Simpson Manufacturing Co., Inc Governance Guidelines
February 2, 2007
Director Qualification Standards
Simpson Manufacturing Company, Inc. seeks as directors persons of reputation, integrity and accomplishment -- individuals who bring to board issues a range of talents, useful experience, information and insights. Outside directors must be independent. This means they must have no financial, family or close personal ties to the company or its executives. They must meet both the NYSE regulatory standard of independence and the practical standard that in acting on board matters, they rely only on their own abilities and judgment. Within three years of becoming a member of the Board of Directors, outside directors are expected to own company stock including options (valued using Black-Scholes) in an amount at least equal to their annual board fee. No outside director will be proposed for re-nomination after 20 years of board service.
Key Director Responsibilities
Directors are expected to attend all board and committee meetings, be well-prepared by studying in advance meeting materials and analysts' reports and by staying abreast of trends and issues that affect company performance. In all meetings directors are expected to assure that the agenda includes items they deem important and to evaluate, add value and, as appropriate, act on agenda items. Directors review operating plans, approve budgets, monitor the implementation of company strategy and financial performance. Directors oversee the company's risk profile and monitor its control environment. Outside directors set compensation for named executives and regularly review succession plans. Directors are expected to both challenge and support management. They are expected to encourage critique and discussion, to work together in a healthy atmosphere of give and take, and when necessary, to take tough, constructive stands.
Director Access to Management and, as Necessary and Appropriate, Independent Advisors
Senior company managers who are not board members are invited to attend board meetings both to make presentations and to serve as a resource for questions and discussion. Independent directors have ready access to management as needed for their board or committee duties. The charters for the three basic board committees -- Audit, Compensation and Governance and Nominating -- authorize them to retain such independent, outside advisors as committee members decide are necessary for their work.
Director Compensation
Director compensation is a mixture of cash and company performance based options. As of 2005, the cash is paid by an annual retainer of $32,000, and a $2,000 fee for attending each board meeting, and a fee of $2,000 for each committee meeting on a day the board does not meet. For attending committee meetings days the board does meet, the meeting fee is $1,000. Directors who participate by telephone in regularly scheduled meetings are paid one-half the regular meeting fee. The chairs of each of the Compensation and Governance and Nominating committees are paid an additional $4,000 annual fee. The chair of the Audit committee is paid an additional $8,000 annual fee.
Under an independent director stock option plan approved by stockholders in 1995, and (as amended) in 2002, the Compensation committee at the beginning of the year reviews and approves company-wide operating goals. When these goals are not met, no options are granted. When they are met, under the plan each outside director is granted options to purchase 5,000 shares unless to adjust for a stock split. Under the plan, the committee is authorized to recommend for board decision the number of options to be granted to new outside directors when they join the board.
These arrangements are set by reference to director compensation practices in companies of comparable size and complexity, and by the judgment of the board as to the appropriate level of incentives. These policies and practices are reviewed at least bi-annually by the Compensation committee.
Director Orientation and Continuing Education
New directors are oriented to the company's business and governance through meetings with company officers, directors and site visits. The Secretary of the Corporation is responsible for arranging the orientation program for new directors. The company supports and pays for participation in continuing education programs to assist directors in performing their board responsibilities.
Management Succession
The Compensation committee, meeting in executive session, conducts an annual review of the CEO and senior management. The committee chair reports on that evaluation to non-management members of the board. The annual performance review is based on the following CEO rating factors: leadership, strategic planning, financial results, succession planning, human resources, communication, external relations and board relations.
On an annual basis, the independent directors meet with the Chairman and the CEO to review succession planning. During the CEO's absence or inability to act, the board chairman shall assume the CEO's duties on a temporary basis, until the permanent CEO returns, or the board, using the criteria established for CEO evaluation, makes a new appointment.
