Members of the Kaman Corporation Board of Directors and the company's corporate management take governance matters very seriously. This section of the Kaman website includes the full text of the Board of Directors' Corporate Governance Principles. In other portions of this section, you will find a full list of Board members with brief biographical information, and detail on Board Committee Assignments. Effective April 27, 2011, the Board has nine members, eight of whom are independent.
Table of Contents:
- Philosophy and Role of the Board
- Selection and Composition of the Board
1. Board Membership Criteria
2. Selection and Orientation of New Directors
3. Director Elections - Board Leadership
4. Selection of Chairman and CEO
5. Lead Independent Director - Board Composition and Performance
6. Size of the Board
7. Independence of the Board
8. Directors Who Change Their Principal Occupation, Position or Responsibility
9. Term Limits
10. Retirement Age
11. Board Compensation; Stock Ownership Guidelines
12. Executive Sessions of Independent Directors
13. Assessing the Board's Performance
14. Board's Interaction with Institutional Investors, Press, Customers, etc. - Board Relationship to Senior Management
15. Regular Attendance of Non-Directors at Board Meetings
16. Board Access to Senior Management - Meeting Procedures and Attendance
17. Number, Structure and Independence of Committees - Committee Matters
18. Number, Structure and Independence of Committees
19. Assignment and Rotation of Committee Members
20. Frequency and Length of Committee Meetings
21. Committee Agenda - Leadership Development
22. Formal Evaluation of the Chief Executive Officer
23. Succession Planning and Management Development - Annex A - Director Independence Guidelines
Philosophy and Role of the Board
The primary mission of the Board is to represent and protect the interests of the company's shareholders. In so doing, the Board has the legal responsibility for overseeing the affairs of the company and has certain specified powers and authorities with respect to corporate action provided by Connecticut law. The Board's oversight function can and should be exercised through the election and appointment of competent officers. The Board nevertheless remains responsible for oversight and thus has an obligation to keep informed in order to assist management in formulating and developing plans; it also sets necessary criteria and serves as a body to review and advise management on the operations of the company. These duties should be discharged by the full Board, the Board's committees, or the independent members of the Board, as appropriate in the circumstances.
Specific duties include:
(a) Selecting the Chief Executive Officer; evaluating performance of the Chief Executive Officer; establishing compensation for the Chief Executive Officer; approving the selection of senior management; evaluating the performance of senior management; establishing compensation of senior management; periodic review of plans for management succession; and assessment of the soundness of the organizational structure;
(b) Encouraging the long-term success of the company by exercising sound and independent business judgment with respect to significant strategic and operational issues, including major capital expenditures, diversifications, acquisitions, divestitures and new ventures;
(c) Safeguarding corporate assets by periodically reviewing the financial affairs and policies of the company and overseeing the company's financial reporting process and internal controls;
(d) Exercising direct oversight of strategic risks to the Company, and receiving and reviewing reports from the appropriate standing committees of the Board regarding specific areas of risk for which the committees are tasked with responsibility and oversight;
(e) Ensuring the company's compliance with applicable laws and regulations;
(f) Being sensitive to the public and political environment, taking into account the responsibility of the company to its shareholders, employees, customers, and the community;
(g) Evaluating the effectiveness of the Board as a body;
(h) Reviewing and recommending the structure, composition, and responsibilities of the committees of the Board; and
(i) Meeting in executive session regularly to allow full and candid discussion among Board members on matters of importance to the company.
Selection and Composition of the Board
1. Board Membership Criteria
The Corporate Governance Committee is responsible for reviewing with the Board, on a periodic basis, the appropriate skills and characteristics required of Board members in the context of the current composition of the Board. This assessment should include issues of diversity, age, skills such as understanding of industries in which the company does business, international, financial or systems background, etc.all in the context of an assessment of the perceived needs of the Board at that point in time.
2. Selection and Orientation of New Directors
The Board is responsible for selecting its own members and in recommending them for election by the shareholders. The Board delegates the screening process involved to the Corporate Governance Committee which consults with the Chairman and Chief Executive Officer and an independent consultant after which it provides recommendations to the Board. The Board and the company have an orientation process for new Directors that includes background material, meetings with senior management and visits to company facilities. Once the Board has made the determination to add a new Director, the invitation to join the Board should be extended by the Chairman of the Board.
3. Director Elections
Majority Vote. In an uncontested election for Directors (one in which the number of nominees does not exceed the number of Directors to be elected) at a meeting of shareholders duly called and held, any Director nominee who does not receive a majority of the votes cast but is elected pursuant to a plurality vote, shall promptly tender his or her resignation following certification of the shareholder vote by the Company's tabulation agent. For purposes of this policy, a "majority of the votes cast" means that the number of shares voted "for" a Director's election exceeds fifty percent (50%) of the number of votes cast with respect to that Director's election. "Votes cast" include votes to withhold authority and exclude abstentions and broker non-votes with respect to that Director's election.
The Process. The Corporate Governance Committee shall make a recommendation to the Board as to acceptance or rejection of the tendered resignation or whether other action should be taken, and, depending on the recommendation, whether or not a resulting vacancy should be filled. The Board will act on the tendered resignation, taking into account the Committee's recommendation. The Board will publicly disclose its decision and the rationale therefor in a press release to be disseminated in the customary manner together with the filing of aForm 8-K with the Securities and Exchange Commission (SEC). This deliberation and disclosure process shall be completed within ninety (90) days after the aforementioned shareholder vote certification. A Director who has tendered his or her resignation in accordance with this Section 3 shall not participate in the Corporate Governance Committee's determination process and/or the Board's action regarding the matter.
Factors. In arriving at their recommendations/decision, the Corporate Governance Committee and the Board shall evaluate such tendered resignation in light of the best interests of the company and its shareholders and may consider any information that they consider relevant and appropriate, including the:
- Director's qualifications in light of the overall composition of the Board;
- Director's past and anticipated future contributions to the Board;
- stated reasons, if any, for the "withheld" votes and if the underlying cause can be otherwise addressed; and
- potential adverse consequences of accepting the resignation, including failure to comply with any applicable rule or regulation (including NASDAQ rules or federal securities laws) or triggering defaults or other adverse consequences under material contracts or the acceleration of change-in-control provisions and other rights in employment agreements, if applicable.
Determination; Board Vacancies. If the Board determines to accept the resignation of a Director nominee, the Board may, in its sole discretion, (a) fill the resulting vacancy with any other person pursuant to the provisions of Article Seventh of the company's Amended and Restated Certificate of Incorporation, or (b) reduce the number of Directors of the Board to equal the number of remaining Directors pursuant to the provisions of Article Seventh of the Company's Amended and Restated Certificate of Incorporation. In the event the Board elects to fill the resulting vacancy on the Board, the term of the Director so elected shall expire at the next annual meeting of shareholders at which Directors are to be elected.
If the Board determines not to accept the resignation of a Director nominee, such Director will continue to serve until the annual meeting for the year in which such Director's term expires and until such Director's successor shall be duly elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
Board Leadership
4. Selection of Chairman and CEO
The Board should be free to make this choice any way that seems best for the company at a given point in time. Therefore, the Board does not have a policy on whether or not the role of the Chief Executive and Chairman should be separate and, if it is to be separate, whether the Chairman should be selected from the non-employee Directors or be an employee.
5. Lead Director
Annually, the Board shall appoint from among its members an individual to serve as Lead Independent Director. The Lead Independent Director shall perform the following roles and functions:
- member of the Corporate Governance Committee;
- Chair of the Board's Executive Sessions;
- Chair of Board meetings at which the Chairman and Vice Chairman (if any) are not in attendance;
- review and approval of all Board and Committee meeting agendas;
- liaison between the Chairman and the independent Directors, which shall include facilitating communications and assisting in the resolution of conflicts, if any, between the independent Directors and the Company's management;
- provide counsel to the Chairman and Chief Executive Officer, including provision of appropriate feedback regarding effectiveness of Board meetings, and otherwise as needed or requested; and
- such other responsibilities as the Board may delegate from time to time.
In performing these responsibilities, the Lead Independent Director is expected to consult with the chairpersons of other Board Committees as appropriate and solicit their participation as needed in order to avoid the appearance of diluting the authority or responsibility of the Board Committees and their chairpersons.
Board Composition and Performance
6. Size of the Board
The company's Bylaws provide for a maximum of fifteen directorships. It is the sense of the Board that a size of nine to eleven is appropriate at this time.
7. Independence of the Board
The Board believes that as a matter of policy, a significant majority of the Board should consist of independent Directors. In addition to establishing its own criteria for independence, the company complies with the rules promulgated by NASDAQ for determining the independence of directors, as well as the Sarbanes-Oxley Act for independence of directors on the Audit Committee and Internal Revenue Code of 1986 requirements for independence of directors on the Personnel and Compensation Committee. To be deemed "independent" in any year, a director must meet the qualifications in the Director Independence Guidelines attached hereto as Annex A.
8. Directors Who Change Their Principal Occupation, Position or Responsibility
Individual Directors who change the principal occupation, position or responsibility they held when they were elected to the Board should submit a letter of resignation to the Board. It is not the sense of the Board that in every instance the Directors who retire or change from the position they held when they came on the Board should necessarily leave the Board. There should, however, be an opportunity for the Board, via the Corporate Governance Committee, to review the continued appropriateness of Board membership under these circumstances. The Board believes this is a matter to be decided in each individual instance. It is assumed that when the Chief Executive Officer resigns from that position, he/she should submit his/her resignation from the Board at the same time. Whether the individual continues to serve on the Board is a matter for discussion at that time with the new Chief Executive Officer and the Board.
9. Term Limits
The Board does not believe it should establish term limits. While term limits could help insure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of Directors who have been able to develop, over a period of time, increasing insight into the company and its operations and, therefore, provide an increasing contribution to the Board as a whole.
10. Retirement Age
The Bylaws of the company provide that, unless otherwise authorized by the Board in writing, the mandatory retirement age for directors is 72. Directors serving on November 14, 2000 shall be eligible to serve until age 75. The Board's policy in implementing this requirement is that if a Director attains mandatory retirement age during his or her then current term, the Director may continue to serve the remaining portion of that term.
11. Board Compensation; Stock Ownership Guidelines
The Corporate Governance Committee reviews the Board's compensation structure on a biennial basis with a view to determining its competitiveness related to other similar U.S. companies. As part of a Director's total compensation and to create a direct linkage with corporate performance, the Board believes that a meaningful portion of a Director's compensation should be provided in Common Stock.
In 2006, the Board adopted stock ownership guidelines for itself consisting of a requirement that each Director own three times the current annual retainer and non-employee Directors who are not currently at this level are required to retain one-third of any newly vested restricted stock grants until the required level of ownership is achieved. In determining the value of the shares owned, the per share value will be the greater of the then current share value or the share value on the date the guidelines were adopted.
12. Executive Sessions of Independent Directors
The independent Directors of the Board will meet in Executive Session following each regular meeting of the Board, with the Lead Independent Director presiding as chairman. After each of these meetings, the Lead Independent Director will discuss any relevant items with the Chief Executive Officer.
13. Assessing the Boards Performance
The Corporate Governance Committee is responsible to report annually to the Board an assessment of the Board's performance. This will be discussed with the full Board. This review will ordinarily be performed during the fourth quarter of each year.
This assessment should be of the Board's contribution as a whole and specifically review areas in which the Board and/or management believes a better contribution could be made. Its purpose is to increase the effectiveness of the Board, not to target individual Board members.
14. Boards Interaction with Institutional Investors, Press, Customers, Etc.
The Board believes that management speaks for the company. Individual Board members may, from time to time at the request of the management, meet or otherwise communicate with various constituencies that are involved with the company. If comments from the Board are appropriate, they should, in most circumstances, come from the Chairman.
Board Relationship to Senior Management
15. Regular Attendance of Non-Directors at Board Meetings
The Board welcomes the regular attendance at each Board meeting of non-Board members as determined by the Chief Executive Officer.
16. Board Access to Senior Management
Board members have complete access to the companys management.
It is assumed that Board members will use judgment to be sure that this contact is not distracting to the business operation of the company and that such contact, if in writing, be copied to the Chairman and Chief Executive Officer.
Furthermore, the Board encourages management to, from time to time, bring managers into Board meetings who: (a) can provide additional insight into the items being discussed because of personal involvement in these areas, and/or (b) represent managers with future potential that the senior management believes should be given exposure to the Board.
Meeting Procedures and Attendance
17. Selection of Agenda Items for Board Meetings; Board Materials and Attendance; Retention of Advisors; Continuing Education
The Chairman establishes the agenda for each Board Meeting, with input by the Lead Independent Director (and if the Chairman is not also the Chief Executive Officer, from the Chief Executive Officer) as appropriate. Each Board member is free to suggest the inclusion of item(s) on the agenda.
Board materials related to agenda items are provided to Board members sufficiently in advance of Board meetings to allow the Directors to prepare for discussion of the items at the meeting.
Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend the time needed to properly discharge their responsibilities. Directors are also strongly encouraged to attend the Annual Meeting of Shareholders.
Retention of Advisors
The Board may retain independent legal, financial, accounting or other advisors as it deems appropriate in its discretion.
Continuing Education
The Board maintains a policy that Directors should be regularly exposed to discussion of current developments in their roles and responsibilities as directors and to information relevant to the market segments in which the company operates. The Board should periodically receive presentations from outside industry experts regarding developments and trends in the company's business segments, presentations from outside advisors regarding any significant developments impacting the Board's responsibilities, and participate in training sessions regarding the company's Code of Business Conduct. Board members are also encouraged to attend seminars that are relevant to their responsibilities as a Director, for which the company would reimburse them.
Committee Matters
18. Number, Structure and Independence of Committees
The current standing committees of the Board are considered appropriate. The standing committees are Corporate Governance, Audit, Personnel & Compensation, and Finance. From time to time, the Board may form a new committee or dissolve a current committee, as it deems appropriate. Each committee will adopt a charter to outline its responsibilities, which charter will be discussed with, and subject to approval by the Board. In all cases, the Board follows legal and regulatory requirements for the definition of 'independence' as well as the Director Independence Guidelines set forth in Annex A attached hereto, relative to Board Committee service and each Committee charter shall so reflect. Each committee will review its charter on a periodic basis.
With respect to the Audit Committee, if a committee member simultaneously serves on the audit committees of more than three publicly traded companies (including the Audit Committee), the Board must determine that such service would not impair such member's ability to serve effectively on this Committee and the Board's determination will be disclosed in the company's annual proxy statement.
19. Assignment and Rotation of Committee Members
The Corporate Governance Committee is responsible, after consultation with the Chief Executive Officer and with consideration of the desires of individual Board members, for the assignment of Board members to various committees. The Corporate Governance Committee shall consist of the chairmen of the standing committees and the Lead Independent Director, if that individual is not already a standing committee chairman.
Subject to any applicable independence requirements under law or NASDAQ listing standards, each Director shall have the opportunity to serve on two committees. Consideration should be given to rotating certain committee members periodically at about a three to five year interval. The Board does not feel that such a rotation should be mandated as a policy since there may be reasons at a given point in time to maintain an individual Director's Committee membership for a longer period.
20. Frequency and Length of Committee Meetings
The Committee Chairman, in conjunction with Committee members, will determine the frequency and length of the meetings of the Committee.
21. Committee Agenda
The Chairman of the committee, in conjunction with the appropriate members of management and staff, will develop the committee's agenda for each meeting.
Leadership Development
22. Formal Evaluation of the Chief Executive Officer
The Board believes that CEO performance should be evaluated annually and as a regular part of any decision with respect to CEO compensation. The Board and the Corporate Governance and Personnel and Compensation Committees currently share this responsibility. The Board has delegated responsibility to the Corporate Governance Committee to evaluate CEO performance and discuss its findings with the Personnel and Compensation Committee. The Corporate Governance Committee is responsible for setting annual and long-term performance goals for the CEO and for evaluation of his or her performance against such goals. As part of this process, the Corporate Governance Committee seeks direct input from all independent directors. The Committee meets annually with the CEO to receive his or her recommendations concerning such goals and to evaluate his or her performance against the prior year's goals. The evaluation will be used by the Personnel and Compensation Committee in the course of its deliberations when considering the compensation of the CEO.
The CEO's salary, bonus and long-term incentives will be ratified by the Board (with the CEO excusing himself or herself from the meeting) following the Personnel & Compensation Committee's action. Discussion of the CEO's performance is part of the ratification process. The Chairman of the Corporate Governance Committee reviews comments of the Board with the CEO following each such meeting, as appropriate.
The Board believes the evaluation of the CEO should be a process based on both qualitative and quantitative factors, including performance of the business, accomplishments of long-term objectives, positioning of the company for the future development of management and leadership in the industry.
23. Succession Planning and Management Development
There should be an annual review on succession planning given by the Chief Executive Officer to the Board. There should also be an annual review by the Chief Executive Officer with the Board on the company's program for management development.
There should also be available, on a continuing basis, the Chief Executive Officer's recommendation as to a successor should he/she be unexpectedly disabled.
Annex A - Director Independence Guidelines
- has not been employed by the company or its subsidiaries or Affiliates1 in any capacity in the past three years, other than as an interim executive officer, provided such interim employment did not last longer than one year (a director shall not be deemed to be "independent" while serving as an interim executive officer) (this qualification does not apply to Family Members1);
- does not have a Family Member who is, or at any time during the past three years was, employed by the company or its subsidiaries or Affiliates as an executive officer (this qualification applies only to Family Members of the director);
- has not accepted any compensation from the company or its subsidiaries or Affiliates during any period of twelve consecutive months within the past three years, other than the following: (a) compensation for service on the Board or a Board committee; (b) compensation paid to a Family Member who is a non-executive employee of the company or its subsidiaries or Affiliates; (c) benefits under a tax-qualified retirement plan; (d) non-discretionary compensation; or (e) compensation received for former services as an interim executive officer, provided such employment did not last longer than one year.
- has not received, during the current year or either of the three immediately preceding years, remuneration, directly or indirectly, other than de minimis remuneration, as a result of service as, or being affiliated with an entity that serves as (1) an adviser, consultant or legal counsel to the company or to a member of the company's senior management or (2) a significant customer or supplier of the company;
- is not a partner in, or a controlling shareholder or an executive officer of, any organization to which the company or its subsidiaries or Affiliates made, or from which the company or its subsidiaries or Affiliates received, payments for property or services in the current or any of the past three years that exceed the greater of $200,000 or 5% of the organization's consolidated gross revenues for that year (such payments do not include payments arising solely from investments in the company's securities, nor payments made under non-discretionary charitable contribution matching programs);
- is not a current partner of the company's outside auditor, or was a partner of the company's outside auditor who worked on the company's audit at any time during the past three years;
- has no personal services/contract(s) with the company or a member of the Company's senior management;
- is not affiliated with a not-for-profit entity that has received significant contributions from the company within the past five years;
- during the current year or any of the three immediately preceding years, has not had any business relationship with the company for which the company has been required to make disclosure under SEC Regulation S K, other than for service as a director or for which relationship no more than de minimis remuneration was received in any one such year;
- has not been employed by a company where at any time during the past three years any of the executive officers of the company served as a director;
- has not had any of the relationships described above, with any Affiliate of the company; and
- is not a Family Member of any person described above.
A director is deemed to have received remuneration, directly or indirectly, if remuneration, other than de minimis remuneration, was paid by the company, its subsidiaries or Affiliates, to any entity in which the director has a beneficial ownership interest of five percent or more, or to an entity by which the director is employed or self-employed other than as a director. Remuneration is deemed de minimis remuneration if such remuneration is $5,000 or less in any year, or if such remuneration is paid to an entity, and it (1) did not for the year exceed the lesser of $5 million, or one percent of the gross revenues of the entity and (2) did not directly result in an increase in the compensation received by the director from that entity.
1 For the purposes of this annex, an "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
1 For the purposes of this annex, a "Family Member" means a person's spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person's home.
