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Corporate Governance Guidelines
The Board of Directors (the "Board") of The First Marblehead Corporation
(the "Company") has adopted the following Corporate Governance Guidelines
(the "Guidelines") to assist the Board in the exercise of its duties
and responsibilities and to serve the best interests of the Company and its stockholders.
The Guidelines should be applied in a manner consistent with all applicable laws
and stock exchange rules and the Company's charter and bylaws, each as amended
and in effect from time to time. The Guidelines provide a framework for the conduct
of the Board's business. The Board may modify or make exceptions to the Guidelines
from time to time in its discretion and consistent with its duties and responsibilities
to the Company and its stockholders.
A. Director Responsibilities
- Oversee Management of the Company. The principal responsibility of the
directors is to oversee the management of the Company and, in so doing, serve
the best interests of the Company and its stockholders. This responsibility includes:
- Reviewing and approving fundamental operating, financial and other corporate
plans, strategies and objectives.
- Evaluating the performance of the Company and its senior executives and
taking appropriate action, including removal, when warranted.
- Evaluating the Company's compensation programs on a regular basis and
determining the compensation of its senior executives.
- Requiring, approving and implementing senior executive succession plans.
- Evaluating whether corporate resources are used only for appropriate
business purposes.
- Establishing a corporate environment that promotes timely and effective
disclosure (including robust and appropriate controls, procedures and incentives),
fiscal accountability, high ethical standards and compliance with all applicable
laws and regulations.
- Reviewing and approving material transactions and commitments not entered
into in the ordinary course of business.
- Developing a corporate governance structure that allows and encourages
the Board to fulfill its responsibilities.
- Providing advice and assistance to the Company's senior executives.
- Evaluating the overall effectiveness of the Board and its committees.
- Exercise Business Judgment. In discharging their fiduciary duties of
care, loyalty and candor, directors are expected to exercise their business judgment
to act in what they reasonably believe to be the best interests of the Company
and its stockholders.
- Understand the Company and its Business. Directors have an obligation
to become and remain informed about the Company and its business, including the
following:
- The principal operational and financial objectives, strategies and plans
of the Company.
- The results of operations and financial condition of the Company and
of significant subsidiaries and business segments.
- The relative standing of the business segments within the Company and
vis-à-vis competitors.
- The factors that determine the Company's success.
- The risks and problems that affect the Company's business and prospects.
- Establish Effective Systems. Directors are responsible for determining
that effective systems are in place for the periodic and timely reporting to the
Board on important matters concerning the Company, including the following:
- Current business and financial performance, the degree of achievement
of approved objectives and the need to address forward-planning issues.
- Future business prospects and forecasts, including actions, facilities,
personnel and financial resources required to achieve forecasted results.
- Financial statements, with appropriate segment or divisional breakdowns.
- Compliance programs to assure the Company's compliance with law and corporate
policies.
- Material litigation and governmental and regulatory matters.
- Monitoring and, where appropriate, responding to communications from
stockholders.
Directors should also periodically review the integrity of the Company's internal
control and management information systems.
- Board, Stockholder and Committee Meetings. Directors are responsible
for attending Board meetings, meetings of committees on which they serve and the
annual meeting of stockholders, and devoting the time needed, and meeting as frequently
as necessary, to discharge their responsibilities properly.
- Reliance on Management and Advisors; Indemnification. The directors
are entitled to rely on the Company's senior executives and its outside advisors,
auditors and legal counsel, except to the extent that any such person's integrity,
honesty or competence is in doubt. The directors are also entitled to Company-provided
indemnification, statutory exculpation and directors' and officers' liability
insurance.
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B. Director Qualification Standards
- Independence. Except as may otherwise be permitted by NYSE rules, a
majority of the members of the Board shall be independent directors. To be considered
independent: (1) a director must be independent as determined under Section 303A.02(b)
of the New York Stock Exchange Listed Company Manual and (2) in the Board's judgment,
the director must not have a material relationship with the Company (either directly
or as a partner, shareholder or officer of an organization that has a relationship
with the Company).
The Board has established guidelines to assist it in determining whether a director
has a material relationship with the Company. Under these guidelines, a director
will not be considered to have a material relationship with the Company if (1)
he or she is independent as determined under Section 303A.02(b) of the New York
Listed Company Manual and (2) he or she:
- is an executive officer of another company which is indebted to the Company,
or to which the Company is indebted, unless the total amount of either company's
indebtedness to the other is more than one percent of the total consolidated assets
of the company he or she serves as an executive officer; or
- serves as an officer, director or trustee of a charitable organization, unless
the Company's discretionary charitable contributions to the organization are more
than the greater of $1 million, or 2% of that organization's total annual charitable
receipts. (The Company's automatic matching of employee charitable contributions
will not be included in the amount of the Company's contributions for this purpose.)
In addition, ownership of a significant amount of the Company's stock, by itself,
does not constitute a material relationship.
For relationships not covered by the guidelines set forth above, the determination
of whether a material relationship exists shall be made by the other members of
the Board of Directors who are independent as defined above.
- Size of the Board. The Board currently has nine members. The Board
believes this is an appropriate size given the Company's present circumstances,
but that a smaller or larger Board may be appropriate at any given time, depending
on circumstances and changes in the Company's business.
- Other Directorships. The Board does not believe that its members should
be prohibited from serving on boards of other organizations, and the Board has
not adopted any guidelines limiting such activities. However, the Nominating and
Corporate Governance Committee shall take into account the nature of and time
involved in a director's service on other boards in evaluating the suitability
of individual directors and making its recommendations to the Board with respect
to a new director or the renomination of an existing Director. Service on boards
and/or committees of other organizations shall comply with the Company's conflict
of interest policies.
- Tenure. The Board does not believe it should establish term limits.
Term limits could result in the loss of directors who have been able to develop,
over a period of time, increasing insight into the Company and its operations
and an institutional memory that benefit the entire membership of the Board as
well as management. As an alternative to term limits, the Nominating and Corporate
Governance Committee shall review each director's continuation on the Board at
least once every three years. This will allow each director the opportunity to
conveniently confirm his or her desire to continue as a member of the Board and
allow the Company to conveniently replace directors who are no longer interested
or effective.
- Retirement. Any director who reaches the age of 72 while serving as
a director will retire from the Board effective at the end of his or her then
current term.
- Lead Director. In the event that the Chairman of the Board is not an
independent director, the Nominating and Corporate Governance Committee may nominate
an independent director to serve as "Lead Director," who shall be approved
by a majority of the independent directors.
The Lead Director, if one is appointed, shall:
- Chair any meeting of the non-management or independent directors in executive
session;
- Meet with any director who is not adequately performing his or her duties
as a member of the Board or any committee;
- Facilitate communications between other members of the Board and the
Chairman of the Board and/or the Chief Executive Officer; however, each director
is free to communicate directly with the Chairman of the Board and with the Chief
Executive Officer;
- Work with the Chairman of the Board in the preparation of the agenda
for each Board meeting and in determining the need for special meetings of the
Board; and
- Otherwise consult with the Chairman of the Board and/or the Chief Executive
Officer on matters relating to corporate governance and Board performance.
- Separation of the Offices of Chairman and Chief Executive Officer. The
Board does not have a policy on whether the offices of Chairman of the Board and
Chief Executive Officer should be separate and, if they are to be separate, whether
the Chairman of the Board should be selected from among the independent directors
or should be an employee of the Company.
- Selection of New Director Candidates. Except where the Company is legally
required by contract, bylaw or otherwise to provide third parties with the ability
to nominate directors, the Nominating and Corporate Governance Committee shall
be responsible for (i) identifying individuals qualified to become Board members,
consistent with criteria approved by the Board, and (ii) recommending to the Board
the nominees for election as directors at any meeting of stockholders and the
persons to be elected by the Board to fill any vacancies on the Board. Director
nominees shall be considered for recommendation by the Nominating and Corporate
Governance Committee in accordance with these Guidelines, the policies and principles
in its charter and the criteria set forth in Attachment A to these Guidelines.
It is expected that the Nominating and Corporate Governance Committee will have
direct input from the Chairman of the Board, the Chief Executive Officer and,
if one is appointed, the Lead Director.
- Extending the Invitation to a New Director Candidate to Join the Board.
The invitation to join the Board should be extended by the Chairman of the Board,
on behalf of the Board, and the Chairman of the Nominating and Corporate Governance
Committee, on behalf of such Committee. Unauthorized approaches to prospective
directors can be premature, embarrassing and harmful.
- Change of Responsibility of Director. The Board believes that any director
who retires from his or her principal current employment, or who materially changes
his or her current position, should offer to tender his or her resignation to
the Board. The Nominating and Corporate Governance Committee shall then recommend
to the Board whether the Board should accept the resignation based on a review
of whether the individual continues to satisfy the Board's membership criteria
in light of his or her new status.
- Former Chief Executive Officer's Board Membership. The Board believes
that the continuation of a former Chief Executive Officer of the Company on the
Board is a matter to be decided in each individual instance by the Board, upon
recommendation of the Nominating and Corporate Governance Committee. Accordingly,
when the Chief Executive Officer ceases to serve in that position, he or she will
resign from the Board. The Board, upon recommendation of the Nominating and Corporate
Governance Committee, will decide whether to accept such resignation.
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C. Board Meetings
- Selection of Agenda Items. The Chairman of the Board shall approve the
agenda for each Board meeting. Each Board member is free to suggest the inclusion
of agenda items and is free to raise at any Board meeting subjects that are not
on the agenda for that meeting.
- Frequency and Length of Meetings. The Chairman of the Board, in consultation
with the members of the Board, shall determine the frequency and length of the
Board meetings. Special meetings may be called from time to time as determined
by the needs of the business.
- Advance Distribution of Materials. Information and data that are important
to the Board's understanding of the business to be conducted at a Board or committee
meeting should generally be distributed in writing to the directors before the
meeting, and directors should review these materials in advance of the meeting.
The Board acknowledges that certain items to be discussed at a Board or committee
meeting may be of an extremely confidential or time-sensitive nature and that
the distribution of materials on these matters prior to meetings may not be appropriate
or practicable. Presentations made at Board meetings should do more than summarize
previously distributed Board meeting materials.
- Executive Sessions. In general, the agenda for every regularly scheduled
Board meeting shall include a meeting of the "non-management" directors,
as defined by the rules of the New York Stock Exchange, in executive session.
In any event, the non-management direcrtors shall meet in executive session at
least semi-annually to discuss, among other matters, the performance of the Chief
Executive Officer. The non-management directors will meet in executive session
at other times at the request of any non-management director. Absent unusual circumstances,
these sessions shall be held in conjunction with regular Board meetings. The director
who presides at these meetings shall be the Lead Director if there is one, and
if not, shall be chosen by the non-management directors, and his or her name shall
be disclosed in the annual meeting proxy statement.
- Attendance of Non-Directors at Board Meetings. The Board encourages
the senior executives of the Company to, from time to time, bring Company personnel
into Board meetings who (i) can provide additional insight into the items being
discussed because of personal involvement in these areas or (ii) appear to be
persons with future potential who should be given exposure to the Board.
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D. Board Committees
- Key Committees. The Board shall have at all times an Audit Committee,
a Compensation Committee and a Nominating and Corporate Governance Committee.
Each such committee shall have a charter that has been approved by the Board.
The Board may, from time to time, establish or maintain additional committees
as necessary or appropriate.
- Assignment and Rotation of Committee Members. The Nominating and Corporate
Governance Committee shall be responsible for recommending to the Board the directors
to be appointed to each committee of the Board. Except as otherwise permitted
by the applicable rules of the New York Stock Exchange, each member of the Audit
Committee, the Compensation Committee and the Nominating and Corporate Governance
Committee shall be an "independent director" as defined by such rules.
- Committee Charters. In accordance with the applicable rules of the New
York Stock Exchange, the charters of the Audit Committee, the Compensation Committee
and the Nominating and Corporate Governance Committee shall set forth the purposes,
goals and responsibilities of the committees as well as qualifications for committee
membership, procedures for committee member appointment and removal, committee
structure and operations and committee reporting to the Board. The Board shall
annually review and reassess the adequacy of each charter and make appropriate
changes.
- Selection of Agenda Items. The chairman of each committee, in consultation
with the committee members, shall develop the committee's agenda. At the beginning
of the year each committee shall establish a schedule of subjects to be discussed
during the year (to the extent practicable). The schedule for each committee meeting
shall be furnished to all directors.
- Frequency and Length of Committee Meetings. The chairman of each committee,
in consultation with the committee members, shall determine the frequency and
length of the committee meetings consistent with any requirements set forth in
the committee's charter. Special meetings may be called from time to time as determined
by the needs of the business and the responsibilities of the committees.
E. Director Access to Management and Independent Advisors
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- Access to Officers and Employees. Directors have full and free access
to officers and employees of the Company. Any meetings or contacts that a director
wishes to initiate may be arranged through the Chief Executive Officer or the
Secretary or directly by the director. The directors shall use their judgment
to ensure that any such contact is not disruptive to the business operations of
the Company and shall, to the extent appropriate, copy the Chief Executive Officer
on any written communications between a director and an officer or employee of
the Company.
- Access to Independent Advisors. The Board and each committee have the
power to hire and consult with independent legal, financial or other advisors
for the benefit of the Board or such committee, as they may deem necessary, without
consulting or obtaining the approval of any officer of the Company in advance.
Such independent advisors may be the regular advisors to the Company. The Board
or any such committee is empowered, without further action by the Company, to
cause the Company to pay the compensation of such advisors as established by the
Board or any such committee.
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F. Director Compensation
- Role of the Board and Compensation Committee. The form and amount of
director compensation shall be determined by the Board in accordance with the
policies and principles set forth below. The Compensation Committee shall conduct
an annual review of the compensation of the Company's directors. The Compensation
Committee shall consider that questions as to directors' independence may be raised
if director compensation and perquisites exceed customary levels, if the Company
makes substantial charitable contributions to organizations with which a director
is affiliated or if the Company enters into consulting contracts or business arrangements
with (or provides other indirect forms of compensation to) a director or an organization
with which the director is affiliated.
- Form of Compensation. The Board believes that directors should be incentivized
to focus on long-term stockholder value. Including equity as part of director
compensation helps align the interest of directors with those of the Company's
stockholders.
- Amount of Consideration. The Company seeks to attract exceptional talent
to its Board. Therefore, the Company's policy is to compensate directors at least
competitively relative to comparable companies. The Company's management shall,
from time to time, present a comparison report to the Board, comparing the Company's
director compensation with that of comparable companies. The Board believes that
it is appropriate for the Chairman of the Board and the chairmen and members of
the committees to receive additional compensation for their services in those
positions.
- Employee Directors. Directors who are also employees of the Company
shall receive no additional compensation for Board or committee service.
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G. Director Orientation and Continuing Education
- Director Orientation. The Board and the Company's management shall conduct
a mandatory orientation program for new directors. The orientation program shall
include presentations by management to familiarize new directors with the Company's
strategic plans, its significant financial, accounting and risk management issues,
its compliance programs, its code of business conduct and ethics, its principal
officers, its internal and independent auditors and its outside legal advisors.
In addition, the orientation program shall include a review of the Company's expectations
of its directors in terms of time and effort, a review of the directors' fiduciary
duties and visits to Company headquarters and, to the extent practical, certain
of the Company's significant facilities. All other directors are also invited
to attend the orientation program.
- Continuing Education. The Company shall pay all reasonable expenses
related to continuing director education that is authorized or ratified by the
Board or the Nominating and Corporate Governance Committee thereof.
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H. Management Evaluation and Succession
- Selection of Chief Executive Officer. The Board selects the Company's
Chief Executive Officer in the manner that it determines to be in the best interests
of the Company's stockholders.
- Evaluation of Senior Executives. The Compensation Committee shall be
responsible for overseeing the evaluation of the Company's senior executives.
In conjunction with the Audit Committee, in the case of the evaluation of the
senior financial executives, the Compensation Committee shall determine the nature
and frequency of the evaluation and the persons subject to the evaluation, and
shall supervise the conduct of the evaluation, which shall be discussed with the
Board periodically. The Board shall review the assessments to ensure that the
senior executives are providing the best leadership for the Company over both
the long- and short-term.
- Succession of Senior Executives. The Nominating and Corporate Governance
Committee shall be responsible for overseeing an annual evaluation of succession
planning.
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I. Annual Performance Evaluation of the Board
The Nominating and Corporate Governance Committee shall oversee an annual self-evaluation
of the Board to determine whether it and its committees are functioning effectively.
The Nominating and Corporate Governance Committee shall determine the nature of
the evaluation, supervise the conduct of the evaluation and prepare an assessment
of the Board's performance, to be discussed with the Board. The purpose of this
process is to improve the effectiveness of the Board and its committees and not
to target individual Board members.
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J. Board Interaction with Stockholders, Institutional Investors, the Press,
Customers, Etc.
The Board believes that the Chief Executive Officer and his or her designees speak
for the Company. Individual Board members may, from time to time, meet or otherwise
communicate with various constituencies that are involved with the Company. It
is, however, expected that Board members would do so with the knowledge of and,
absent unusual circumstances or as contemplated by the committee charters, only
at the request of the Company's senior executives.
The Board will give appropriate attention to written communications that are submitted
by stockholders, and will respond if and as appropriate. Absent unusual circumstances
or as contemplated by the committee charters, the Chairman of the Board (if an
independent director), or the Lead Director (if one is appointed), or otherwise
the Chairman of the Nominating and Corporate Governance Committee shall, subject
to advice and assistance from outside counsel, (1) be primarily responsible for
monitoring communications from shareholders, and (2) provide copies or summaries
of such communications to the other directors as he or she considers appropriate.
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>K. Periodic Review of the Corporate Governance Guidelines
The Nominating and Corporate Governance Committee shall, from time to time
as it deems appropriate, review and reassess the adequacy of these Guidelines
and recommend any proposed changes to the Board for approval.
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The First Marblehead Corporation
Attachment A to Corporate Governance Guidelines
Criteria for Nomination as a Director
General Criteria
- Nominees should have a reputation for integrity, honesty and adherence to
high ethical standards.
- Nominees should have demonstrated business acumen, experience and ability
to exercise sound judgments in matters that relate to the current and long-term
objectives of the Company and should be willing and able to contribute positively
to the decision-making process of the Company.
- Nominees should have a commitment to understand the Company and its industry
and to regularly attend and participate in meetings of the Board and its committees.
- Nominees should have the interest and ability to understand the sometimes
conflicting interests of the various constituencies of the Company, which include
stockholders, employees, customers, governmental units, creditors and the general
public, and to act in the interests of all stockholders.
- Nominees should not have, nor appear to have, a conflict of interest that
would impair the nominee's ability to represent the interests of all the Company's
stockholders and to fulfill the responsibilities of a director.
- Nominees shall not be discriminated against on the basis of race, religion,
national origin, sex, sexual orientation, disability or any other basis proscribed
by law. The value of diversity on the Board should be considered.
- Nominees should normally be able to serve for at least five years before
reaching the age of 72.
Application of Criteria to Existing Directors
The renomination of existing directors should not be viewed as automatic, but
should be based on continuing qualification under the criteria set forth above.
In addition, the Nominating and Corporate Governance Committee shall consider
the existing directors' performance on the Board and any committee, which shall
include consideration of the extent to which the directors undertook continuing
director education.
Criteria for Composition of the Board
The backgrounds and qualifications of the directors considered as a group should
provide a significant breadth of experience, knowledge and abilities that shall
assist the Board in fulfilling its responsibilities.
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