Corporate Governance Guidelines
Corporate Governance Guidelines
|Corporate Governance Guidelines|
General Dynamics is a Delaware corporation and as such, the Company’s business and affairs are managed by or under the direction of its Board of Directors, which is elected by the shareholders. The basic responsibility of the directors is to exercise their business judgment and act in what they reasonably believe to be the best interests of the Company and its shareholders. The day-to-day business and affairs of the Company are conducted by its employees and officers, under the direction of the chief executive officer (CEO) and the oversight of the Board.
Board Interaction with Stakeholders. The Board believes that as a general matter management speaks for the Company, but recognizes that individual Board members may, from time to time, meet or otherwise communicate with outside constituencies that are involved with the Company. In those instances, however, it is expected that directors will do so only with the prior knowledge and concurrence of senior management.
The Nominating and Corporate Governance Committee considers and makes recommendations to the Board concerning the appropriate size and composition of the Board, including the appropriate characteristics and experience required of new Board members in the context of the current composition of the Board. Shareholders may propose nominees for election in accordance with the requirements and procedures set forth in the Company’s bylaws. The Board proposes a slate of nominees to the shareholders for election to the Board at the annual meeting of shareholders. Between annual shareholder meetings, the Board may appoint directors to serve until the next annual meeting.
Qualifications. In assessing potential new directors, the Nominating and Corporate Governance Committee considers the character, background and professional experience of candidates. Each director or nominee should possess good judgment and an inquiring and independent mind. The criteria include relevant professional experience and expertise (including prior government service and business, financial and technical expertise) and familiarity with the issues affecting defense and aerospace businesses. All nominees must possess a reputation for the highest personal and professional ethics, integrity and values. The Committee will also carefully consider any potential conflicts of interest.
Directors must be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time. Directors should offer their resignation in the event of any significant change in their personal circumstances, including a change in their principal employment. Whether the resignation is accepted or rejected is a matter for consideration by the remaining members of the Board.
Unsuccessful Incumbent Directors. An incumbent director who fails to receive a majority of the votes cast in an election that is not a Contested Election (as defined in the Company's Bylaws) and who tenders his or her resignation in writing pursuant to the Company's Bylaws will remain active and engaged in Board proceedings while the Nominating and Corporate Governance Committee and the Board decide whether to accept or reject such resignation, or whether other action should be taken; provided, however, such incumbent director will not participate in any proceedings by the Nominating and Corporate Governance Committee or the Board regarding whether to accept or reject such director's resignation, or whether to take other action with respect to such director.
To be considered independent under the NYSE rules, the Board must determine that a director does not have any direct or indirect material relationship with General Dynamics. The Board has established the following standards to assist it in determining director independence in accordance with the NYSE rules (including the commentary to the NYSE rules). An “independent director” will mean a director who:
For purposes of these independence standards, the term “the Company” includes any subsidiary in a consolidated group with the company. The term “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.
For relationships not covered by the independence standards above, the determination of whether a relationship is material, and therefore whether the director is independent, will be made by the directors who satisfy the independence standards set forth above and the basis for the determination will be explained in the Company’s annual proxy statement. Any determination by the Board that a director is independent despite the fact that the director does not meet the independence standards set forth above will also be explained in the Company’s annual proxy statement.
Each independent director will promptly notify the Corporate Secretary in the event that his or her circumstances change in any manner that may affect the Board’s independence determination.
Service on Other Boards. Directors may not serve on more than four other public company boards in addition to the Company's Board. Members of the General Dynamics audit committee will not serve on the audit committee of more than two other public companies. The CEO may not serve on the board of a company for which a General Dynamics independent director serves as an officer. Directors should notify the Corporate Secretary prior to accepting an invitation to serve on the board, audit committee or compensation committee of another public company to ensure there are no conflicts of interest or other issues.
Director Retirement. Directors are not subject to term limits. With respect to director retirement age, it is the Company’s general policy, as reflected in its Bylaws, not to nominate individuals for election to its Board of Directors who have reached the age of 72 as of the scheduled date of the respective annual meeting, not taking into account any adjournment or postponement thereof. Individuals over the age of 72 may stand for election as directors only with the approval of the Nominating and Corporate Governance Committee and a two-thirds vote of the directors then in office and for circumstances of significant benefit to the Company that will be enumerated in the Company’s proxy statement. In no event shall a director stand for election beyond the age of 75.
Former Chief Executive Officer’s Board Membership. When a CEO resigns or retires from active management of the Company, he or she must submit his or her resignation from the Board for consideration. Whether the resignation is accepted or rejected is a matter for consideration by the Board.
Chairman of the Board. The Company’s bylaws provide that directors shall elect a Chairman from among the directors. The Company’s policy as to whether the roles of CEO and Chairman should be separate is to adopt the practice which best serves the Company’s needs at any particular time.
Lead Director. The Board will select a lead director from among the independent directors. The lead director will be selected annually by a majority of the independent directors upon recommendation from the Nominating and Corporate Governance Committee. The lead director’s authority and responsibilities are as follows:
The selection of a lead director facilitates communication among the directors or between any of them and the Chairman. Accordingly, the directors are encouraged to continue to communicate among themselves and directly with the Chairman.
Board Meetings. The Board believes that the number of scheduled Board meetings may vary with circumstances and that special meetings should be called as necessary. The Board of Directors believes that as a general matter not fewer than seven scheduled meetings per year is appropriate. The Board will meet more often if necessary. Annually, the Board conducts a three-day meeting with senior management to review General Dynamics’ strategic plans, goals and objectives. Directors are expected to attend all scheduled Board and committee meetings and the annual meeting of shareholders.
Meetings of Non-Management Directors. Executive sessions of only non-management directors are regularly scheduled in connection with each in-person Board meeting. The lead director acts as chair at such meetings. The non-management directors may meet without management present at such other times as requested by any non-management director.
Meeting Agendas. The Chairman and the lead director agree to a preliminary agenda for each Board meeting. Any director may request items to be included on the agenda, and any director may raise at any Board meeting subjects that are not on the agenda for that meeting. The Corporate Secretary maintains a list of recurring agenda items and the timing of such agenda items throughout the year. To the extent practical and appropriate, the meeting agenda and information materials relating to the agenda issues will be provided to the directors before each scheduled Board or committee meeting. Directors may make suggestions for agenda items, or additional meeting materials, to the Chairman, the lead director, or appropriate committee chair at any time.
Director Orientation. The general counsel and the chief financial officer will be responsible for providing an orientation for new directors, and for periodically providing materials or briefing sessions for all directors on subjects that would assist them in discharging their duties. Each new director will, within six months of election to the Board, receive a series of in-person briefings by senior management regarding the Company's business operations; operating plans; significant financial, accounting and risk-management matters; corporate governance; investor relations; and its key policies and practices. Additionally, the new director will receive briefings on the responsibilities, duties and activities of the committee(s) on which the director will initially serve.
Self-Assessment. The Board and each of the committees will perform an annual self-assessment. The self-assessment process is led by the Nominating and Corporate Governance Committee. Assessments will be distributed each November. Each December, the directors will return their assessments of the effectiveness of the Board and the committees on which they serve. The individual assessments will be organized and summarized by the legal department of the Company. The Board and each committee that has a meeting in February will discuss the self-assessment responses in February. The Finance and Benefit Plans Committee will discuss the self-assessment responses in March.
Access to Management, Company Information and Independent Advisors. The Company will provide each director with free and complete access to all members of management and employees of the Company and to information about the Company and its operations. The Board and its committees will have the right at any time to retain independent outside financial, accounting, legal or other advisors, at the Company's expense, to assist in their duties to the Company and its shareholders.
Board Committees. The Board has established the following committees to assist the Board in discharging its responsibilities:
The current charters of these committees are published on the General Dynamics website, and will be mailed to shareholders on written request. The committee chairs report the highlights of their meetings to the full Board following each meeting of the respective committees.
Compensation of the Board. The Compensation Committee, which is composed entirely of independent directors, has the responsibility for recommending to the Board the level and form of compensation and benefits for directors. In discharging this duty, the Compensation Committee is guided by best practices and emerging trends in director compensation, and director compensation is benchmarked against industry peer groups and other companies with comparable revenue. Additionally, the Board believes that compensation should align directors’ interests with the long-term interests of shareholders. The Compensation Committee believes these goals will be served by providing a significant portion of a director’s annual retainer in equity. Directors that are officers or employees of the Company do not receive any additional compensation for their service as directors. The Compensation Committee reviews director compensation and benefits annually.
Stock Ownership Guidelines for Directors. The Board believes that each director should develop a meaningful ownership position in the Company. In furtherance of this belief, the Board has adopted stock ownership guidelines for non-management directors. Each non-management director is expected to own at least 4,000 shares of common stock of the Company. Directors are expected to achieve the target ownership threshold within five years.
Annual Compensation Review of the CEO and Other Officers. General Dynamics' compensation program is designed to reward individual and Company-wide performance and to create incentives for both strong operational performance in the current year and for the long-term benefit of the Company, thereby closely aligning the interests of management with the interests of shareholders. The Board of Directors annually reviews and approves business unit and business group operating goals and approves the Company's operating plan for the year. Throughout the year, the Board reviews and monitors company performance as compared to the operating plan through a series of financial and operating reviews given by the Chief Financial Officer and the Executive Vice Presidents. In February and March of each year the Compensation Committee reviews the performance of the CEO and the Company's other officers against the operating goals and plan. Through the use of survey data and a review of individual, Company, and, where applicable, business group or business unit performance, the Compensation Committee makes compensation determinations for the CEO and the other officers of the Company.
Loans to Directors and Officers. The Company will not make any personal loans or extensions of credit to directors or executive officers.
Succession Planning. The Compensation Committee reviews and monitors succession plans for the CEO and the Company’s other executive officers. To assist the Compensation Committee, the CEO reports at least annually to the Compensation Committee with an assessment of senior executives and their roles in the Company’s succession plans. The CEO also reports at least annually to the Board with an assessment of individuals who could be promoted to senior management positions, including a review of the Company’s management development activities.
Ethics and Conflicts of Interest
Conflicts of Interest. If an actual or potential conflict of interest arises for a director, the director will promptly inform the CEO, the chair of the Nominating and Corporate Governance Committee, or the Corporate Secretary. All directors will recuse themselves from any discussion or decision affecting their personal, business or professional interests. The Board will resolve any conflict of interest question involving the CEO, and the CEO will resolve any conflict of interest issue involving any other officer of the Company.
Receipt of Concerns or Complaints
Accounting Concerns or Complaints. Concerns or complaints regarding the Company’s accounting, internal accounting controls or auditing matters, may be communicated directly to the Audit Committee. Such communications may be confidential and anonymous, and can be submitted in writing or reported by telephone. Written communications should be submitted to the chair of the Audit Committee in care of the Ethics Officer of the Company, at the address set forth on the Company’s website. Telephone reports may be made by employees of the Company via a toll-free hotline number that is provided to all employees. All communications will be reviewed, investigated and addressed in the ordinary course by the Company’s Ethics Officer unless otherwise instructed by the Audit Committee. The status of all such concerns and complaints will be reported to the Audit Committee on a quarterly basis, or more frequently as determined by the Committee. The Audit Committee may direct that certain matters be presented to the full Board and may direct special treatment, including the retention of outside advisors or counsel, for any concern or complaint addressed to it.
The Company’s Standards of Business Ethics and Conduct handbook prohibits retaliation against any person who raises in good faith an ethics or compliance issue.
The Company does not currently have a shareholder rights plan or “poison pill.” If, however, the Board does choose to adopt a shareholder rights plan, the Board will submit the plan to a vote of the shareholders within one year from the date of its adoption.
Effective May 6, 2015
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