Corporate Governance Guidelines
U.S. HOME SYSTEMS, INC.
CORPORATE GOVERNANCE GUIDELINES
I. THE BOARD OF DIRECTORS
A. MEMBERSHIP
1. SIZE OF BOARD
The Board’s optimum size is seven to nine members.
2. MIX OF DIRECTORS; “INDEPENDENT” DIRECTORS
A majority of the directors shall satisfy the independence requirements of the NASDAQ Stock Market, Inc. (“NSM”) and any other regulatory authority. The Board believes that it should not have more than two management directors.
3. BOARD MEMBERSHIP CRITERIA
The Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and be selected based upon contributions they can make. The Company does not limit the number of boards on which a director may sit. Directors should plan to make a significant time commitment to the Company.
4. NEW DIRECTORS
The Nominating/Corporate Governance Committee has, as one of its responsibilities, the recommendation of director candidates to the full Board. The Nominating/Corporate Governance Committee will maintain an orientation program for new directors.
5. RETIREMENT; RESIGNATION
a. Term Limits The Board does not favor term limits for directors, but believes that it is essential to monitor overall Board performance as well as the performance of individual Board members.
b. Retirement Policy The Board does not favor a mandatory retirement policy for directors.
c. Resignation Policy - Management Directors Management directors shall offer to resign from the Board upon their resignation, removal or retirement as an officer of the Company.
d. Directors Changing Their Present Job Responsibilities The Board expects directors to offer to resign from the Board upon a change in their business position including, without limitation, retirement from the position held upon nomination as a director.
B. CONDUCT
1. BOARD MEETINGS
a. Selection of Agenda Items and Executive Sessions The Chairman and Chief Executive Officer will establish the agenda for Board meetings. The non-management directors of the Board will meet in executive session during each of the Board’s regularly scheduled meetings without any management directors and any other members of the Company’s management who may otherwise be present. The non-management directors will rotate the presiding position among the chairs of the authorized Board Committees and will disclose this process in the annual proxy statement.
b. Distribution of Materials The Company shall distribute, sufficiently in advance of meetings to permit meaningful review, written materials for use at Board meetings.
c. Attendance of Non-Directors The Board believes that attendance of key executive officers augments the meeting process.
d. Number of Meetings; Attendance and Preparation The Board of Directors shall hold a minimum of four (4) meetings per year. Directors are expected to attend all meetings and, prior to the meetings, to have reviewed all written meeting materials distributed to them in advance. Directors are expected to be physically present at all regularly scheduled meetings. Conference telephone, videoconference, or similar communication equipment attendance at a meeting will generally only be permitted if it is necessary to constitute a quorum.
2. CONFLICTS OF INTEREST
Directors are expected to avoid any action, position or interest that conflicts with an interest of the Company, or gives the appearance of a conflict. The Company annually solicits information from directors in order to monitor potential conflicts of interest, and directors are expected to be mindful of their fiduciary obligations to the Company. Directors are under a continuing obligation to disclose to the Board any situation that presents the possibility of a conflict or disparity of interest between the director and the Company. Although the Board encourages its directors to avoid any action or interest that could result in a conflict of interest, the Board is aware that its directors, particularly its independent directors, in the course of their professional and other employment activities may encounter situations which could cause a conflict of interest with the Company. The Board shall be responsible for determining in its judgment if a material or inconsequential conflict of interest exists between any action, position or interest of a director with an interest of the Company.
3. CONSULTING ARRANGEMENTS WITH DIRECTORS
The Board believes that the Company should not enter into paid consulting arrangements with outside directors or their employers, without obtaining the Board’s approval. Such approval may, in appropriate circumstances, be granted on an annual basis.
4. SHARE OWNERSHIP BY DIRECTORS
The Board encourages equity ownership in the Company by directors, but believes the number of shares of the Company’s stock owned by each director is a personal decision.
5. COMPENSATION REVIEW
The Compensation Committee will annually review, and (when it deems appropriate) recommend to the full Board changes in, director compensation and benefits.
6. ASSESSING BOARD AND COMMITTEE PERFORMANCE
The Board shall conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Board’s self-evaluation shall be based, in part, on the Nominating/Corporate Governance Committee’s assessment questionnaire.
7. ACCESS TO SENIOR MANAGEMENT
Board members have complete and open access to senior members of management. The Chief Executive Officer shall invite key employees to attend Board sessions at which the Chief Executive Officer believes they can meaningfully contribute to Board discussion.
8. MANAGEMENT SUCCESSION
The Nominating/Corporate Governance Committee shall develop management succession plans.
9. INTERACTION WITH THIRD PARTIES
The Board believes that management should speak for the Company and that the Chairman should speak for the Board.
10. CONFIDENTIALITY
The Board believes maintaining confidentiality of information and deliberations is an imperative.
II. COMMITTEES OF THE BOARD
A. BOARD COMMITTEES; COMMITTEE CHARTERS
The Board currently has the following three Committees: the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee. The Audit Committee shall consist of three or more directors, The Compensation Committee and Nominating /Corporate Governance Committees shall each consist of at least two directors. Each member of each of the Committees shall satisfy the independence (and, in the case of the Audit Committee, the financial literacy and experience) requirements of Section 10A of the Securities Exchange Act of 1934, the NASDAQ Stock Market and any other regulatory requirements. Each Committee shall meet in executive session during each of its regularly scheduled meetings. The Audit Committee, the Compensation Committee and the Nominating/Corporate Governance Committee shall each have appropriate written charters. These committee charters will be made available on the Company’s website at www.ushomesystems.com.
B. ROTATION OF COMMITTEE ASSIGNMENTS AND CHAIRPERSONS
Committee assignments and the designation of Committee chairpersons should be based on the director’s knowledge, interests and areas of expertise. The Board does not favor mandatory rotation of Committee assignments or chairpersons. The Board believes experience and continuity are more important than rotation. Board members and chairpersons should be rotated only if rotation is likely to increase Committee performance.
C. FREQUENCY OF COMMITTEE MEETINGS; ATTENDANCE
The Audit Committee has four regularly scheduled meetings each year. The Compensation Committee and the Nominating/Corporate Governance Committee each have two regularly scheduled meetings each year. Committee members are expected to be physically present at all regularly scheduled meetings. Conference telephone, videoconference or similar communication equipment attendance at a meeting will generally only be permitted if it is necessary to constitute a quorum.
III. DUTIES AND RESPONSIBILITIES OF THE COMMITTEES
A. AUDIT COMMITTEE
The Audit Committee has the powers and responsibilities set forth in its Charter (which is available on the Company’s website at www.ushomesystems.com). The role of the Audit Committee is oversight. The members of the Audit Committee are not employees of the Company and may or may not be accountants or auditors by profession or experts in the fields of accounting or auditing and, in any event, do not serve in such capacity. Consequently, it is not the duty of the Audit Committee to conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the Company’s independent auditors.
B. COMPENSATION COMMITTEE
The Compensation Committee shall have the powers and responsibilities set forth in its Charter (which is available on the Company’s website at www.ushomesystems.com).
C. NOMINATING/CORPORATE GOVERNANCE COMMITTEE
The Nominating/Corporate Governance Committee shall have the powers and responsibilities set forth in its Charter (which is available on the Company’s website at www.ushomesystems.com).
IV. OTHER GUIDELINES
A. CONFIDENTIAL VOTING
The Board has adopted a policy whereby shareholders’ proxies are received by the Company’s independent tabulators and the vote is certified by independent inspectors of election. Proxies and ballots that identify the vote of individual shareholders will be kept confidential from the Company’s management and directors, except as necessary to meet legal requirements, in cases where shareholders request disclosure, or in a contested election.
B. DISCLOSURE OF CORPORATE GOVERNANCE GUIDELINES
These Corporate Governance Guidelines will be made available on the Company’s website at www.ushomesystems.com.
Approved by the Board of Directors on November 10, 2003.