CORPORATE GOVERNANCE GUIDELINES FOR THE BOARDS OF DIRECTORS
APPROVED: JULY 12, 2012
The NASDAQ Stock Market LLC (“NASDAQ Exchange”), the NASDAQ OMX PHLX LLC (“PHLX”) and the NASDAQ OMX BX, Inc. (“BX”) (each an “Exchange” and collectively “Exchanges”) Boards of Directors have developed corporate governance policies and practices to help fulfill their responsibilities to members of the Exchanges. These governance policies and practices are memorialized in these guidelines.
The purpose of these Corporate Governance Guidelines (“Guidelines”) is to assist the Boards in the exercise of their responsibilities and to provide a concise description of the corporate governance obligations, principles and practices of the Boards. The Guidelines, in conjunction with each Exchange’s Certificate of Incorporation or Operating Agreement, By-Laws, Rules and Committee Charters, form the framework for the governance of the Exchanges and help assure that the Boards will have the necessary information, authority and practices in place to review and evaluate the Exchanges’ business operations and risks, and to make decisions independent of management.
The Boards are committed to upholding the highest legal and ethical conduct in fulfilling their responsibilities. The Boards expect the Exchanges’ Board members, officers and employees to act ethically at all times.
Since the operations of the Boards are a dynamic process, these Guidelines are reviewed periodically and are subject to such future refinement or changes as the Boards may find necessary or advisable
The Board of each Exchange is vested with all powers necessary for the management and administration of the Exchange’s regulatory and business operations. The Board has a function independent of management and is not responsible for the day-to-day affairs of the Exchange. However, it does have the responsibility to oversee management and be informed, investigate and act as necessary to promote the Exchange’s regulatory obligations and business objectives. As required by applicable law, the commitment of the directors is to the Exchange and includes regulatory obligations.
Each Board reviews reports by management on its performance, its plans and business prospects, as well as issues facing the Exchange during its regularly scheduled meetings and any special meetings. Board members are expected to prepare for, attend and participate in all scheduled Board and applicable Committee meetings.
Board members are expected to comply with the Code of Conduct for the Exchanges’ Boards of Directors (“Board Code”). The Board Code was adopted by the Boards to reflect a commitment to the highest standards of ethical and business conduct and to comply with the Listing Rules of the NASDAQ Exchange. Although these Listing Rules are not directly applicable to the Exchanges, which are not themselves public companies, it has been determined by the Boards that compliance with these requirements sets an appropriately high standard of conduct. Each Board member is expected to become familiar with and abide by the specific ethical standards set forth in the Board Code, as well as any interpretations and procedures issued thereunder. Board members are encouraged to consult with the NASDAQ OMX Office of General Counsel if there is any doubt as to whether a particular transaction or course of conduct complies with or is subject to the Board Code.
Board meetings are scheduled in advance, although special meeting may be called as necessary. The meetings are usually held at NASDAQ OMX headquarters in New York, New York, but may occasionally be held at another facility in the United States or abroad.
A. Meeting Order and Agenda
The Chairman establishes the rules of order and procedure of the Board meeting to ensure the meeting is conducted in an orderly fashion. The Chairman also controls the order of issues to be presented to the Board. The Chairman retains the right, if necessary, to rule out of order any remarks or discussion.
The Board is responsible for the Board meeting agenda. Board members are urged to make suggestions for agenda items or meeting materials to the Chairman and Chief Executive Officer. The Chairman and Chief Executive Officer establish an agenda for the Board meetings to be held during the year.
B. Attendance and Participation
Board members should attend and participate regularly in Board and Committee meetings consistent with the general fiduciary standards and governance needs of NASDAQ OMX. Pursuant to the SEC Proxy Rules, Board members who attend less than 75% of the NASDAQ OMX's Board meetings and applicable committee meetings will be noted in the annual proxy. Each director is invited and strongly encouraged to attend the Annual Meeting of Shareholders.
C. Selection of Agenda Items and Board Meeting Materials
The Chairman, with input from the CEO, Board members and Corporate Secretary, will establish an agenda for each Board meeting. Board members are urged to suggest agenda items or pre-meeting materials that may be of interest to the entire Board. Information important to the business matters at the Board meeting is distributed in advance of the Board meeting. As a general rule, materials are distributed in advance so that the Board meeting time may be focused on discussions and analysis, rather than an exchange of information. Confidential matters may be discussed at the Board meeting without materials being distributed in advance of the meeting.
D. Board Presentations by Managers
Board meetings routinely include presentations by senior executives and managers to who can either provide additional insight to the Board on topics being discussed, and/or who management believes have future potential and should be given exposure to the Board. Senior executives in the top management positions attend each Board meeting.
E. Stockholder Communication with Directors
Stockholders may communicate to the NASDAQ OMX Board by sending correspondence to the Corporate Secretary. The Corporate Secretary will forward all correspondence to the appropriate Board member.
In accordance with SEC Rules and the Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures for the treatment of concerns relating to accounting, internal controls or auditing matters. These matters are immediately brought to the attention of NASDAQ OMX's internal audit department and Office of General Counsel.
F. Chairman and Executive Sessions of Board
The Chairman and the independent directors meet in a separate meeting with the CEO and Corporate Secretary ("Chairman's Sessions") at every regularly scheduled Board meeting.
The independent directors meet in a separate closed session ("Executive Sessions") at every Board meeting.
The Chairman is responsible for chairing the Chairman's Sessions and the Executive Sessions and reporting to the CEO and Corporate Secretary any actions taken during an Executive Sessions.
G. Committees of the Board
Committees are appointed by the Board to facilitate and assist in the execution of the Board's responsibilities. NASDAQ OMX's Board Committees include, at a minimum, Audit, Executive, Finance, Nominating & Governance, and Management Compensation Committees. The Board may add new committees or remove existing committees as it deems it advisable in the fulfillment of its responsibilities. Each independent Board member generally serves on more than one committee.
Each committee will perform its duties as assigned by the Board in compliance with the By-Laws and the Committee Charters. The Committee Charters of the Audit, Executive, Finance, Nominating & Governance and Management Compensation Committees are located on the NASDAQ OMX website at www.nasdaqomx.com.
H. Assignment and Rotation of Committee Members
The Nominating & Governance Committee reviews and recommends to the Board for approval the Chair and the members of the Board Committees on an annual basis. Board members may indicate their Committee preference; however, the selection process will be subject to the compositional requirements for the Committees and to the Board's view as to the most appropriate persons to serve on the Committee, taking into account all factors that it deems relevant including any independence and other criteria required by securities law or the Board of Directors. The Board is responsible for the appointment of committee members and committee chairpersons according to criteria that it determines to be in the best interest of NASDAQ OMX and its stockholders.
The Audit, Nominating & Governance, and the Management Compensation Committees consist solely of independent Board members.
I. Operation of Committees
The Committee Chairman establishes the rules of order and procedure of the meeting to ensure the meeting is conducted in an orderly fashion. The Committee Chairman controls the meeting agenda and the order of issues to be presented to the Board. The Committee Chairman retains the right, if necessary, to rule out of order any remarks or discussion that does not comply with Committee procedures. The Committee Chairman may make additional meeting rules as appropriate or advisable.
J. Selection of Committee Agenda and Committee Materials
The Committee is responsible for the Committee meeting agenda. Committee members are urged to make suggestions for agenda items or meeting materials to the Committee Chairman, Chief Executive Officer and Corporate Secretary.
The Chairman of the Committee, with input from the Chairman, CEO, Corporate Secretary, or staff liaison, will establish a meeting agenda for each Committee. Information important to the business matters at the Committee meeting is distributed in advance of the meeting. As a general rule, materials are distributed in advance so that the Committee meeting time may be focused on discussions and analysis, rather than an exchange of information. Confidential matters may be discussed at the Committee meeting without materials being distributed in advance of the meeting.
K. Executive Sessions of Committees
The Committee Chairman has separate meetings for the independent members ("Executive Sessions") at every regularly scheduled Committee meeting. In addition to Executive Sessions, the Audit Committee and any other committees as deemed necessary, may have separate meetings with management, the independent auditors, and other third parties.
A. Director Orientation
Annually all directors receive an orientation and reference manual providing a corporate and business overview and summarizing the director duties and responsibilities. The orientation program includes among other things: a strategic presentation by each of the business lines, a presentation of significant financial, accounting and risk management issues; a presentation of the corporate legal, compliance and regulatory programs; and a presentation of the NASDAQ OMX Code of Ethics.
The orientation program also includes a review of directors' fiduciary duties and obligations, the corporate expectations in terms of a director's times and attendance at Board meetings.
New directors attend an orientation program that includes meetings with senior management. The General Counsel and Corporate Secretary are responsible for providing materials and briefings sessions for all Board members on subjects that will assist them in discharging their duties.
B. Director Continuing Education
Directors are expected and encouraged to participate in continuing education programs in order to maintain the necessary level of expertise to perform their responsibilities as directors. NASDAQ OMX will pay all reasonable expenses related to director continuing education.
C. Evaluation of Senior Management
The Board, through the Management Compensation and Nominating & Governance Committees, evaluates the CEO on an annual and semi-annual basis. The Chairman of the Board and the Management Compensation Committee communicates this evaluation to the CEO. The evaluation is based on objective criteria including performance of the corporation, accomplishment of long-term strategic objectives and development of senior management. The Management Compensation Committee will use the evaluation when considering the compensation of the CEO. The Board, through the Management Compensation Committee, also evaluates results to senior management and the Corporate Secretary annually. The Chief Executive Officer or Chairman communicates the evaluation to senior management and to the Corporate Secretary.
D. Succession Planning and Management Development
The Management Compensation Committee, the Board and the Chief Executive Officer review on an annual basis the succession planning and management development program. The Chief Executive Officer prepares and the Board reviews, on an annual basis, a short-term succession plan which delineates a temporary delegation of authority to certain officers of the company, if all or a portion of the senior officers should unexpectedly become unable to perform their duties. In conjunction with the annual report of the succession plan, the CEO will also report on NASDAQ OMX's program for senior management development.