January 30, 2017
The primary purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Simpson Manufacturing Co., Inc. (the "Company") is to provide independent and objective oversight of the accounting functions and internal controls of the Company and its subsidiaries, and establish an appropriate risk management framework for the effective identification, assessment and management of risk, to ensure the integrity of the Company's financial statements and compliance with applicable legal and regulatory requirements. The Committee is responsible for preparing a report of its findings, to be included in the Company's annual proxy statement. The Committee has the sole authority and responsibility to select, evaluate the qualifications and independence of, and, where appropriate, replace the independent auditors. Also, the Committee evaluates the performance of the Company's internal audit function.
The Committee's role is one of oversight and review. It is not expected to audit the Company, to define the scope of the audit, to control the Company's accounting practices, or to define the standards to be used in preparation of the Company's financial statements.
The Committee shall perform the following functions in the following areas:
- Independent Auditors. Exercise sole authority to retain and terminate the Company's independent auditors and approve all audit engagement fees and terms, as well as all significant non-audit engagements with the independent auditors. The independent auditors shall report directly to the Committee.
- Plan of Audit. Consult with the independent auditors regarding the plan of audit. The Committee also shall review with the independent auditors their report on the audit and review with the Company's officers the independent auditors' suggested changes or improvements in the Company's accounting practices or controls.
- Accounting Principles and Disclosure. Review significant developments in accounting rules. The Committee shall review with the Company's officers recommended changes in the Company's methods of accounting or financial statements. The Committee also shall review with the independent auditors any significant proposed changes in accounting principles and financial statements. The Committee shall review with the Company's officers and the independent auditors any correspondence with regulatory authorities and any published reports that raise material issues regarding the Company's accounting practices.
- Captial Expenditures. Review annually with management and the Internal Audit Director the Company's capital budget approval process and an analysis of a sampling of completed projects compared to projected performance.
- Internal Accounting Controls. Discuss the Company's major financial risk exposures and the steps the Company's officers have taken to monitor and control such exposures. The Committee consults with the independent auditors regarding the adequacy of internal accounting controls. Where appropriate, consultation with the independent auditors regarding internal controls shall be conducted out of the presence of the Company's officers.
- Financial Disclosure Documents. Review with the Company's officers and the independent auditors the Company's financial disclosure documents including all interim and annual financial statements and reports filed with the Securities and Exchange Commission or sent to stockholders and interested parties and, following the satisfactory completion of each year-end review, recommend to the Board the inclusion of the audited financial statements in the Company's annual report on Form 10-K. The Committee shall discuss with the Company's officers the type and presentation of information to be included in the Company's earnings press releases (paying particular attention to any use of "pro forma" or "adjusted" non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies. The review shall include any significant problems and material disputes between the Company's officers and the independent auditors and a discussion with the independent auditors out of the presence of the Company's officers of the quality of the Company's accounting principles as applied in its financial reporting and tax provision calculations, the clarity of the Company's financial disclosures and degree of aggressiveness or conservatism of the Company's accounting principles and underlying estimates, and a frank and open discussion of other significant decisions made by the Company's officers in preparing the financial disclosure and reviewed by the independent auditors.
- Risk Management. Review whether Company officers have in place a current and comprehensive enterprise risk management framework and associated procedures for effective identification and management of the Company's business and financial risks, including fraud. Assess the impact of the Company's enterprise risk management framework on its control environment and insurance arrangements. Determine whether a sound and effective approach has been followed in establishing the Company's business continuity planning arrangements, including whether business continuity and disaster recovery plans have been periodically updated and tested. Ensure all major strategic and operational risks are brought to the attention of the Committee in a timely manner and monitor and report on the management of major strategic and operational risk. Periodically review the Company's information technology strategy and provide oversight for all matters related to information technology systems and procedures, including data privacy and security.
- Internal Control Systems. Conduct separate meetings quarterly with the Company's officers, internal auditors, and independent auditors to review the Company's internal control systems intended to ensure the reliability of financial reporting and compliance with applicable codes of conduct, laws, and regulations. The review shall include internal audit summaries of and, as appropriate, copies of its significant reports to the Company's officers and the officers' responses, as well as any significant problems and regulatory concerns.
- Ethical Environment. Consult with the Company's officers on the establishment and maintenance of an environment that promotes ethical behavior, including the establishment, communication, and enforcement of codes of conduct to guard against dishonest, unethical, or illegal activities. The Committee shall establish procedures for the receipt, retention, and treatment of complaints received by the Company from its employees regarding accounting, internal accounting controls, and auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
- Oversight of Independent Auditors. Evaluate qualifications, performance and independence of the independent auditors on an annual basis and where appropriate retain a replacement for the independent auditors. In such evaluation, the Committee shall annually obtain and review a report of the independent auditors' internal quality-control procedures, any material issues raised by their internal quality-control review or any external review occurring within the preceding five years with respect to one more independent audits carried out by the independent auditors, and steps taken to resolve any such issues. With regard to the evaluation of independence, the Committee shall ensure that the independent auditors deliver to the Committee a formal written statement delineating all relationships between the independent auditors and the Company. The Committee shall engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may affect the objectivity and independence of the independent auditors and in response to the independent auditors' report take, or recommend that the Board take, appropriate action to satisfy itself of the independent auditors' independence. The Committee shall review the response of the Company's officers to any audit problems or difficulties.
- Hiring Policies for Former Employees of the Independent Auditors. Ensure compliance with the following hiring policies: Any former employee of the independent auditors may be eligible for employment with the Company if he or she has no influence over the independent auditors' operations or financial policies; has no capital balance in the independent auditors; has no financial arrangement with the independent auditors; and has not been a member of the independent auditors' audit engagement team within the year preceding the commencement of employment with the Company. In addition, a formal hiring request must be received and reviewed by the Chief Financial Officer for any proposed employment candidate who was an audit supervisor or above with the independent auditors. The Chief Financial Officer must discuss the formal hiring request with the Committee Chair before an offer is extended.
- Review and Amendment of Charter. Perform annually a self-evaluation of the Committee's performance to assess and insure effectiveness. Also, the Committee will review this Charter annually, to assess its adequacy and propose appropriate amendments to the Board.
- Whistleblower Communications. Ensure that the Company has appropriate procedures for receiving and responding to complaints about the Company's accounting, internal accounting controls or auditing matters. To carry out this responsibility the Committee posts on the Company's internal website the procedures for two formal means by which employees may confidentially or anonymously express directly to the Committee their concerns about accounting or auditing matters. The two formal means are US mail sent directly to the Committee's PO Box and interoffice mail sent by sealed envelope to the Committee Chair. Committee procedures concerning the handling and consideration of complaints are appended to this Charter, along with a statement of the informal means by which employees may express concerns about accounting or auditing matters.
III. COMPOSITION & INDEPENDENCE
The Committee shall consist of not fewer than three independent Directors, who shall be appointed by the Board of Directors. Members of the Committee shall be financially literate or become financially literate within a reasonable period of time after appointment to the Committee, and at least one member of the Committee shall have accounting or related financial management expertise or any other comparable experience or background that results in the individual's financial sophistication. No member of the Committee shall be employed or otherwise affiliated with the Company's independent auditors. Each member of the Committee shall meet the independence and experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulation of the Securities and Exchange Commission.
In the event that a Committee member faces a potential or actual conflict of interest with respect to a matter before the Committee, that Committee member shall be responsible for fully informing the Committee Chair, and in the case where the Committee Chair faces a potential or actual conflict of interest, the Committee Chair shall fully inform the Chairman of the Board. In the event that the Committee Chair, or the Chairman of the Board, concurs that a potential or actual conflict of interest exists, an independent substitute Director shall be appointed as a Committee member until the matter posing the potential or actual conflict of interest is resolved. The Board may, at any time and in its complete discretion, replace a Committee member.
The Committee shall meet on a regular basis. Meetings shall be scheduled at the discretion of the Committee Chair. The Committee may ask the Company's officers or others to attend a meeting and provide pertinent information as necessary.
The Committee will report to the Board regularly with respect to its activities and its recommendations. When presenting any recommendation or advice to the Board, the Committee will provide such background and supporting information as may be necessary for the Board to make an informed decision. The Committee will keep minutes of its meetings and will make such minutes available to the Board for review.
The Committee shall report to the shareholders in the Company's proxy statement for its annual meeting whether the Committee has satisfied its responsibilities under this Charter.
VI. OTHER AUTHORITY
The Committee is authorized to confer with the Company's officers and other employees to the extent it may deem necessary or appropriate to fulfill its duties. The Committee is authorized to conduct or authorize investigations into any matters within the scope of the Committee's responsibilities. The Committee is also authorized to seek outside legal or other advice to the extent it deems necessary or appropriate, provided it shall keep the Board informed as to the nature and extent of such outside advice. The Committee shall have the authority to delegate any of its responsibilities to subcommittees or individual(s) as the Committee may deem appropriate in its sole discretion. The Company shall provide appropriate funding, as deemed necessary by the Committee, to compensate any independent auditor, outside legal counsel, or any other advisors employed by the Committee, and to pay ordinary Committee administrative expenses that are necessary and appropriate in carrying out its duties.
AUDIT COMMITTEE INFORMAL WHISTLEBLOWER PROCEDURES
January 30, 2017
1. Submission and Receipt of Complaints
Employees are free to bring complaints about accounting or auditing matters directly to the attention of their supervisors or any other manager as they would any other workplace concern. If the employee is not satisfied that the matter has been appropriately addressed, the employee should feel free to contact the President of his/her company or the President of Simpson Manufacturing Co., Inc. (the "Company"). When a President receives such a complaint, he or she shall forward it promptly in the following order and manner:
An employee may choose to deliver any complaint directly to the Audit Committee of the Company's Board of Directors by mail at P.O. Box 1394, Alamo, CA 94507-7394, or in a sealed envelope sent through the Company's interoffice mail to the Chair of the Audit Committee.
2. Retention of Records of Complaints
Records pertaining to a complaint are the property of the Company and shall be retained:
- in compliance with applicable laws and document retention policies;
- subject to safeguards that ensure their confidentiality, and, when applicable, the anonymity of the person making the complaint.
3. Consideration of Complaints
- All complaints shall be treated as confidential.
- Although a person making an anonymous complaint may be advised that maintaining anonymity could hinder an effective investigation, the anonymity of the person making the complaint shall be maintained unless the person indicates that he or she no longer wishes to remain anonymous.
- The Chair of the Audit Committee shall inform the Audit Committee, in summary form or otherwise, of all complaints received, with an initial assessment as to the appropriate treatment of each complaint. Assessment, investigation, and evaluation of each complaint shall be conducted by, or at the direction of, the Audit Committee. If the Audit Committee deems it appropriate, the Audit Committee may engage at the Company's expense independent advisors, such as outside counsel and accountants unaffiliated with the Company's auditor.
- Following investigation and evaluation of a complaint, the Chair of the Audit Committee shall report to the Audit Committee on recommended disciplinary or remedial action, if any. The action determined by the Audit Committee to be appropriate under the circumstances shall then be brought to the Board or to the appropriate officers for authorization or implementation, respectively. If the action taken to resolve a complaint is deemed by the Audit Committee to be material or otherwise appropriate for inclusion in the minutes of the meetings of the Audit Committee, it shall be so noted in the minutes.
- Any effort to retaliate against any person making a complaint in good faith is strictly prohibited and shall be reported immediately to the Chair of the Audit Committee or the Internal Audit Director.