Exhibit 99.3
CUBIST PHARMACEUTICALS, INC.
AMENDED AND RESTATED
CORPORATE GOVERNANCE GUIDELINES
EFFECTIVE DECEMBER 10, 2004
TABLE OF CONTENTS
1. ROLE OF THE BOARD AND MANAGEMENT........................................................2
2. SELECTION OF CHAIRMAN, CEO AND LEAD DIRECTOR............................................2
3. DIRECTOR RESPONSIBILITIES...............................................................3
4. DIRECTOR QUALIFICATION STANDARDS........................................................3
5. DIRECTOR SELECTION PROCESS..............................................................3
6. BOARD COMMITTEES........................................................................4
7. ASSIGNMENT AND ROTATION OF COMMITTEE MEMBERS............................................4
8. COMMITTEE MEETING AGENDA................................................................5
9. BOARD MEETING AGENDA....................................................................5
10. BOARD MATERIALS DISTRIBUTED IN ADVANCE..................................................5
11. REGULAR ATTENDANCE OF NON-DIRECTORS AT BOARD MEETINGS...................................5
12. EXECUTIVE SESSIONS OF THE BOARD.........................................................5
13. BOARD ACCESS TO SENIOR MANAGEMENT.......................................................5
14. DIRECTOR COMPENSATION...................................................................6
15. SIZE OF THE BOARD.......................................................................6
16. ATTENDANCE OF BOARD MEETINGS............................................................6
17. INDEPENDENT DIRECTORS...................................................................6
18. DEFINITION OF INDEPENDENCE..............................................................6
19. FORMER CEO'S BOARD MEMBERSHIP...........................................................7
20. BOARD MEMBERSHIP CRITERIA...............................................................7
21. ASSESSING THE BOARD'S PERFORMANCE.......................................................7
22. DIRECTORS WHO CHANGE THEIR PRESENT JOB RESPONSIBILITY...................................7
23. TERM LIMITS.............................................................................8
24. RETIREMENT AGE..........................................................................8
25. FORMAL EVALUATION OF THE CEO............................................................8
26. EVALUATION OF EXECUTIVE OFFICERS........................................................8
27. SUCCESSION PLANNING.....................................................................9
28. MANAGEMENT DEVELOPMENT..................................................................9
29. BOARD INTERACTION WITH STOCKHOLDERS, THE PRESS, CUSTOMERS, ETC..........................9
30. SHARE OWNERSHIP OF DIRECTORS............................................................9
31. CONFLICTS OF INTEREST...................................................................9
32. RELATED PARTY TRANSACTIONS..............................................................10
33. DIRECTOR ORIENTATION AND CONTINUING EDUCATION...........................................10
34. DONATIONS TO DIRECTORS OR OFFICER CHARITIES.............................................10
35. MEMBERSHIP ON OTHER BOARDS..............................................................10
36. BOARD ACCESS TO INDEPENDENT ADVISORS....................................................11
37. CODE OF CONDUCT AND ETHICS..............................................................11
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CUBIST PHARMACEUTICALS, INC.
AMENDED AND RESTATED
CORPORATE GOVERNANCE GUIDELINES
EFFECTIVE DECEMBER 10, 2004
The business of Cubist Pharmaceuticals, Inc. (the "Company") is managed
under the direction of its Board of Directors (the "Board"), which is elected by
the Company's stockholders. The basic responsibility of the Board is to exercise
its business judgment to act in what it believes to be the best interests of the
Company and its stockholders. The Board believes that sound governance practices
and policies provide an important framework to assist it in fulfilling its duty
to stockholders. The Board will rely on the following guidelines to provide that
framework. These guidelines are not absolute rules; they can be modified to
reflect changes in the Company's organization or business environment. They
should be interpreted in the context of applicable law, the Company's Charter
and By-laws, and other governance documents such as committee charters.
1. ROLE OF THE BOARD AND MANAGEMENT
The Board performs the following principal functions: (i) selecting,
evaluating, compensating and, where necessary, replacing the CEO; (ii) in
consultation with the CEO, selecting the executive officers; (iii) approving
corporate strategy, annual goals and operating budgets, mergers and
acquisitions, and significant financings; (iv) acting as an advisor and
counselor to senior management and monitoring its performance; (v) providing
general oversight of the business; (vi) evaluating and establishing Board
processes, performance and compensation; and (vii) monitoring legal and ethical
conduct.
Management executes the approved plans and budgets and is responsible
for the day-to-day management of the Company.
Both the Board and Management recognize that the long-term interests of
the stockholders are advanced by responsibly addressing the concerns of the
other stakeholders and interested parties.
2. SELECTION OF CHAIRMAN, CEO, AND LEAD DIRECTOR
The Board has the sole responsibility to select its Chairman and the
CEO. The Board shall also consider, upon recommendation from the Corporate
Governance Committee, appointing a Lead Director if appropriate. The Chairman
shall have the responsibility for managing the Board. The CEO shall have the
responsibility for managing the Company. The Lead Director, if any, shall have
the responsibility for leading meetings of the independent directors if the
Chairman is not an independent director and shall serve as a liaison between
independent directors and the CEO if the CEO is also the Chairman. The CEO may
or may not be a member of the Board as determined by the Board.
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3. DIRECTOR RESPONSIBILITIES
The Board holds at least four scheduled meetings each year, at which it
reviews and discusses reports by management on the performance of the Company,
its plans and prospects, as well as immediate and long-term strategic issues
facing the Company. Directors are expected to attend all scheduled board and
applicable committee meetings, as well as the Company's Annual Meeting of
Stockholders. The Board's committees also have regularly scheduled meetings
throughout the year. The Board and its committees hold additional meetings on an
as needed basis, and Directors are expected to attend these meetings whenever
possible. In addition to its general oversight of management and other
obligations imposed by the Company's Certificate of Incorporation and By-laws
and the Delaware General Corporation Law, the Board, acting itself or through
one or more of its committees, performs a number of specific functions
including:
a. selecting, evaluating and compensating the executive officers,
and overseeing executive officer succession planning;
b. reviewing, approving and monitoring fundamental financial and
business strategies and major corporate actions;
c. assessing major risks facing the Company, and reviewing
options for the mitigation; and
d. overseeing the processes for maintaining the integrity of the
Company, including the integrity of the financial statements,
the integrity of compliance with law and ethics, the integrity
of relationships with customers and suppliers, and the
integrity of relationships with other stakeholders.
4. DIRECTOR QUALIFICATION STANDARDS
Directors should possess the highest personal and professional ethics,
and be committed to representing the long-term interests of the stockholders.
Directors must be willing to devote sufficient time to carrying out their duties
and responsibilities effectively, and should be committed to serve on the Board
for an extended period of time.
5. DIRECTOR SELECTION PROCESS
The Board is responsible for selecting new members to join the Board
and will either elect a new member to fill a vacant seat or recommend a new
member to the shareholders for election at an Annual Meeting of Stockholders.
The Board delegates the screening process involved in such selection to the
Corporate Governance and Nominating Committee with direct input from the
Chairman, the CEO, the Lead Director, if any, and such other executive officers
as the Corporate Governance and Nominating Committee deems appropriate.
Stockholders may propose nominees for consideration by the Corporate Governance
and Nominating Committee by submitting names and
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supporting information to the Secretary of the Company in accordance with the
deadlines and procedures set forth in the Proxy Statements for Annual Meetings
of the Stockholders.
6. BOARD COMMITTEES
It is the general policy of the Company that all major decisions be
considered by the Board as a whole but that certain decisions are specifically
delegated to committees as set forth in the committee charters, which charters
are approved by the Board. Except as otherwise required by applicable laws,
regulations or listing standards, the Board supports a committee structure in
which the committees study and consider issues, and in some cases, bring a
recommendation to the full Board. The Board currently has established the
following committees to assist the board in discharging its responsibilities:
a. Audit Committee;
b. Compensation Committee; and
c. Corporate Governance and Nominating Committee.
From time to time, AD HOC committees may be established for special assignments.
The current committee charters are published on the Company website.
The committee chairmen report the highlights of their meetings to the full Board
in the regularly scheduled Board meetings. The Corporate Governance and
Nominating Committee recommends the membership and chairmen of the committees to
the Board for approval. The Audit Committee, Compensation Committee, and
Corporate Governance and Nominating Committee and made up entirely of
Independent directors. The membership of the committees may be rotated among
Board members from time to time as set forth below.
7. ASSIGNMENT AND ROTATION OF COMMITTEE MEMBERS
The Corporate Governance and Nominating Committee is responsible, with
consideration of the recommendations of the Chairman, the CEO, and individual
Board members, for recommending Board members to individual committees. In
making such recommendation, the Corporate Governance and Nominating Committee
will take into consideration individual skill sets and preferences as well as
any requirements of committee charters.
Consideration will be given to rotating committee members each year. To
the extent practical, the Corporate Governance and Nominating Committee will
consider rotating one person on and one person off each committee each year, but
rotation is not necessarily required each year. In addition, to the extent
practical, the Corporate Governance and Nominating Committee will endeavor to
rotate committee chairmen
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every three to five years, with the expectation that a new chairman will have
served on the committee before becoming chairman of said committee.
8. COMMITTEE MEETING AGENDA
The Chairman of each committee, in consultation with the appropriate
members of Management, will develop the committee's agenda. As a general rule,
the agenda and supporting materials will be distributed prior to committee
meetings.
9. BOARD MEETING AGENDA
The Chairman (or Lead Director if there is no Chairman), in
consultation with the CEO (or Lead Director if the Chairman is the CEO),
establishes the agenda for each Board meeting. The Secretary shall solicit
agenda topics from each of the Committee Chairmen. Individual Directors may add
topics to the agenda by contacting the Chairman. In addition, the Chairman may
solicit topics from individual Directors.
10. BOARD MATERIALS DISTRIBUTED IN ADVANCE
Information and data that is important to the Board's understanding of
the business is distributed in writing to the Board before the Board meets.
Management will see that this material is as concise as possible while still
providing the desired information.
As a general rule, presentations on specific subjects will be sent to
the Board members in advance so that the Board meeting time may be conserved,
and discussion time focused on questions that the Board has about the material.
11. REGULAR ATTENDANCE OF NON-DIRECTORS AT BOARD MEETINGS
The Board is comfortable with regular attendance at each Board meeting
of non-board members who are invited by the Chairman, except during Executive
Sessions of the Board.
12. EXECUTIVE SESSIONS OF THE BOARD
The Board shall regularly conduct Executive Sessions of the independent
Directors.
13. BOARD ACCESS TO SENIOR MANAGEMENT
Board members have complete access to Management.
Furthermore, the Board encourages Management to, from time to time,
bring executives and managers into Board meetings who (a) can provide additional
insight to
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the items being discussed because of personal involvement in these areas, and/or
(b) represent managers with executive potential that the Management believes
should be given exposure to the Board.
14. DIRECTOR COMPENSATION
Directors who are also our employees do not receive additional
compensation for serving on the Board. The Compensation Committee has the
responsibility for recommending to the Board compensation and benefits for
non-employee directors. In discharging this duty, the Compensation Committee
shall be guided by three goals; compensation should fairly pay directors for
work required in a company of the Company's operational size and scope;
compensation should align directors' interests with the long-term interests of
stockholders; and the structure of the compensation should be adequate to enable
the Company to attract and retain well-qualified directors. The CEO should
report annually to the Compensation Committee the status of Board compensation
in relation to other like companies. Changes in Board compensation, if any,
should come at the recommendation of the Compensation Committee, but with
discussion and approval of the full Board.
15. SIZE OF THE BOARD
The Board should consider the appropriate size of the Board and fix the
number of Directors pursuant to a resolution adopted by a majority of the Board.
The Board believes that, given the current operations of the Company, the needs
of the various committees of the Board, and the need for a diversity of views,
the size of the Board should be in the range of 7 to 11 directors.
16. ATTENDANCE OF BOARD MEETINGS
The Board believes that Directors, to the extent possible, should: (a)
attend all Board meetings and all applicable committee meetings, in person or by
phone, and in no event should a Director attend less than 75% of Board meetings
or applicable Committee meetings and (b) participate in the entire meeting. If a
Director attends a Board Meeting via telephone, such Director shall use a land
line (I.E., not a cell phone) unless this requirement is waived by the Chairman.
17. INDEPENDENT DIRECTORS
No less than a two-thirds majority of Directors on the Board will be
Independent Directors. (See Item 18 for Definition of Independence)
18. DEFINITION OF INDEPENDENCE
An independent Director is one who is independent of Management and
free from any relationship that, in the opinion of the Corporate Governance and
Nominating Committee, would interfere with the exercise of independent judgment
as a Director and
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who meets the definition of independence set forth in applicable SEC and Nasdaq
regulations.
19. FORMER CEO'S BOARD MEMBERSHIP
It is assumed that when a CEO resigns from that position, he should
offer his resignation from the Board at the same time. Whether or not the
individual continues to serve on the Board is a matter for discussion with the
new CEO and the Board.
A former CEO or any other former officer serving on the Board will not
be considered independent until the expiration of any applicable "cooling off
period" and he/she meets the definition of independence set forth in applicable
SEC and Nasdaq regulations.
20. BOARD MEMBERSHIP CRITERIA
The Corporate Governance and Nominating 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 make-up
of the Board.
21. ASSESSING THE BOARD'S PERFORMANCE
The Board and each of the committees will perform an annual
self-evaluation. Directors will be requested to provide their assessments of the
effectiveness of the Board and the committees on which they serve. The
assessments will be presented to, and discussed by, the full Board.
The Corporate Governance and Nominating Committee is responsible to
solicit feedback on the Board's performance and report to the Board, on an
annual basis, an assessment of the Board's performance. This report will be
discussed by the full Board. This assessment is of the Board's contribution as a
whole and specifically reviews 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 review individual Board members.
In addition, the Corporate Governance and Nominating Committee will
review the performance of each individual Board member prior to proposing him or
her for re-election.
Each committee, on an annual basis, will evaluate its performance,
consider its goals for the coming year, and report thereon to the full Board.
22. DIRECTORS WHO CHANGE THEIR PRESENT JOB RESPONSIBILITY
It is the sense of the Board that an individual Director who changes
his/her full-time, responsibility should volunteer to resign from the Board. It
is not the sense of the
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Board, however, that a Director who retires or changes his/her full-time
responsibility should necessarily leave the Board. Therefore, there should be an
opportunity for the full Board, after preliminary review by the Corporate
Governance and Nominating Committee, to review the continued appropriateness of
Board membership under these circumstances.
23. TERM LIMITS
Directors currently serve for three (3) year terms. While term limits
could help ensure 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. Therefore, Directors shall be expected to serve for no
more than three (3) terms unless, upon recommendation of the Corporate
Governance and Nominating Committee, the Board shall approve additional terms.
24. RETIREMENT AGE
It is the sense of the Board that Directors will volunteer to resign
from the Board at the end of the term during which they reach the age of 72.
While a retirement age could help ensure that there are fresh ideas and
viewpoints available to the Board, it holds 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. Therefore, Directors shall
be expected to resign from the Board at the end of the term during which they
reach the age of 72 unless, upon recommendation of the Corporate Governance and
Nominating Committee, the Board shall approve additional terms.
25. FORMAL EVALUATION OF THE CEO
The Compensation Committee will present to the Board annually after the
close of the fiscal year an evaluation of the CEO. After agreement of the
evaluation by the Independent Directors, the evaluation will be communicated to
the CEO by the Chairman of the Compensation Committee. The evaluation will be
based on objective criteria, communicated to the CEO at the beginning of each
fiscal year, including performance of the business, accomplishment of near and
long term objectives, development of Management, ETC. The evaluation will be
used by the Compensation Committee when considering the compensation of the CEO.
26. EVALUATION OF EXECUTIVE OFFICERS
The CEO will present to the Compensation Committee annually after the
close of the fiscal year an evaluation of the Company's executive officers.
After agreement of the evaluations by the Compensation Committee, the
evaluations will be communicated to
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the executive officers by the CEO. The Chairman of the Compensation Committee
will present a summary of the evaluations to the full Board.
27. SUCCESSION PLANNING
There will be available, on a continuing basis, the CEO's
recommendation as to his or her successor should he or she be unexpectedly
disabled.
There will be an annual report by the CEO to the Board on succession
planning.
28. MANAGEMENT DEVELOPMENT
In addition to the succession planning annual report, the CEO will at
the same time report on Management development to the Board.
In addition, the CEO reviews annually with the Compensation Committee
performance of the other executive officers and the extent to which these
officers have accomplished their goals. The Compensation Committee may, in turn,
provide a summary of these reports and reviews to the full Board.
29. BOARD INTERACTION WITH STOCKHOLDERS, THE PRESS, CUSTOMERS, ETC.
Management speaks for the Company. Directors do not speak for the
Company. Stockholders and other interested persons may communicate with
Directors by writing to them c/o the Secretary of the Company. The Secretary
will received the correspondence and forward it to the Director or Directors to
whom it is addressed.
30. SHARE OWNERSHIP OF DIRECTORS
The Board expects that Directors will be stockholders and have a
meaningful financial stake in the Company. It is anticipated that each Director
will develop such a meaningful ownership position in the Company over time,
depending upon individual circumstances. All Directors will comply with the
Company's Equity Interest Policy.
31. CONFLICTS OF INTEREST
A Director's business or family relationships may occasionally give
rise to that Director's material personal interest on a particular issue. Each
Director is responsible for disclosing situations that he or she reasonably
believes give rise to a potential conflicts of interest to the Corporate
Governance and Nominating Committee. In addition, the Corporate Governance and
Nominating Committee shall ask Directors about potential conflicts of interest
at least once per year. The Board, upon recommendation of the Corporate
Governance and Nominating Committee and after consultation with the Company's
outside counsel, determines on a case-by-case basis whether such a conflict of
interest exists. The Board takes appropriate steps to identify such potential
conflicts
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and to assure that all Directors voting on an issue are disinterested with
respect to that issue.
32. RELATED PARTY TRANSACTIONS
The Company generally disfavors related party transactions. The Company
shall not enter into any transaction with any Director without the prior
approval of the Board.
33. DIRECTOR ORIENTATION AND CONTINUING EDUCATION
The Board encourages Directors to participate in continuing education
programs, including, but not limited to, those recommended by the Corporate
Governance Committee.
The Corporate Governance and Nominating Committee oversees the
Corporation's Director Orientation and Director Continuing Education programs,
which are set forth below:
(a) The Secretary of the Company shall be responsible for
providing an orientation for new Directors, and periodically
providing materials or briefing sessions for all Directors on
subjects that would assist them in discharging their duties.
(b) Each Director shall, within six months of election to the
Board, receive a personal briefing from Senior Management at
the Company offices on the Company's strategic plans,
financial statements, and key policies and practices.
(c) Directors are encouraged to attend director continuing
education institutes and programs offered by certain national
associations, universities, and other third parties, and the
Company has established an annual allowance to pay reasonable
expenses and fees occurred for attendance at these programs.
The Secretary of the company will keep a record of Director
Continuing Education.
34. DONATIONS TO DIRECTOR OR OFFICER CHARITIES
Except for any contributions made pursuant to a company matching
program that is generally available to all employees, the Company shall not make
any donation to any charity with which any Director or Officer is affiliated
without the prior approval of the Board.
35. MEMBERSHIP ON OTHER BOARDS
From time to time, Directors, Officers, or other employees may wish to
serve on the boards of other public, private, or non-profit organizations. Such
service is often in
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the best interests of both the Company and the individual, but the Company has a
legitimate interest in protecting against conflicts of interest and limiting
demands on a Director's, Officer', or employee's time. Therefore, the following
procedures shall apply:
1) if a director intents to join a board, he or she shall so
notify the Corporate Governance Committee, carbon copying the
Company Secretary. Directors are expected to limit membership
on boards of other public companies to the extent necessary to
prevent interference with fulfilling responsibilities and
duties to the Company.
2) if a Section 16 Officer wishes to join a board, he or she
shall not do so without prior approval of the Board.
3) if (a) an officer who is not a Section 16 Officer, or (b) a
non-officer employee wishes to joint a board, he or she shall
not do so without prior approval of the CEO.
36. BOARD ACCESS TO INDEPENDENT ADVISORS
The Board shall have the authority to obtain advice and assistance from
internal or external legal, financial, accounting or other advisors.
37. CODE OF CONDUCT AND ETHICS
All of the Company's employees, Officers, and Directors are required to
abide by the Company's Code of Conduct and Ethics. The Board expects Directors,
Officers, and employees, to act ethically at all times and to adhere to this
Code. The Sarbanes-Oxley Act of 2002 also requires companies to have procedures
to receive, retain, and treat employee complaints regarding accounting, internal
accounting controls or auditing matters and to allow for the confidential and
anonymous submission by employees of concerns regarding questionable accounting
or auditing matters. We have such procedures in place, and the Company's
hotlines are set forth in the Code.
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