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(Effective Feb. 7, 2008)
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.
The Board of Directors has adopted these Corporate Governance
Guidelines as a framework for the governance of the Company. The
Nominating and Governance Committee reviews the Guidelines annually
and recommends changes to the Board of Directors as appropriate.
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; and
- Provide counsel and oversight on the selection, evaluation,
development and compensation of executive officers.
Directors
- Board Membership Criteria. Membership on the
Board should be confined to 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 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 Committee also recommends
to the Board candidates to be elected by the Board as necessary
to fill vacancies and newly created directorships.
- 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.
- 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.
- 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.
- 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 Chairman 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.
- 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.
- 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
will recuse themselves from any discussion or decision affecting
their business or personal interests.
- Stock Ownership and Retention Requirements.
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 with a market value of at least two times their annual
retainer. In addition, a portion of director annual fees are
paid into a deferred stock compensation plan to purchase deferred
shares that cannot be disposed of until the director leaves the
Board.
- 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
that has been accredited by Institutional Shareholder Services.
The Nominating and Governance Committee is responsible for oversight
of the orientation and continuing education program.
- 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.
- Meetings and Preparation. The Board holds
a minimum of six regularly scheduled meetings per year. Directors
are generally 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.
- 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.
- Executive Sessions. The independent directors
generally hold executive sessions at each regularly scheduled
meeting. The Presiding Director chairs the executive sessions.
- 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.
- Access to Employees. Directors have free and
open access to management and other employees.
- 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.
- 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
c/o The Clorox Company, attention Secretary, 1221 Broadway, Oakland
, CA 94612-1888.
The Secretary will review communications directed to the Board and will forward all communications determined to bear substantively on the business, management or governance of the Company to the addressee(s) as soon as practicable.
Committees of the Board
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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 should be independent directors except
for the Executive Committee, which will be chaired by the Chief
Executive Officer. Except for the Chief Executive Officer,
all members of the Executive Committee will be 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.
- 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 and the Company's independence 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.
- 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 management development and succession planning processes and approves compensation for executive management 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.
- Committee Charters. 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.
- Committee Agendas. The chair of each Committee,
in consultation with the Chairman, determines the schedules and
agendas for the Committee's meetings.
Evaluation of the Chief Executive Officer and Succession
Planning
- 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.
- 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
the Clorox Executive Committee. The Chief Executive Officer reports
on succession planning annually to the Management Development
and Compensation Committee.
- 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.
The Board has established the following criteria to be used in
determining whether a director has a material relationship with
the Company:
- 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,
interim CEO or other interim executive officer shall not disqualify
a director from being considered independent following that employment.
- 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 chief executive officer 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.
- 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.
- 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.
- 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.
- 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. |
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