LOWE'S COMPANIES, INC.
BOARD OF DIRECTORS'
CORPORATE GOVERNANCE
GUIDELINES
Adopted by Board Resolution: 12/9/94
Lowe's Companies, Inc.
Board of Directors'
Corporate Governance Guidelines
1. Classification and Definition of Directors
The principal classifications of Directors are "Independent"
and "Management."
The term "Management Director" includes both present and
former employees who serve on the Board.
The term "Independent Director" describes those individuals
contemplated by prior rulings by the Securities Exchange
Commission (SEC) defining "Disinterested Directors" and by
IRS regulations defining "Outside Directors." Both of these
speak very strongly on this subject and Lowe's does not feel
that a by-law is necessary to establish any further
definition of independent.
The Board believes there is no current relationship between
any Independent Director and Lowe's that would be construed
in any way to compromise such independent designation.
2. Mix of Independent and Management Directors
Lowe's Board plans to continue its long-standing policy of
maintaining a majority of Independent Directors. The Board
also expects to continue to have Management Directors,
including the Chief Executive Officer.
3. Size of the Board
The Board presently has 10 members. It is the sense of the
Board that a range of 9 to 15 is appropriate.
4. Board Membership Criteria
The Independent Directors Committee is responsible for
reviewing with the Board on an annual basis the appropriate
skills and characteristics required of Board members in the
context of the current makeup of the Board. This assessment
should include an analysis of skills such as an
understanding of retailing, merchandising, and hardlines
distribution as well as appropriate sociological criteria as
judged to be in the current best interests of Lowe's.
5. Former Chief Executive Officer's Board Membership
The Board believes this is a matter to be decided in each
individual instance. It is expected that when the Chief
Executive Officer resigns from that position, that person
will voluntarily offer to resign 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.
A former Chief Executive Officer serving on the Board will
be considered a Management Director for purposes of
corporate governance.
6. Selection of New Director Candidates
The Board itself should be responsible, in fact as well as
procedure, for selecting its own members. The Board expects
the process flow to begin with the direct input from the
Chairman and the Chief Executive Officer to a screening by
the Independent Directors Committee, to the full Board for
action.
7. Extending the Invitation to a New Potential Director to Join
the Board
The invitation to join the Board should be extended jointly
by the Chairman, the Chief Executive Officer and an
Independent Director.
8. Directors Who Change Their Present Job Responsibility
It is the sense of the Board that individual Directors who
change the responsibility they held when they were elected
to the Board should volunteer to resign from the Board.
It is not the Board's view that 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
Independent Directors Committee, to review the continued
appropriateness of Board membership under these
circumstances.
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.
As an alternative to term limits, the Independent Directors
Committee, in consultation with the Chairman of the Board
and the Chief Executive Officer, will review each Director's
continuation on the Board every three years. This will
allow each Director the opportunity to conveniently confirm
his/her desire to continue as a member of the Board.
10. Assessing the Board's Performance
The Independent Directors Committee is responsible for
reporting annually to the Board an assessment of the Board's
performance. The report will include an analysis of the
performance of the committees compared to their committee
job descriptions. This report will be discussed with the
full Board who will review the results and decide areas
where it wants more information.
This assessment would 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 any individual Board member(s).
11. Board Access to Senior Management
Board members have complete access to Lowe's management and
are encouraged to make regular contact.
12. Board Interaction With Institutional Investors, the Press,
Customers, etc.
The Board believes that the Management and specifically, the
Chairman, the Chief Executive Officer and their designees
speak for Lowe's Companies. Individual Board members may,
from time to time, meet or otherwise communicate with
various constituencies that are involved with Lowe's
Companies. But, it is expected that Board members would do
this with the knowledge of Management and in most instances,
at the request of Management.
13. Board Compensation
It is Lowe's policy to compensate Independent Directors in a
range in the upper quartile of comparable firms. Under
Lowe's bylaws, the Chairman and the Chief Executive Officer
are responsible for this compensation administration, and
recommendations to the full Board for adoption.
Management Directors who are also employees receive no
additional compensation for Board service.
14. Board Retirement Age
It is the sense of the Board that a retirement age of 70 be
set for all future Board Members. All current (as of
December 31, 1994) Directors will be grandfathered as
follows:
1. An interim retirement age of 72 is established, after
which, on or before each December 31, the grandfathered
Directors are expected to submit their voluntary
resignation to the Independent Directors Committee for
screening in accordance with Guideline 6.
15. Number of Committees
Currently, Lowe's has five Board committees: 1) Audit,
2) Executive, 3) Independent Directors, 4) Compensation and,
5) Government and Legal Affairs.
16. Independent Directors Committee
Of significance to these guidelines is the Independent
Directors Committee, which will meet at least annually and
more frequently at their discretion. The committee chairman
will schedule the meeting(s).
The group will meet with the CEO at any time but at minimum,
will have an annual discussion and review with the CEO, and
also with the Chairman whenever the Chairman is not the CEO
and not an Independent Director.
The Independent Directors Committee will also perform the
functions of a Corporate Governance Committee.
17. Assignment and Rotation of Committee Members
The Chairman of the Board is responsible, after consultation
with the Committee Chairmen and with individual Board
members, for the assignment of Board members to various
committees, subject to Board approval.
The Board does not feel that rotating committee assignments
on a fixed schedule should be mandated as a policy since
there may be reasons at any given time to maintain an
individual Director's committee membership for a longer
period.
18. Frequency and Length of Committee Meetings
The Committee Chairman, in consultation with Committee
members, will determine the frequency and length of the
meetings of the Committee.
19. Committee Agenda
The Chairman of each Committee, in consultation with
Committee members and the appropriate members of Management
and staff, will develop the Committee's agenda.
At the beginning of each fiscal year, each Committee will
issue a schedule of agenda subjects to be discussed for the
ensuing year (to the degree these can be foreseen). This
forward agenda will be shared with the Board.
20. Selection of Agenda Items for Board Meetings
The Chairman of the Board and the Chief Executive Officer
(if the Chairman is not the Chief Executive Officer) will
establish the agenda for each Board meeting.
Each Board member is free to suggest the inclusion of
item(s) on the agenda.
The secretary of the corporation is responsible for
maintaining compliance with required Board actions.
21. Board Materials Distributed in Advance
It is the sense of the Board that information and data that
is important to the Board's understanding of the business
should be distributed in writing to the Board before the
Board meets. Lowe's Management will make every attempt to
see that this material is as brief as possible while still
providing the desired information.
22. Presentations
The sense of the Board is that presentations by senior
management are beneficial in giving Board members the
opportunity to evaluate these persons. Further, bios of
presenters will be distributed in advance, with the Board
meeting material.
23. Attendance of Non-Directors at Board Meetings
Lowe's Board is comfortable with the attendance at Board
Meetings of non-Board members who are members of the
President's or Chairman's staffs.
Further, the Board specifically encourages Management to,
from time to time, bring managers into Board Meetings who:
(1) 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
Management believes should be given exposure to the Board.
Should the Chief Executive Officer or Chairman want to
invite people as attendees on a regular basis, it is
expected that this suggestion would be made to the Board for
its prior concurrence.
24. Selection of Chairman and CEO
The Board will remain free to make this choice in the manner
it judges most appropriate for the Company at any given
point in time.
Therefore, the Board does not have a predetermined policy as
to whether or not the roles of the Chief Executive Officer
and Chairman should be separate and, if they are to be
separate, as to whether the Chairman should be an
Independent Director or a Management Director.
25. Formal Evaluation of the Chief Executive Officer
The Independent Directors Committee should make this
evaluation annually, and it should be communicated to the
Chief Executive Officer by the Chairman of the Independent
Directors Committee, and one other Independent Director,
subsequent to the Committee's annual meeting.
26. Succession Planning
There shall be an annual report by the Chairman and Chief
Executive Officer to the Board on succession planning.
There shall also be available, on a continuing basis,
recommendations from the Chairman and the Chief Executive
Officer as to a succession plan should either or both be
unexpectedly disabled.
27. Management Development
There shall be an annual report to the Board by the Chief
Executive Officer on the Company's program of management
development.
This report should be given to the Board at the same time as
the Succession Planning report noted above.