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The shareholders of Ashland Inc. ("Company") elect directors to oversee the management of the business and the affairs of the Company. The Board of Directors of the Company ("Board") has adopted the following guidelines in furtherance of its continuing efforts to enhance its corporate governance. The Board will review and amend these guidelines as it deems necessary and appropriate. These guidelines, and the Board Committee charters, provide the framework for the governance of the Company.
The Board serves as the ultimate decision-making body of the Company, except for those matters reserved for or submitted to the shareholders. The Board selects and oversees the members of senior management, who are charged by the Board with conducting the business of the Company. The Board provides advice and counsel to the Chief Executive Officer and other senior management of the Company.
In addition to its general oversight of management, the Board selects, evaluates, and compensates the Chief Executive Officer and oversees Chief Executive Officer succession planning. The Board also provides counsel, advice and oversight on the selection, evaluation and compensation of senior management. The Board approves and monitors the fundamental financial and business strategies of the Company and maintains policies and procedures designed to ensure that the assets of the Company are properly safeguarded and enterprise risks are properly managed; that appropriate financial and other controls are maintained; that processes are in place for maintaining the integrity of the Company; and that the Company's business is conducted in compliance with applicable laws and regulations.
The Board will hold regularly scheduled meetings. The Chairman of the Board will set the agenda for Board meetings, although any Director may propose items for inclusion on the agenda. Any Director may raise a subject that is not on the agenda at any meeting. The Board will review the Company's long-term strategic plans and the most significant financial and accounting issues facing the Company during at least one Board meeting each year.
The Board believes that having the same person occupy the offices of Chairman of the Board and Chief Executive Officer serves the Company well. However, the Board may reevaluate this structure if and when it deems necessary.
The primary responsibility of the Directors is to act in good faith, on an informed basis, and in what they honestly believe to be in the best interests of the Company as provided for by Kentucky law. Where appropriate, Directors may also take into consideration the interests of other stakeholders, including employees, customers, suppliers, the economy of the state and nation, community and societal considerations and the long-term as well as short-term interests of the Company and its shareholders.
In discharging their duties, Directors may rely on the Company's senior executives and outside advisors and auditors. Accordingly, skill and integrity will be important factors in selection of the Company's senior executives and other advisors.
Directors shall hold all non-public information presented to them by the Company in confidence and shall not disclose this information to third parties except as required by law or with the prior approval of the Company.
Directors are expected to attend all meetings of the Board and of the committees on which they serve. Directors should devote the time and effort necessary to fulfill their responsibilities. Information important to Directors' understanding of issues to come before the Board or a committee will be provided sufficiently in advance of the meeting to permit Directors to properly inform themselves.
Non-management Directors will meet in executive session at each regularly scheduled meeting of the Board. Typically, non-management Directors' meetings will occur during regularly scheduled Board meetings.
The Board shall appoint a Lead Independent Director who will at all times be an independent Director to coordinate the activities of the independent Directors. The Lead Independent Director may serve for no more than three consecutive years, provided, however, that the Board may extend the term of the Lead Independent Director in its discretion. In addition to the duties of all Board members (which shall not be limited or diminished by the Lead Independent Director's role), the specific responsibilities of the Lead Independent Director are to advise the Chairman of the Board, if the Lead Independent Director is not also Chairman of the Board. The Lead Independent Director shall have the following duties:
At least two-thirds of the Directors will be independent. No Director will be deemed independent unless the Board affirmatively determines that the Director has no material relationship with the Company, directly or as an officer, shareholder or partner of an organization that has a material relationship with the Company. The Board will observe and comply with all additional criteria for independence established by the New York Stock Exchange or other governing laws and regulations.
Directors may be nominated by the Board or by shareholders as provided by the Company's By-laws. The G&N Committee will review all nominees for the Board in accordance with its charter. The G&N Committee will select qualified nominees and review its recommendations with the Board, which will decide whether to invite the nominee to join the Board. The Chairman of the Board will extend any invitation to join the Board. The Board desires to be comprised of Directors that possess high personal and professional ethics, integrity and values, and that are committed to representing the long-term interests of the shareholders. The Board shall reflect the diversity of the Company's shareholders, employees, customers, guests and communities.
In order to ensure that the Board remains composed of high functioning members able to keep their commitments to Board service, the G&N Committee will evaluate the qualifications and performance of each incumbent Director before recommending the nomination of that Director for an additional term.
The Board has adopted a Related Person Transaction Policy which is attached as Addendum 1 to these guidelines.
Committees shall be established by the Board from time to time to facilitate and assist in the execution of the Board's responsibilities. The Board presently has four committees: Audit, G&N, Personnel and Compensation, and Environmental, Health Safety and Product Compliance. The Board may establish additional committees, and/or change existing committees, as provided for in the By-laws.
Only independent Directors may serve on the Audit Committee, the Personnel and Compensation Committee and the G&N Committee. Any Director who is not a member of a particular committee may attend any committee meeting. Each of the committees has its own charter, which sets forth the responsibilities of each committee, the qualifications and procedures of the committee and how the committee will report to the Board. Each committee will conduct a self-evaluation annually.
Directors shall have access to management of the Company as necessary to carry out their duties. It is expected that Directors will ensure that any such contact is not disruptive to the business or operations of the Company.
The Board has the authority to hire independent legal, financial or other advisors as it may deem necessary.
All new Directors must participate in the Company's orientation program, which should be conducted within a reasonable time period of a new Director's election to serve on the Board. The Chief Financial Officer, General Counsel and Corporate Secretary will be responsible for providing the new Director orientation, and for periodically providing materials or briefing sessions for all Directors on subjects that would assist them in discharging their duties. The orientation will include presentations to familiarize new Directors with the Company's business and strategic plans, its significant financial and accounting issues, its compliance programs, its Code of Business Conduct, its senior management, and its internal and independent auditors. Any sitting Directors may attend the orientation program.
The Board will annually evaluate the Chief Executive Officer's performance in leading the Company. The Board of Directors will discuss the Chief Executive Officer's performance in an executive session of non-management Directors. The Board's evaluation of the Chief Executive Officer's performance will be a significant factor in the Board's annual review of the Chief Executive Officer's compensation.
The Board of Directors will conduct annual self-evaluations to determine whether it and its committees are functioning effectively. The G&N Committee will receive comments from all Directors and report to the Board with an annual assessment of the Board's performance, which will be discussed with the full Board. The assessment will focus on the Board's contribution to the Company and specifically focus on areas in which the Board or management believes that the Board or any of its committees could improve.
The form and amount of Director compensation shall be determined by the G&N Committee subject to approval by the full Board.
The Board believes that management is responsible for communicating on behalf of the Company. However, at the request of management, individual Board members may meet or otherwise communicate with various constituencies that are involved with the Company. Where comments from the Board are appropriate, they will normally come from the Chairman.
Addendum 1 - Related Person Transaction Policy
"Related Person" means:
"Related Person's Firm" means any firm, corporation or other entity in which a Related Person is an executive officer or general partner or in which all Related Persons together have a 10 percent or more ownership interest.
"Related Person Transaction" means a Transaction in which a Related Person is determined to have, had, or will have a direct or indirect material interest.
"Transaction" means any single transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) with the Company since the beginning of the Company's last fiscal year in an amount greater than $120,000 that involves or will involve a Related Person or a Related Person's Firm. It does not include:
The Board of Directors recognizes that Related Person Transactions can present potential conflicts of interest (or the perception thereof) and therefore has adopted this policy.
Each Director and executive officer shall annually identify any Transaction that they, their Immediate Family Members or their Related Person Firms are or will be involved in. On an ongoing basis, Directors and executive officers shall promptly advise the G&N Committee of any changes to such Transactions.
Management shall submit all disclosed Transactions and appropriate supplemental information to the G&N Committee for its review.
The G&N Committee shall review each disclosed Transaction in order to determine whether a Transaction is a Related Person Transaction. The G&N Committee shall take such action with respect to the Related Person Transaction as it deems necessary and appropriate under the circumstances, including approval, disapproval, ratification, cancellation, or a recommendation to management. Only disinterested members of the G&N Committee shall participate in those determinations. In the event it is not practical to convene a meeting of the G&N Committee, the Chair of the G&N Committee shall have the right to make such determination and shall promptly report his or her determination in writing to the other members of the G&N Committee.
The G&N Committee shall report its action with respect to any Related Person Transaction to the Board of Directors.