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Corporate Governance Principles

PDF Icon Corporate Governance Principles As of: December 13, 2016

Corporate Governance Principles

ESSENDANT
CORPORATE GOVERNANCE PRINCIPLES

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Introduction

The Board of Directors (the “Board”) of Essendant Inc. (the “Company”) has adopted these Corporate Governance Guidelines (these “Guidelines”) to assist the Board in the exercise of its responsibilities and to serve the best interests of the Company and its stockholders. These Guidelines are intended to serve as a flexible framework within which the Board may conduct its business in accordance with applicable laws, regulations and other corporate governance requirements, as the same may be amended from time to time, and not as a set of legally binding obligations. They are subject to future refinement or modification by the Board in such manner and at such time(s) as the Board may deem advisable in furtherance of these objectives or as may be necessary or appropriate to comply with applicable laws and regulations.

Board Leadership, Performance and Compensation

  1. Selection of Chairman of the Board.   The Company’s Bylaws call for the Chairman of the Board to be elected by the Board from among its members and to have the powers and duties customarily associated with the position of a non-executive Chairman. The Company’s Bylaws also provide that, while the Chairman may hold an officer position, under no circumstances may the Chairman also serve as the President or Chief Executive Officer of the Company. The Chairman of the Board normally will serve as the Company’s lead independent Director.
  2. Director Responsibilities.  The business and affairs of the Company will be managed by or under the direction of the Board. Each Company Director is expected to spend the time and effort necessary to properly discharge his or her responsibilities, including that required to review materials distributed in advance of a Board or committee meeting. Accordingly, each Director is expected to prepare for, attend and participate in the meetings of the Board and Board committees of which he or she is a member, with the understanding that on occasion a Director may be unable to attend such meetings. A Director who is unable to attend a meeting is expected to notify the Chairman of the Board or the appropriate committee Chair in advance of such meeting.
  3. Evaluation of the Board.  The Board will be responsible for conducting a selfevaluation annually. The Governance Committee will advise and assist the Board in establishing the evaluation criteria and methodology, and implementing the process, for such evaluation. The assessment should include a review of any areas in which the Board or management believes the Board can enhance its contribution to the governance of the Company.
  4. Board Access to Management.  Board members will have complete access to the Company’s senior management and to such other Company employees as the Directors deem necessary or advisable to fulfill their responsibilities. It is expected that Board members will use sound business judgment to ensure that this is not distracting to the Company’s operations. The Board from time to time may prescribe a protocol for such access, which may include an expectation that such contacts generally would be made with the knowledge of the Company’s Chairman of the Board and/or Chief Executive Officer, absent unusual circumstances or except as otherwise contemplated by charters of any Board committees.
  5. Board and Committee Access to Independent Advisors.  The Board and each Board committee may, as it deems necessary or appropriate, obtain advice and assistance from independent, outside financial, legal, accounting, human resources or other advisors. The Company will make funds available to pay for the services of any such advisors.
  6. Board Interaction with Institutional Investors, Analysts and Press.  The Board believes that management generally should speak on behalf of the Company. Accordingly, each Director is asked to refer all inquiries from institutional investors, analysts, the press or other constituencies (such as customers or employees) to the Company’s Chief Executive Officer or head of Investor Relations. Individual Directors may, from time to time at the request of management, communicate or meet with various constituencies involved with the Company. If comments from the Board are deemed appropriate, they should, in most circumstances, come from the Chairman of the Board. The Company’s management will have primary responsibility for establishing such other communications policies as are deemed appropriate to facilitate compliance by the Company and its officers and employees with applicable laws and regulations.
  7. Board Compensation Review.  The Governance Committee will review annually the status of the Company’s Director compensation practices, with input regarding such practices and those of other comparable companies from the Human Resources Committee of the Board and such outside advisors as the Governance Committee deems appropriate. In evaluating the Company’s Director compensation practices, the Governance Committee should consider that equity-based compensation is an important component of the Company’s current Director compensation practices. It is expected that any changes in Director compensation practices should be made only upon the recommendation of the Governance Committee, and following discussion and concurrence by the full Board.
  8. Board Compensation Principles.  When reviewing and determining Director compensation, the Board should critically evaluate all forms of compensation. Directors on the Company’s Audit Committee may not receive any compensation from the Company other than retainer or fees for service as a Director or as a member of one or more Board committees. No Company executive officer may receive any additional compensation for his or her service as a Company Director. The Company will not extend or maintain credit, arrange for an extension of credit or renew an extension of credit, in the form of a personal loan, to any Director, consistent with applicable law.

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Board Meetings

  1. Meeting Scheduling and Frequency.  Regular Board meetings will be scheduled in advance and ordinarily held five times a year at the Company’s principal executive offices or at other appropriate Company facilities. Although Directors are generally expected to be present in person for regular Board meetings, participation by conference telephone, videoconferencing equipment or similar means may be necessary or appropriate at times. The proposed schedule of regular Board meetings for each year generally will be sent to Directors not later than the fourth quarter of the prior year.
  2. Meeting Agenda.  The Company’s President and Chief Executive Officer, in consultation with its Chairman of the Board, will have primary responsibility for preparing the agenda for each Board meeting and arranging for it to be sent to the Board members in advance of the meeting. Each Board committee, and each individual Director, is encouraged to suggest items for inclusion on the agenda.
  3. Advance Distribution of Meeting Materials.  As a general rule, whenever feasible, information and materials that are relevant and important to the Board’s understanding of matters to be discussed at an upcoming Board meeting will be distributed to Board or committee members in writing or electronically in advance of their meeting. This will help facilitate the efficient use of time at Board meetings, with meeting time focused on questions, discussion and deliberation about the matters presented. Management will make every effort to provide materials that are concise yet communicate information sufficient to make informed decisions. Advance written materials may not be provided in certain situations, such as those where there is a pressing need for the Board to meet on short notice or those in which the subject matter is extremely sensitive. In any such case, adequate time will be scheduled for the meeting to enable Directors to educate themselves on the matters to be addressed at the meeting.
  4. Attendance of Non-Directors at Board Meetings.  The Board generally supports the regular attendance at Board meetings of non-Directors in appropriate senior management positions. Should the Chairman of the Board or President and Chief Executive Officer of the Company wish to add additional attendees on a regular basis, it is expected that the Board’s concurrence would be sought in advance. The Board also encourages senior management from time to time to bring managers into Board meetings who (a) can provide additional insight concerning items being discussed because of their direct involvement in those matters, or (b) represent managers with future potential that senior management believes should be given exposure to the Board.
  5. Executive Sessions of Non-Management Directors.  The non-management Directors will meet in regularly scheduled executive sessions, not less than four times per year, without any management Directors or other management present. The Chairman of the Board, if present, will preside at all meetings of the Board, including all such executive sessions, in accordance with the Company’s Bylaws. In his absence, a meeting chair will be selected from among the Directors present. The Chairman of the Board or, if a matter relates to a subject within the purview of a Board committee, the Chair of the Board committee will be the primary contact person for any party seeking to communicate with the non-management Directors.

Board Committees

  1. Number and Type of Committees.  The six current standing committees of the Board are the Audit Committee, the Governance Committee, the Human Resources Committee, the Finance Committee, the Technology Advisory Committee, and the Executive Committee. The responsibilities of each of these committees will be as outlined in its respective committee charter, as the same may be amended from time to time. The Board from time to time may form a new committee, form a special purpose committee (such as a pricing committee) or disband a current committee, as it deems appropriate under the circumstances, subject to applicable legal and regulatory requirements.
  2. Independence of Board Committees.  The Audit Committee, Human Resources Committee, the Finance Committee, the Technology Advisory Committee and Governance Committee will consist entirely of Directors who are independent, as determined by the Board in accordance with Guideline 4 above. The members of each such committee will also meet any additional independence criteria under any NASD, SEC and/or tax rules applicable to that committee.
  3. Assignment and Rotation of Committee Members and Chairs.  The Governance Committee will be responsible for making recommendations to the Board with respect to the assignment of Board members to various committees. After reviewing the Governance Committee’s recommendations, the Board will be responsible for appointing the Chairs and members of the committees on an annual basis. The Board will endeavor to match the committee’s function and needs for expertise with the individual knowledge, skills, interests and experience of the committee appointees. It is the sense of the Board that consideration should be given to rotating committee members periodically at about a five-year interval. However, the Board does not favor mandatory rotation of committee assignments or Chairs. The Board believes that experience and continuity are more important than adherence to a fixed rotation schedule, and that any rotation should be likely to enhance committee performance or facilitate committee work.
  4. Committee Meetings and Agendas.  The Chair of each committee, in accordance with the committee’s charter and in consultation with the members of the committee, will determine the frequency of that committee’s meetings. The Chair of each committee, in consultation with other committee members and appropriate members of management, will develop that committee’s meeting agenda.
  5. Evaluation of Board Committees.  Each committee will conduct, on an annual basis, a self-evaluation, review its charter and recommend to the Board any changes it deems necessary or appropriate.

Leadership Development/Succession Planning

  1. Annual CEO Evaluation.  The Board, with input from the Governance and Human Resources Committees, as appropriate, and the Chief Executive Officer, will establish annual goals and objectives relative to the compensation of the Chief Executive Officer. The non-management Directors of the Board will evaluate annually the Chief Executive Officer’s performance in light of those goals and objectives and present the results of its evaluation to the Governance and Human Resources Committees in connection with establishment of the Chief Executive Officer’s compensation level for the ensuing year. The Chairman of the Board or the Chair of the Governance Committee will communicate the results of the evaluation to the Chief Executive Officer.
  2. Annual CEO Compensation.  The Human Resources Committee will make a recommendation to the Board of Directors as to the Chief Executive Officer’s compensation, with consideration of the compensation principles and practices established by the Committee and the annual evaluation of the Chief Executive Officer’s performance. The Chairman of the Board or the Chair of the Human Resources Committee will communicate the results of the approved compensation changes to the Chief Executive Officer.
  3. Succession Planning.  The Board, with general input from the Governance Committee, will work with the Company’s Chief Executive Officer to establish and review annually a succession plan for the chief executive officer position, as well as to develop plans for interim succession in the event of an unexpected occurrence. The Board may review succession planning more frequently as it deems appropriate.
  4. Management Development.  The Board, with general input from the Human Resources or Governance Committees, as appropriate, will provide general direction and oversight in the Company’s establishment and management of an appropriate system for the education, training, development and orderly succession of senior and other managers throughout the Company.

Other Guidelines

  1. Confidential Voting.  The Company’s policy is that individual stockholder voting be confidential, except where disclosure may be necessary to satisfy legal requirements, where disclosure is requested by the stockholder or in a contested election.
  2. Governance Disclosures.  The Company will post on its website (a) these Guidelines, (b) the Charters of the Audit, Governance, Human Resources, Finance and Technology Advisory Committees, and (c) such other business conduct or ethics policies or codes as the Board from time to time may deem appropriate.
  3. Repricing of Stock Options.  The Board opposes repricing of stock options by a reduction in the option’s exercise price. The Board supports equitable adjustment of an option’s exercise price, as contemplated by the Company’s management equity plans, in connection with a reclassification of the Company’s stock, stock split, restructuring, merger or combination of the Company or other similar event in which it is customary to adjust the exercise price of an option and/or the number and kind of shares subject thereto.

Effective as of December 13, 2016