CORPORATE GOVERNANCE: PHILOSOPHY
As reflected in our Guiding Principles, Ethics Policy, and overall code of conduct, Kimball International is committed to the highest standards of ethical conduct in its business transactions. Kimball International believes that our Company, through its Board of Directors, Executive Management, and Employees, reflect these Guiding Principles in the structure of the governance of our Company. We are aligned, engaged, and operating in an environment of mutual trust and respect. While ethics cannot be legislated or mandated, they are the foundation of the Corporate Governance Principles.
Board Leadership Structure
The Board shall determine the leadership structure of the Board from time to time. The Board shall choose its Chairman based upon the Board’s view of what is in the best interests of the Company at any given point in time, based on the recommendation of the Compensation & Governance Committee. Therefore, the Board does not have a policy on whether the role of the Chairman and Chief Executive Officer should be separate or combined and, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee.
When the Chairman of the Board is not an independent director, the Board will elect a “Lead Independent Director” in order to monitor and support the relationship between the Board and the Chairman/CEO and ensure that the interests of the shareholders are served by the Board. The independent members of the Board shall select the Lead Independent Director. The Lead Independent Director shall be affirmed or replaced at the Reorganization Meeting held by the Board following the Annual Shareholder Meeting each year. The Lead Independent Director shall serve in that role for a maximum of three years.
The Lead Independent Director shall have the duties and responsibilities set out in the Corporate Governance Principles and as may be assigned from time to time by the Board or the Chairman. The Lead Independent Director’s responsibilities shall include:
presiding at all meetings of the Board, including executive sessions, when the Chairman is not present;
presiding over shareholder meetings when the Chairman is not present;
acting as liaison between the Chairman and independent directors, although direct communication between each director and the Chairman/CEO is encouraged;
assisting the Chairman with developing schedules and agendas for Board meetings and meetings of the independent directors;
leading the annual board and director performance evaluation process in conjunction with the Compensation and Governance Committee; and
assisting the Chairman with other Board matters as requested by the Chairman or the Board.
Size of Board
The Company's Articles of Incorporation require that the Board consist of between 7 and 15 members, the exact number being set by the Board of Directors as authorized under the By-laws. The Compensation & Governance Committee and the Board periodically review the appropriate size of the Board.
The exercise of independent judgment by the directors is critical to effective corporate governance. The majority of the directors on the Company's Board are classified as "Independent" in accordance with our stock exchange (NASDAQ) listing requirements. The Board shall affirmatively determine the independence of each non-employee director and consider all factors relevant in determining whether he or she has a relationship with the Company which is material to the director’s ability to be independent from management in the performance of his or her duties. In addition, a director will not qualify to serve on either the Company’s Audit Committee or Compensation & Governance Committee if the director is not independent in accordance with applicable NASDAQ requirements and the rules of the Securities and Exchange Commission.
Board Membership Criteria
The rapidly changing business conditions and markets in which the Company operates require a high-performance and committed Board. Expectations of our Board members include:
Commitment to the Company's Vision, and Guiding Principles;
Commonsense and practical and good judgment;
Broad and complementary experience and expertise in various areas such as finance and accounting, education, government, etc., such that the members can bring a diverse set of skills and backgrounds to bear on the complicated issues which come before it;
Prepare for, attend and participate in all Board and applicable committee meetings;
Commitment to serve over a period of time sufficient to understand the Company's history, markets, and business operations; and
Willingness to think independently and present reasoned points of view.
The Compensation & Governance Committee shall identify possible nominees who meet specified objectives in terms of the composition of the Board, taking into account the diversity of the nominees with respect to gender, race, national origin, education and professional experience.
Shareholder Board Member Recommendations
The Compensation & Governance Committee will consider candidates recommended by shareholders. A shareholder who wishes to recommend a director candidate for consideration by the Compensation & Governance Committee should send such recommendation to the Secretary of the Company at 1600 Royal Street, Jasper, IN 47549, who will forward it to the Committee. Any such recommendation should include a description of the candidate's qualifications for Board service, the candidate's written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the shareholder and the candidate for more information. A shareholder who wishes to nominate an individual as a director candidate at the annual meeting of shareholders, rather than recommend the individual to the Compensation & Governance Committee as a nominee, must comply with the advance notice requirements mandated by the Company's By-laws and further explained in the "Share Owner Proposals" section of its Proxy Statement.
Conflicts of Interest
A relationship by a Board member, or a member of his or her family, with a customer, supplier, or other relationship which may impair a director's ability to exercise independent judgment is prohibited.
Directors who Change Their Present Job Responsibility
The Board does not believe that directors who retire or change the position they held when they became a member of the Board should necessarily leave the Board. The Compensation & Governance Committee will review the continued appropriateness of Board membership under such circumstances.
Other Directorships and Committee Memberships
Directors are encouraged to limit the number of other public company boards on which they serve, taking into account potential board attendance, participation and effectiveness on these boards. Directors should advise the Chairman of the Board and the Chair of the Compensation & Governance Committee before accepting an invitation to serve on another public company board.
In addition, no member of the Company's Audit Committee or Compensation & Governance Committee may simultaneously serve on committees of more than two other public companies unless the Board has determined that service on the respective committees of other public companies will not impair that director's ability to effectively serve on the Company's Audit or Compensation & Governance Committee.
Majority Election of Directors
In any uncontested election of an individual director or a class of directors, if more proxy votes are “withheld” than are cast “for” in the election of an incumbent director, the director shall promptly tender his or her resignation to the Board of Directors. The Compensation and Governance Committee of the Board of Directors (the “Committee”) shall be given 90 days after receipt of the resignation to consider whether to accept it and shall make a recommendation to the Board regarding same. The Committee shall review relevant information, including factors relevant to why votes would have been withheld; the length of service, qualifications and skillsets of the director; the contributions by that director to the Company during his or her tenure; the Corporate Bylaws, Governance Principles, applicable laws and regulations; and any other relevant factors, to make their determination. The Board shall review the recommendation of the Committee and render a decision within 30 days of receipt of the resignation, making such decision publicly known. The impacted director(s) shall not participate in either the Committee review or the Board decision, but may participate in any scheduled Board meetings up to the point in time when a decision is made to accept or reject the resignation. If the resignation is accepted, the director will immediately be removed from the Board. The Compensation and Governance Committee shall then proceed with selection of a replacement in accordance with the Bylaws and Corporate Governance Principles.
In the event that more proxy votes are “withheld” than cast “for” more than one director, resulting in the Committee not having a quorum for purposes of the necessary review, the independent directors of the Board shall conduct the review normally performed by the Committee. The Committee and Board may adopt procedures appropriate to facilitate the review and determination required by this Policy. “Uncontested” shall mean that the proxy election does not involve nominees for director who are not part of the slate of nominees recommended by the Board, and/or the number of nominees does not exceed the number of director positions to be filled at any given proxy election. “Independent directors” are determined in accordance with requirements of NASDAQ, and shall consist only of those independent directors who received a majority of favorable votes cast, if they were part of the same proxy election.
Board Stock Ownership Guidelines
The Board has adopted stock ownership guidelines requiring the holding of certain levels of equity interest in the Company by not only executives, but directors as well. These guidelines require that each director, within 5 years of election, own an equity interest in the Company with a value equal to at least three times his or her total annual Board compensation. Annual review of ownership progression is carried out under the direction of the Board.
Restrictions on Hedging and Pledging Shares
Members of the Company’s Board of Directors and the Kimball Operating Performance Team are not permitted to engage in the follow practices related to Company stock owned or controlled by them:
Trading in Company stock on a short-term basis – all stock must be held for at least six months;
Engaging in short sales;
Margin-trading, buying or selling puts or calls;
Pledging Company stock as collateral in transactions or otherwise to secure debt(s); or
Engaging in hedging or monetization transactions, such as collaring or forward sale contracts.
Related Persons Transactions Policy
Related Persons Transactions, which are limited to those described in this Policy, shall be subject to the review and approval, ratification, modification, or rejection by the Committee and/or the Board in accordance with this Policy, the Business Ethics Policy, or other Company policies, when applicable. This Policy is not intended to supersede or replace any other policy of the Company.
Review of Corporate Governance Principles
These Corporate Governance Principles are subject to modification from time to time by the Board, based upon the recommendations from the Compensation & Governance Committee.
Kimberly K. Ryan
Chair of the Board
Audit Committee Member
President, Coperion GmbH
Senior Vice President, Hillenbrand, Inc
Patrick E. Connolly
Audit Committee Chair
President & CEO, Follett Corporation
Dr. Susan B. Frampton
Compensation and Governance Committee Chair
President, Planetree, Inc.
Kristine L. Juster
Chief Executive Officer, Kimball International
Geoffrey L. Stringer
Compensation and Governance Committee Member
Retired Former Executive Vice President of Bank One and Chief Executive Officer of Bank One Capital Corporation
Thomas J. Tischhauser
Compensation and Governance Committee Member
Principal & Executive Coach, Wynstone Partners; Former Corporate Vice President, Continental Automotive and Motorola, Inc.
Timothy J. Jahnke
Audit Committee Member
President and CEO, Elkay Manufacturing Co.
The Board is elected by the shareholders to protect their interests through counsel and direction to the management of the Company with a long-term view toward the Company's success and prosperity. The Board’s role is to oversee the management and governance of the Company and to monitor performance of senior management.
The Board has delegated certain functions to committees of the Board, and primarily delegates to the Chief Executive Officer, working in conjunction with all the other officers and employees of the Company, the authority and responsibility for the day-to-day management of the business of the Company consistent with our Guiding Principles. Major matters affecting the Company require approval of the Board of Directors, and in some instances, approval of the shareholders.
Among the Board’s core fiduciary responsibilities are the following:
Select individuals for Board and committee membership and evaluate the performance of the Board, its committees, and individual directors;
Select, monitor, evaluate and compensate senior management;
Assure management succession planning is adequate;
Review and approve significant corporate actions;
Review, approve and monitor implementation of management’s strategic plans;
Monitor corporate performance and evaluate results compared to the strategic plans and other long-range goals;
Review the Company’s financial controls and reporting systems, oversee the audit function and hire the external auditor;
Review and approve the Company’s financial statements and financial reporting;
Review the Company’s governance policies, ethical standards and legal compliance programs and procedures;
Oversee the Company’s management of enterprise risk; and
Monitor relations with shareholders, employees and the communities in which the Company operates.
CONFLICT MINERALS POLICY STATEMENT
Minerals mined in the Democratic Republic of Congo (DRC) and adjoining countries may be making their way into the supply chain. Some mining operations in the DRC have been linked to poor labor and environmental practices, and there is evidence that some mining and transportation of minerals in the Eastern provinces of the Democratic Republic of Congo (DRC) are funding conflict in the country by funding illegal armed groups. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the United States Securities and Exchange Commission (SEC) passed legislation which requires U.S. companies to report on the origin of these conflict minerals including tin, tantalum, tungsten and gold.
Kimball International is committed to ethical practices and compliance with all applicable laws and regulations. While we do not source these metals directly, they may exist in the materials and components we source. We are therefore committed to working with our suppliers to responsibly source the materials and components we use in manufacturing our products which may contain these minerals. To comply with the SEC reporting regulations relating to conflict minerals, Kimball International requires chain of custody declarations from our suppliers to verify the origin of the conflict minerals contained in their products.
In addition, we require the following from our suppliers:
to source materials from socially responsible sub-tier suppliers and manufacturers
to assist us to comply with the SEC regulations related to conflict minerals and to provide all necessary declarations
to undertake reasonable due diligence within their supply chain to determine the origin of the conflict minerals, including developing policies and management systems preventing the use of conflict minerals or derivative metals sourced from mines that directly or indirectly finance armed groups through mining or mineral trading in the DRC or any adjoining country, and to pass these requirements along to their sub-tier suppliers and require them to do the same with lower tiers of suppliers.
In addition, we will work with our suppliers to seek remedies for non-compliance.
The process of tracing the conflict minerals through the supply chain is complicated and time- consuming. Therefore, we will rely on industry initiatives, such as the Conflict Free Smelter Program, for assistance in complying with the SEC reporting requirements on conflict minerals.
Kimball is committed to working with our suppliers to ensure effective implementation of this legislation.
Click on the following link for our full report - Conflict Minerals Report
Board meetings are scheduled in advance. There are four regularly-scheduled meetings per year. The Board can also meet at other times or act by unanimous written consent, as appropriate in the circumstances.
The Chairman, in consultation with the Chief Executive Officer, Secretary, and Lead Independent Director (if applicable), drafts the agenda of each meeting and distributes it in advance for input by the Board. There is an annual cycle of agenda items which include regular operational reviews and finance reports by the Chief Financial Officer and/or operating unit executives.
It is expected that directors attend all Board meetings and meetings of committees on which they serve, as well as the annual meeting of shareholders.
Relevant materials are sent in advance of the Board meeting for review and adequate preparation by Board members.
Board Access to Management
The Board has complete and open access to any member of the Company's management. Senior Executive Management is often present at Board meetings which allows access directly to the Board members.
Access to Independent Advisors
The Board of Directors and its Committees have the authority, to the extent necessary to carry out their duties, to retain legal, financial, or other advisors. The Compensation and Governance Committee shall conduct a conflict of interest review of such advisors as required by applicable law.
Executive Sessions of Independent Directors
Independent Board members have the opportunity to meet without management present at least twice annually at regularly scheduled meetings.
The Lead Independent Director of the Board, or if no Lead Independent Director has been appointed, the Chair of the Compensation & Governance Committee, shall preside at executive sessions and determine what record, if any, should be made of the executive session.
Shareholder Communications with Board Members
Shareholders may communicate with Board members by sending comments in care of the Company's Secretary at 1600 Royal Street, Jasper, IN 47549. The Secretary has the discretion to forward the correspondence to the director, or if circumstances dictate, to other departments within the Company to which such communication is more appropriately addressed. A log of correspondence received and copies of the correspondence are available to any director who wishes to review it.
Annual Board Self-Evaluation
The Board will conduct an annual review of its operation, including its members and committees with a focus on determining the effectiveness of the Board in operating as a cohesive and effective governing body. The Compensation & Governance Committee, in conjunction with the Lead Independent Director, if any, shall receive comments from all directors and report annually to the Board with an assessment of the Board’s performance, to be discussed with the full Board.
Board Compensation Review
The Board shall conduct an annual review of director compensation. This review will include input from the Company’s management in order to evaluate director compensation compared to other companies of like size. Any change in Board compensation will be approved by the full Board.
Director Orientation and Continuing Education
Meetings of the Board shall be designed to provide orientation for new directors to assist them in understanding the Company’s business as well as an introduction to the Company’s management. Further, the Company encourages directors to participate in continuing education programs focused on the responsibilities of members of the Board. The Company shall reimburse the director for customary and reasonable expenses incurred in connection with their participation in such continuing education programs
Committees are established by the Board from time-to-time to assist in the execution of the Board's responsibilities. There are standing committees, as well as the opportunity if necessary to appoint ad hoc committees for a specified purpose. There are currently no ad hoc committees of the Board, and there exist two standing committees:
Compensation & Governance Committee
The Compensation & Governance Committee is responsible for making recommendations to the Board with respect to the assignment of Board members to these committees and with respect to the Chairs of the committees. After reviewing the Compensation & Governance Committee’s recommendations, the Board shall be responsible for appointing the Chairs and members to the committees.
These committees meet at least once per year, but typically more. Each committee carries out its responsibilities in accordance with the authority delegated in its Charter from the Board of Directors. Each committee has the authority to engage outside advisors and reports its findings and recommendations for action to the full Board.
A brief description for each of the standing committees is as follows:
The primary function of the Audit Committee is to provide independent, objective oversight of the Company's accounting functions, internal controls, and financial reporting. Its primary duties and responsibilities are to monitor and oversee the Company’s accounting functions, financial reporting processes, and the audit of the Company’s financial statements; assist the Board in oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications, independence and performance, (iv) the organization and performance of the Company’s internal audit group, and (v) the Company’s internal accounting and financial controls; and provide an open avenue of communication among the Company’s independent registered public accounting firm, financial and senior management, the internal audit group, and the Board of Directors.
Compensation & Governance Committee
The Committee's primary functions are to assist the Board of Directors in the discharge of its fiduciary responsibilities relating to the grant of stock compensation, the fair and competitive compensation of the Chief Executive Officer and other Executive Officers, the Company's contribution to the Retirement Plan, goals and awards under the Profit Sharing Bonus Plan, matters of corporate governance, identification, evaluation and nomination of individuals qualified to be Board members, Board and committee composition and evaluations, Board member orientation and education and succession planning.