EXHIBIT 99.1
CORPORATE GOVERNANCE PRINCIPLES
The ServiceMaster Company
(adopted by the Board of Directors October 4, 1996, amended
March 8, 2002 and amended and restated January 30, 2004)
The Board of Directors of the Company has adopted the following
Corporate Governance Principles to assist the Board in the exercise of its
responsibilities to the Company and its shareholders. The Board will continue to
assess the appropriateness of these Principles and implement such changes and
adopt such additions as may be necessary or desirable to promote the effective
governance of the Company.
Purpose
The purpose of these Principles is to describe the manner in which the
Company will be managed by or under the direction of its Board within the
framework of its corporate objectives To Honor God In All We Do, To Help People
Develop, To Pursue Excellence, and To Grow Profitably and for the benefit of its
shareholders.
These principles are intended as a guide. They do not supersede or
replace the Company's Amended and Restated Certificate of Incorporation or
Bylaws, nor are they intended to govern or limit the enforceability or validity
of any action taken by the Company, its Board, or any committee of the Board.
These principles do not impose or impute a higher duty or standard of care for
the Board or any individual director than would otherwise be required by law.
Director Qualifications
1. Number of Members of the Board. The Board shall have at least three
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members in accordance with Article 7.1 of the Company's Amended and Restated
Certificate of Incorporation. The Board shall have the objective of having ten
to twelve members with no more than two members from management. Additional
members may be appropriate from time to time in order to accommodate the
availability of one or more outstanding candidates.
2. Selection of Members of the Board. The Governance and Nominating
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Committee is responsible for reviewing the qualifications of, and recommending
to the Board, nominees for membership on the Board. The Governance and
Nominating Committee shall recommend to the Board guidelines and criteria to
determine the qualifications to serve and continue to serve as a director. The
Board shall strive to have a diversity of gender, ethnicity, culture and race.
Members should in general have skills, experience or expertise in one or more of
the following areas: finance, accounting, information technology, senior
management of a major company, federal or state government agencies or
contracting practices, marketing, strategic planning, human resources, ethical
training, and regulatory and compliance.
3. Independence Requirements. The majority of the Board shall satisfy the
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independence requirements of Article 7.5 of the Company's Amended and Restated
Certificate of Incorporation. Unless otherwise determined by the Board, each
member of the Board other than a member who is an officer of the Company shall,
at a minimum, satisfy the independence requirements under the New York Stock
Exchange listing standards. To be considered independent under the New York
Stock Exchange listing standards, no director may:
a. have a material relationship with the Company (as affirmatively
determined by the Board), either directly or indirectly as a partner,
shareholder or officer of an organization that has a relationship with the
Company; provided, that a director will not be considered to have a material
relationship with the Company if (i) the director is a partner, principal,
counsel or advisor to, shareholder, director or officer of another company that
does business with the Company and the annual sales to, or purchases from, the
Company are less than 1% of the annual revenues of the other company and the
director does not receive any compensation (paid, deferred or otherwise) as a
direct result of such business with the Company and (ii) the director is an
officer, director or trustee of a charitable organization, and the Company's
discretionary charitable contributions to the organization are less than 1% (and
no more than $50,000) 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);
provided, further, that a director will be considered to have a material
relationship with the Company if the director is an officer of another company
that is not a charitable organization and any of the Company's present
executives serves on that other company's board of directors;
b. be an employee, or have an immediate family member who is an executive
officer, of the Company;
c. receive, or have an immediate family member who receives, more than
$100,000 per year in direct compensation from the Company, other than director
and committee fees and pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way on continued
service);
d. be affiliated with or employed by, or have an immediate family member
who is affiliated with or employed in a professional capacity by, a present or
former internal or external auditor of the Company;
e. be employed, or have an immediate family member who is employed, as an
executive officer of another company where any of the Company's present
executives serve on that other company's compensation committee; or
f. be an executive officer or an employee, or have an immediate family
member who is an executive officer, of a company that makes payments to, or
receives payments from, the Company for property or services in an amount which,
in any single fiscal year, exceeds the greater of $1 million, or 2% of such
other company's consolidated gross revenues.
An immediate family member includes a director's spouse, parents,
children, siblings, mothers and fathers-in-law, sons and daughters-in-law,
brothers and sisters-in-law and anyone (other than domestic employees) who
shares the director's home.
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No director will be considered independent until a period of three
years (or any shorter period provided under the New York Stock Exchange listing
standards) has elapsed from the end of the relationships described in
subsections (b)-(f) above.
The Company will disclose in its proxy statement the Board's
determinations regarding the independence of each director.
4. Committee Independence Requirements. Each member of the Audit and
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Finance Committee, Compensation and Leadership Development Committee and
Governance and Nominating Committee shall satisfy the independence requirements
and membership criteria set forth in its respective charter.
5. Ethics and Conflicts of Interest. The Board expects all directors,
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officers and employees to act ethically and adhere to the Company's Code of
Conduct. The Board will not permit any waiver of any ethics policy for any
director, executive officer or other member of the Company's senior management.
If an actual or potential conflict of interest arises for a director, the
director shall promptly inform the Chief Executive Officer and the presiding
director.
6. Retirement Age, Term Limits and Evaluation of Director Performance. Each
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director must be younger than the age of 70 at the date he or she is elected to
the Board. Subject to the Company's Bylaws, the Board shall have the authority
to make exceptions to this policy under circumstances to be determined by the
Board. The Board does not believe it should establish term limits. The
Governance and Nominating Committee shall regularly and timely evaluate the
performance of individual directors.
7. Significant Change in Status. If a director has a significant change in
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professional or personal circumstances, such as through a change of employer,
retirement, a change in job responsibilities or health, the director should
tender his or her resignation to the Board. The Board shall then determine
whether such change in status makes accepting the resignation desirable.
8. Service on Other Public Company Boards. A director who also serves as an
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officer of the Company shall not serve on more than two other boards of public
companies and other directors should not serve on more than four other boards of
public companies. No member of the Audit and Finance Committee may serve on the
audit committee of more than two other public companies. A director should
advise the Chairman of the Board and the Chairman of the Governance and
Nominating Committee prior to accepting an invitation to serve on the board of
another public company.
Director Responsibilities
1. Duties. In meeting its responsibilities, the Board shall act as a whole
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or through a committee. The basic responsibility of the directors is to exercise
their business judgment in good faith to act in what they reasonably believe to
be the best interests of the Company and its shareholders. Each director is
expected to be familiar with the Company's business, to review in advance of
meetings the materials distributed and to attend and participate in meetings of
the Board and meetings of any committee of which such director is a member. The
specific duties and responsibilities of the Board include, among other things,
fostering a continued
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understanding and implementation of the Company's
corporate objectives; representing the interests of the Company's shareholders
in maintaining and enhancing the success of the Company's business; overseeing
and interacting with senior management with respect to key aspects of the
business including strategic planning, succession planning and management
development, operating performance, shareholder returns and budgets and adhering
to the Company's Code of Conduct.
2. Board Meetings. The Board shall meet at least four times annually at
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such locations as the Board or its Chairman shall from time to time determine. A
special meeting of the Board may be called by or at the request of the Chairman
or a majority of the Board. Each Board meeting shall be opened with a devotional
thought relating to the recognition and application of the first objective of
the Company to the operation of the business.
3. Agendas. The Chairman shall be primarily responsible for planning
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agendas for a period of at least 18 months in advance with the objective of
having the Board and its committees informed with respect to material and
relevant matters relating to the operation and future direction of the Company.
Agendas are distributed in advance to each director. Any director may request an
item to be added to an agenda. With respect to each regularly scheduled meeting
of the Board, the Board through its Chairman shall determine the agenda of the
Board meeting.
4. Distribution of Materials. The Board and its committees shall be
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provided with appropriate materials in advance of each meeting, whenever
feasible and appropriate. Management shall be responsible for ensuring that the
materials are accurate and contain all material information necessary for the
director to make an informed decision.
5. Executive Sessions and Presiding Director. At each meeting of the Board,
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the non-management directors of the Company shall meet in executive session
without the Company's management. In the event one or more non-management
directors is not independent, then only independent directors should meet in
executive session at least once a year. In the event the Chairman is not
independent, the Board shall select the chairperson of the Audit and Finance
Committee, Compensation and Leadership Development Committee or Governance and
Nominating Committee to preside at its executive sessions, without management. A
presiding director should serve as such for no more than two consecutive years.
The duties of such a presiding director include advising the Chairman of matters
discussed in executive sessions without management, where appropriate, as well
as on Board agenda items and information to be provided to the Board.
Alternatively, each time the Board holds executive session without management
the Board may select the chairperson of the Audit and Finance Committee, the
Compensation and Leadership Development Committee or the Governance and
Nominating Committee to preside. The name of the presiding director or the
procedure for selecting the presiding director shall be disclosed in the
Company's annual proxy statement. The Company shall also disclose in its annual
proxy statement a method for interested parties to contact the presiding
director, or the non-management directors as a group, directly.
6. Position of Chairman of the Board. The Board shall elect from its
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members a Chairman who may also be the Chief Executive Officer of the Company.
The Chairman shall schedule and call Board meetings, prepare the agenda for
Board meetings, chair and moderate Board meetings, lead the Board and serve
Board committees.
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7. Strategic Review. The Board shall regularly review the strategic
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direction and initiatives of the Company.
8. Stock Ownership. Each director and member of senior management is
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encouraged to maintain ownership of the Company's common stock. The Company's
stock ownership guidelines require each director and member of senior management
to hold a number of shares equal to 50% of (i) the vested shares of restricted
stock and (ii) the number of option shares granted to the director and member of
senior management after providing for payment of the exercise price and taxes,
in each case granted on or after July 17, 2003 until the director leaves the
Board or the member of senior management ceases to be employed by the Company.
All purchases and sales of the Company's common stock by a director and member
of senior management must comply with the Company's Policy Regarding Insider
Trading and Confidentiality.
9. Loans. The Company shall not directly or indirectly extend or maintain
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credit, arrange for the extension of credit or renew an extension of credit in
the form of a personal loan to or for a director or executive officer. An
extension of credit maintained by the Company on July 30, 2002 is not subject to
this prohibition provided there is no material modification or any renewal of
such credit on or after July 30, 2002.
Board Committees
1. Committee Structure. The Board shall have an Executive Committee, Audit
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and Finance Committee, Compensation and Leadership Development Committee and
Governance and Nominating Committee. After considering the recommendation of the
Governance and Nominating Committee, the Board shall designate one person to
serve as Chairman of each committee. The Board shall establish such additional
committees as it deems necessary or appropriate.
2. Committee Charters. The Executive Committee may act on behalf of the
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Board between Board meetings. Each of the Audit and Finance Committee,
Compensation and Leadership Development Committee and Governance and Nominating
Committee shall have its own charter approved by the Board. Each charter shall
set forth the purposes, duties and responsibilities of the committee.
3. Frequency and Length of Committee Meetings. Each committee through its
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Chairman shall determine the agenda, frequency and length of the committee
meetings consistent with its respective charter. A report on regularly scheduled
and special committee meetings shall be made at each regularly scheduled meeting
of the Board.
Director Access to Management and Advisers
Each director shall have access to the management of and advisers to the
Company. Each director shall use his or her judgment to ensure that any such
contact is not disruptive to the business operations of the Company. The Board
and its committees, as set forth in their respective charter, shall have the
right to consult and retain independent counsel and other advisers, as they
determine necessary or appropriate to carry out their duties, at the expense of
the Company.
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Director Compensation
The Compensation and Leadership Development Committee shall recommend to
the Board the compensation of members of the Board who are not employees of the
Company in accordance with the policies and principles set forth in its charter.
The Compensation and Leadership Development Committee shall consider that a
director's independence may be jeopardized when a director's compensation
exceeds customary levels, when the Company makes substantial charitable
contributions to organizations in which a director is affiliated, or enters into
consulting contracts with (or provides other indirect forms of compensation to)
a director. Directors who are employees of the Company shall not be eligible to
receive compensation for service as a director of the Company.
Director Orientation and Continuing Education
Each new director shall participate in a director orientation program
within a reasonable time after the director is first elected to the Board. The
orientation program shall be designed to familiarize new directors with the
Company, its management structure and operations, and key operational, financial
and other issues. The orientation program shall include a visit to the Company's
offices to meet with senior management and visit local branches. Each director
should, through seminars, conferences and similar events, remain current in
matters relating to governance, disclosure, accounting or industry developments.
CEO Evaluation and Management Succession
The Compensation and Leadership Development Committee shall review and
approve the corporate goals and objectives of the Chief Executive Officer. The
Compensation and Leadership Development Committee shall annually evaluate the
performance of the Chief Executive Officer in light of the Chief Executive
Officer's competencies, corporate goals, objectives, potential and such other
considerations as the Committee deems appropriate and determine the Chief
Executive Officer's compensation based on such evaluation. The Compensation and
Leadership Development Committee shall conduct a review of succession planning
and make a report annually to the Board, including plans for interim succession
for the Chief Executive Officer in the event of an emergency or the retirement
of the Chief Executive Officer.
Evaluation of Board and Committee Performance
The Governance and Nominating Committee shall conduct annual evaluations of
the performance of the Board and its committees. The evaluations shall serve as
the basis for a discussion of Board and committee performance.
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