet the New York Stock Exchange definition of independence, as determined by the Board in accordance with the standards set forth in Appendix A.  In addition, directors who serve on the Audit Committee must meet additional, heightened independence and qualification criteria applicable to audit committee members under the New York Stock Exchange listing standards.

3. Responsibilities.  The responsibility and authority of the Committees of the Board is set forth in their respective charters.  In general, the areas of responsibility for each committee are as follows:

a.   Executive Committee — Acts for the Board in certain matters when the full Board cannot be convened.
b.   Audit Committee — Oversees the integrity of the financial statements, the Company’s accounting and financial controls, including the independent and internal auditors, and risk management activities.
c.   Finance Committee — Oversees and makes recommendations to the Board with respect to the Company’s major financial policies and actions, including capital structure and borrowing.
d.   Management Development and Compensation Committee — Oversees the development of executive management and approves compensation for executive officers and various benefit plans for the Company as a whole.
e.   Nominating and Governance Committee — Oversees the Company’s corporate governance practices, director nominations, and Board evaluation.

4. Committee Charters and Reports.  Each of the Audit, Management Development and Compensation, Nominating and Governance, and Finance Committees assesses the adequacy of its charter annually and recommends changes to the Board as appropriate.  All Committees report regularly to the full Board with respect to their activities.
5. Committee Agendas.  The Chair of each Committee, in consultation with the Chairman, determines the schedules and agendas for the Committee’s meetings.

Stock Ownership and Retention

1. Directors.  The Board believes that the linkage of directors’ interests to those of stockholders is strengthened when directors are also stockholders.  The Board therefore requires that directors, within three years of being first elected to the Board, own Company stock or deferred stock units with a market value of at least two times their annual retainer.
2. Executive Officers.  To foster a vital long-term partnership between management and stockholders, executive officers are expected to acquire significant equity ownership in the Company.  The target ownership guidelines for executive officers have two components.  The minimum ownership levels are the equivalent of four times base annual salary for the Chief Executive Officer and three times base annual salary for the other executive officers.  In addition, executive officers are expected to retain a certain percentage of shares that are obtained upon the exercise of options or the release of restrictions on equity-based awards, after satisfying any applicable tax withholding.  The Chief Executive Officer is expected to retain 75% of shares acquired until the minimum ownership level is met and then is expected to retain 50% of shares acquired until retirement or termination.  Other executive officers are expected to retain 75% of shares acquired until minimum ownership levels are met and thereafter are expected to retain 25% of shares acquired for one year after receipt.

Evaluation of the Chief Executive Officer and Succession Planning

1. Chief Executive Officer Evaluation.  The Presiding Director is responsible, with the Management Development and Compensation Committee, for conducting an annual evaluation of the Chief Executive Officer’s performance.  That evaluation considers the Chief Executive Officer’s achievement with respect to a number of financial and non-financial performance goals that are established at the beginning of each fiscal year.  

2. Ordinary-Course Succession Planning.  The Board is responsible for planning for succession of the Chief Executive Officer and for overseeing succession planning for members of management comprising the Clorox Executive Committee.  The Chief Executive Officer reports on succession planning annually to the Management Development and Compensation Committee.

3. Emergency Succession Planning.  The Presiding Director and the Chief Executive Officer make available to the Board on a continuing basis their recommendation as to a successor for the Chief Executive Officer in the event of an unexpected disability or inability to perform the duties of this position.

Appendix A

Independence

The Board reviews annually, or when called for under the circumstances, any relationships that directors or nominees have with the Company and makes an affirmative determination regarding the independence of each director.  Only those directors whom the Board affirmatively determines have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) are considered independent.

1. A director will not be deemed to be independent if the director is, or has been within the preceding three years, an employee of the Company, or an immediate family member is, or has been within the preceding three years, an executive officer of the Company, provided, however, that employment as an interim Chairman or interim CEO or other interim executive officer shall not disqualify a director from being considered independent following that employment.

2. A director will not be deemed to be independent if, during any 12-month period within the preceding three years, the director or an immediate family member received more than $100,000 in direct compensation from the Company, other than director and committee fees, pension or other forms of deferred compensation for prior service (provided that such compensation is not contingent in any way on continued service), compensation for former service as an interim Chairman or interim CEO or other interim executive officer, compensation received by an immediate family member for service as an employee (other than an executive officer) of the Company, or dividends on Company stock beneficially owned by the director.

3. A director will not be deemed to be independent if (i) the director, or an immediate family member is a current partner of the firm that is the Company’s independent registered public accounting firm; (ii) the director is a current employee of such firm; (iii) an immediate family member of the director is a current employee of such firm who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was within the preceding three years (but is no longer) a partner or employee of such firm and personally worked on the Company’s audit within that time.

4. A director will not be deemed to be independent if, within the preceding three years: (i) the director or an immediate family member is or was employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or served on that company’s compensation committee; or (ii) the director is a current employee, or an immediate family member is a current executive officer, of another company that has made payments to or received payments from the Company for property or services that, in any of the preceding three fiscal years, exceeded two percent or $1 million, whichever is greater, of such other company’s consolidated gross revenues.

5. A director may be considered independent notwithstanding that the director owns, or is a partner, stockholder, officer, director or employee of, an entity that owns not more than 30% of the outstanding stock of the Company unless the director or the entity owning the Company’s stock has a relationship with the Company that, under paragraphs 1 through 4 above or otherwise, precludes a finding of independence.

6. A director will not be deemed independent if the director serves, or an immediate family member serves, as an executive officer of a tax exempt organization that received contributions from the Company and its Foundation, in any single fiscal year within the preceding three years, more than the greater of $1 million or 2% of such organization’s consolidated gross revenues.

For purposes of these criteria, “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone, other than domestic employees, who shares such person’s home.