Principles of Corporate Governance
The Board of Directors of St. Jude Medical, Inc. has adopted the following
principles of corporate governance.
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Independence
A majority of the members of the Board of Directors shall be independent of
management.
Determination of Independence
The Governance and Nominating Committee will annually review the status of each
director as independent or not independent using the following criteria from
the Company's by-laws:
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has not been employed by the corporation in an executive capacity within the
last five years;
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is not, and is not affiliated with a company that is, an advisor or consultant
to the corporation, or a significant customer or supplier of the corporation;
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has no personal service contracts with the corporation or the corporation's
senior management;
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is not affiliated with a not-for-profit entity that receives significant
contributions from the corporation;
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is not employed by a public company at which an executive officer of the
corporation serves as a director;
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does not have a relationship described in 1 through 5 above with any affiliate
of the corporation; and
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is not a member of the immediate family of any person described in 1 through 6
above.
In addition, the Governance & Nominating Committee will consider each director's
status as independent under the New York Stock Exchange and SEC definitions
(for Audit Committee members). The Committee's recommendations will be referred
to the entire Board of Directors for final determination.
Committees
The Board of Directors has three standing Committees: Audit, Compensation, and
Governance & Nominating. Each of these Committees has a
written charter. Each Committee consists entirely of independent
directors. Committee membership is proposed by the Governance & Nominating
Committee and approved by the entire board.
Sessions of the Independent Directors
At least twice each year the independent members of the Board of Directors meet
in a separate session. These sessions are chaired by the Presiding Director who
is the Chairperson of the Governance & Nominating Committee.
Annual Board Performance Review
Each year the Board of Directors will conduct a review of its own performance as
well as the performance of its standing Committees.
Board Role in Strategy
The Board of Directors dedicates the major portion of two meetings each year to
the Company's strategic plan—one meeting at the beginning of the
strategic planning process and the second to approve the plan.
Board Role in Succession Planning
The board devotes a substantial portion of one meeting each year to a
management-led review of the Company's succession planning process. The major
portion of one independent directors' session each year is devoted to the CEO
succession plan.
CEO Review
Each year the Board of Directors conducts a formal review of the CEO's
performance.
Director Terms
Each director is elected for a three-year term. The terms are staggered. The
Board of Directors has no term limit policy. The Board of Directors has a
retirement policy of age 75, or in the case of a director first elected to a
three-year term that would expire after the age of 75, the expiration of the
three-year term.
If a director experiences a material change in the director’s occupation
(including termination of the director’s employment or a material change
in the director’s position or principal responsibilities), the director
shall promptly offer to tender the director’s resignation to the Chairman
of the Board.
The Governance & Nominating Committee shall consider the resignation offer
and recommend to the Board whether to accept it. The Board will act on the
Governance & Nominating Committee’s recommendation within 90 days
following receipt of the Governance & Nominating Committee’s
recommendation.
Voting for Directors
In an uncontested election, any nominee for Director who receives a greater
number of votes "withheld" from his or her election than votes
"for" such election (a "Majority Withheld Vote") shall
promptly offer to tender his or her resignation to the Chairman of the Board
following certification of the shareholder vote.
The Governance & Nominating Committee shall consider the resignation offer and
recommend to the Board whether to accept it. The Board will act on the
Governance & Nominating Committee's recommendation within 90 days following
certification of the shareholder vote.
Thereafter, the Board will promptly disclose their decision whether to accept
the Director's resignation offer (and the reasons for rejecting the resignation
offer, if applicable) in a press release to be disseminated in the manner that
Company press releases typically are distributed.
Any Director who tenders his or her resignation pursuant to this provision shall
not participate in the Governance and Nominating Committee recommendation or
Board action regarding whether to accept the resignation offer.
However, if each member of the Governance and Nominating Committee received a
Majority Withheld Vote at the same election, then the independent Directors who
did not receive a Majority Withheld Vote shall appoint a committee amongst
themselves to consider the resignation offers and recommend to the Board
whether to accept them.
Limit of Number of Directorships
The Company has a guideline that directors should serve on no more than three to
five boards of other publicly owned companies.
Director Orientation & Education
The Company has a formal orientation program for new directors. The Company does
not require that directors attend a "director college" or similar
program, but will reimburse each director for tuition and reasonable travel
expenses to attend one ISS accredited director education program each calendar
year.
Director Responsibilities
Directors are expected to have a good attendance record at board and committee
meetings, to read in advance the meeting materials, to be generally
knowledgeable about the strategy and affairs of the Company and to approach
their duties with an independent frame of mind.
Access to Others
Directors have access to all the officers of the Company and as a board or as a
board committee have the authority to directly retain independent advisors if
they consider it to be advisable.
The Company believes it is well served by having the positions of Chairman of
the Board and CEO combined.
Shareholder Approval of Plans
The Company submits its stock option and other stock plans and executive bonus
plans to the shareholders for approval.
Repricing of Stock Options
The Company does not reprice stock options.
Stock Ownership Guidelines
In order to align the interests of shareholders and management, the Company has
stock ownership guidelines for directors, officers, and senior
employees.
Loans to Officers and Directors
Company loans to officers and directors are prohibited.
Compensation of Directors
The following principles are used to develop the compensation of non-management
directors:
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Directors should be fairly compensated for the time commitment and
responsibility associated with service as a director
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Director's compensation should be comparable to the compensation of directors
of companies of similar size and nature as St. Jude Medical, Inc.
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Director compensation should facilitate directors acquiring an equity position
in the Company consistent with the stock ownership guidelines
Stock Option Accounting Treatment
The Company expenses equity instruments, including stock options, in accordance
with FAS 123 (R).
The Company has adopted a
Code of Business Conduct that applies to all employees and directors.
Any waivers granted under the Code are brought to the attention of the Audit
Committee.
The Company currently has no shareholder rights plan in place. In the event of
the threat of a hostile takeover of the Company, the Board would consider
adopting a shareholder rights plan in order to protect shareholder interests by
encouraging any potentially hostile bidder to negotiate with the Board and
Company management.
The Audit Committee of the Board of Directors has the authority to retain and
terminate the Company's external auditor. The Company has a policy that
prohibits the hiring of personnel from the Company's external auditor for two
years after the person has left the employment of the external auditor. The
Company has a policy prohibiting directors who are members of the Audit
Committee and executive officers from using the Company's external auditor for
tax services.
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