|Highlights | Management & Directors | Committee Composition | Governance Guidelines | Code of Ethics | Insider Transactions|
|Corporate Governance Guidelines|
As of: November 2016
THE ALLSTATE CORPORATION
The primary role and responsibility of the Board of Directors is to oversee the affairs of the Corporation for the benefit of the stockholders. The Board is the ultimate decision-making body of the Corporation except with respect to those matters reserved to the stockholders. It selects the senior leadership team, which is responsible for the day-to-day management of the business. The Board acts as advisor and counselor to senior leadership and ultimately evaluates their performance.
The Board’s responsibility for oversight of the Corporation’s affairs includes, but is not limited to, oversight of the Corporation’s strategy, business performance, capital structure, management selection, compensation programs, shareholder advocacy, corporate reputation, social responsibility initiatives, ethical business practices, and Board and Committee structure and operations.
The Board is committed to operating with transparency and accountability so that stockholders and other investors have timely, relevant, and accessible information for making decisions regarding investing and voting.
Stockholders have a right, a responsibility, and a long-term economic interest to vote their shares in a thoughtful manner. The Board believes that stockholders’ voting decisions should be based on a careful consideration of the Corporation’s particular characteristics including its business, its financial results, and its corporate governance structure.
Voting results will be carefully and thoughtfully evaluated by the Board in furtherance of its duty to oversee the affairs of the Corporation for the benefit of the stockholders.
The Board believes that the long-term success of the Corporation is dependent upon the maintenance of a strong ethical business environment that focuses on adherence to both the letter and the spirit of regulatory and legal mandates. The Board believes that the Corporation's code of ethics reflects the Corporation's commitment to operating its business with honesty and integrity. The code of ethics applies to all directors, employees, and officers, including the Chief Executive Officer and senior financial officers.
Directors are required to comply with the Corporation’s code of ethics and policies regarding ethical behavior including, but not limited to, the Corporation’s policies on insider trading, conflicts of interest, integrity, privacy, communications, and confidentiality.
Decisions on matters of corporate governance are approved by the Board based on the recommendation of the Nominating and Governance Committee and after such consultation with senior leadership (including the CEO) as appropriate. These guidelines have been approved by the Board and reflect the governance framework for the Corporation. The guidelines will be reviewed annually by the Nominating and Governance Committee or more often if deemed necessary.
The Board views the selection of the Chair and the CEO as one of its most important responsibilities. The independent members of the Board determine periodically whether these positions should be held by the same person or by separate individuals based on the recommendation of the Nominating and Governance Committee, the current circumstances of the Corporation, the skills and experiences of the individuals involved, and the leadership composition of the Board. The roles of Chair and CEO may be held by the same person when the individual has sufficient expertise, the ability to effectively fulfill both roles simultaneously, and the Board concludes that a combined role improves the effectiveness of the Board and management team.
Chair of the Board. The independent members of the Board annually select one member of the Board to act as Chair for a one-year period with the general expectation that the individual will serve for a longer period of time, except as circumstances warrant otherwise. In addition to the responsibilities set forth in the Corporation’s bylaws, the Chair is responsible for:
Chief Executive Officer. The Board selects the CEO. The CEO should be an effective leader and strategist and have extensive business and operational experience. The CEO should have the intellectual capacity, experience, and decisiveness to execute on corporate priorities and to meet the needs of a wide group of stakeholders. Most importantly, the CEO should exemplify the Corporation’s values, including among others, honesty, caring, integrity and inclusive diversity. The CEO is responsible for the Corporation’s overall strategic direction, performance and operating results, as well as corporate stewardship and maintaining and motivating a high performing senior leadership team.
Pursuant to its charter, the Nominating and Governance Committee discusses with the Board and Lead Director individuals who have been identified as potential successors to the role of Chair or CEO and for the election as Chair or CEO.
The Nominating and Governance Committee recommends to the independent members of the Board the election of an independent director to serve as Lead Director, as well as selection considerations to use in evaluating Lead Director nominees. The Lead Director is elected annually by the independent directors of the Board but is generally expected to serve for more than one year. In selecting the Lead Director, the independent members of the Board consider evolving market, operational, and governance issues facing the Corporation, in addition to the following considerations:
The responsibilities of the Lead Director are reviewed annually in connection with the annual evaluation of the Lead Director’s performance. The responsibilities of the Lead Director include:
The Board performs an annual evaluation of each of the Board Chair and the CEO in an executive session with the input of the Compensation and Succession Committee and the Lead Director. The Chair of the Compensation and Succession Committee, in conjunction with the Lead Director, communicates the results of the evaluations to the Chair and CEO individually if they are not the same person.
Evaluations are based on broad-based objective criteria focused on the Corporation's overall performance, accomplishment of long-term strategic objectives, and leadership development. The CEO is evaluated using several criteria, including, but not limited to the following:
The Chair is also assessed on overall Board effectiveness, including Board composition and capabilities and the strength of the Board’s governance practices.
The Compensation and Succession Committee generally discusses management succession planning three times a year in joint sessions with the Board. Two of the joint meetings are generally focused on potential candidates for senior management roles including the CEO position pursuant to recommendations from the Nominating and Governance Committee. The other joint meeting is focused on alternative management succession scenarios under various hypothetical situations.
Succession planning discussions generally include input from the CEO regarding senior executive officers’ skills, experiences, competencies, and potential in order to assess development opportunities.
The Lead Director guides succession planning discussions relating to the roles of the Chair and CEO. Together with the Lead Director, the Compensation and Succession and Nominating and Governance Committees consider which, if any, executives currently possess or have the ability to develop the attributes necessary to lead and achieve the Corporation’s goals and strategies as CEO.
With input from the Lead Director, the Nominating and Governance Committee annually reviews and recommends for approval by the Board the criteria and processes to be used to evaluate the performance of the Board as a whole and each Committee. The purpose of this annual evaluation process review is to increase the overall effectiveness of the Board and the Committees in fulfilling their responsibilities.
The Board and each Committee evaluates its performance as a whole at the end of each regularly scheduled in-person meeting. The Committee Chairs report to the Lead Director and Board any matters raised during Committee discussions as part of Committee reports to the Board. This ongoing self-assessment process prompts reflection and discussion on the most recently completed meeting. It includes consideration of the following questions to enhance the effectiveness of the Board and Committees’ oversight responsibilities:
The contributions and performance of each individual director is evaluated annually by the Lead Director, the Chair, and the Chair of the Nominating and Governance Committee. In addition, on a biennial basis, the Chair or the Lead Director discusses with each director future plans on continued Board membership. Separate discussions are held to evaluate the performance of the Chair, the Chair of the Nominating and Governance Committee, and the Lead Director, with each recusing himself or herself, respectively, for the evaluation of his or her performance. Evaluation criteria used in the director evaluation process includes:
Individual directors receive feedback, if necessary, from the Board Chair or the Lead Director.
The outcomes of such evaluations are shared with the Nominating and Governance Committee in connection with the annual nomination process.
The Nominating and Governance Committee also considers Board composition on an ongoing basis to ensure the Board is composed of directors with skills and experiences that fit the Corporation’s business and strategies.
The Board believes that its optimum size range is 9 to 13 directors and that a significant majority of the Board should be composed of independent directors with no significant business or personal ties to the Corporation. The Board believes that, in most situations, the CEO should be the only employee-director, but that circumstances may warrant the addition of one other.
The Board believes that directors should act on behalf of all stockholders, should not represent the interests of particular constituents, and should reflect a diversity of experience and viewpoints. Directors must always act in a manner consistent with their fiduciary duties of loyalty and care. The Board believes that directors should:
In order to be effective in carrying out its responsibilities, the Board believes that it should be composed of directors with superior skills or extensive experience in several of the following areas: leadership and management; accounting and finance; investment management; technology; risk management; innovation and consumer focus; executive compensation and talent management; highly regulated industries; global operations and economics; corporate governance; strategy development; and civic involvement.
The Nominating and Governance Committee applies these criteria in recommending nominees for election to the Board. Periodically, the Nominating and Governance Committee reviews these criteria to ensure that they appropriately reflect the issues that should be considered in evaluating director candidates.
Directors who are active executives may serve on the boards of no more than two public companies, and other directors may serve on the boards of no more than four public companies, in addition to the Corporation’s Board in each case.
The Board expects a non-employee director to be free of interests or affiliations that could give rise to a biased approach to directorship responsibilities or a conflict of interest and to be free of any significant relationship with the Corporation that would interfere with the director's exercise of independent judgment.
A director will not qualify as "independent" unless the Board affirmatively determines that the director has no material relationship with the Corporation. The Nominating and Governance Committee assesses the independence of nominees and makes recommendations to the Board on matters related to director independence, including length of Board service. The Board determines the independence of each director and discloses the determinations as required in accordance with regulatory requirements.
In addition, the Board's confidentiality and recusal procedures address potential conflicts of interest and the protection of confidential or proprietary information presented at Board meetings when a member of the Board has a relationship with another company or entity whose products or services may be potentially competitive with those offered by the Corporation or its affiliates. The General Counsel is responsible for the interpretation and application of these procedures when appropriate.
Executive officers of the Corporation may not serve on boards of other corporations whose executive officers serve on the Corporation’s Board.
In identifying candidates to be nominated for election as directors, the Nominating and Governance Committee solicits input from current directors. The Committee considers stockholder-recommended candidates and evaluates stockholder-recommended candidates on the same basis as other candidates. The Nominating and Governance Committee may also retain a search firm. The Committee evaluates candidates and makes recommendations to the Board regarding potential nominees. Ultimately, the Board determines who will be nominated.
An invitation to join the Board may be extended by the Board itself or, with the Board's authorization, by the Nominating and Governance Committee Chair or by the Board Chair.
New directors meet with members of senior leadership to review the Corporation’s markets, competitors, business, strategies, operating performance, leadership, culture and corporate governance. New directors also receive background materials related to these matters and visit the corporate facilities.
To continue development, directors may participate in external programs and become members of organizations that assist in enhancing director skill sets. Reasonable costs incurred in connection with such programs will be reimbursed by the Corporation. In addition, management regularly makes in-depth presentations and provides educational materials to the Board on particular aspects of the Corporation's business.
Directors who intend to resign or who intend to not stand for re-election at the Corporation’s next annual meeting of stockholders are required to notify the General Counsel, the Secretary, or an assistant secretary. Such notice facilitates compliance with the Corporation’s reporting responsibilities and allows for effective planning with regard to the composition of the Board.
Directors who change their principal employment are required to offer to resign from the Board. The offer should be submitted to the General Counsel, the Secretary, or an assistant secretary. While the resignation may not be accepted, the practice provides an opportunity for the Board, initially through the Nominating and Governance Committee, to review the appropriateness of the director's continued membership on the Board.
Directors who anticipate a change in other responsibilities, such as board service on other companies, are required to provide 60 days advance notice of proposed changes to the Secretary. Such notice facilitates a review of potential conflicts and whether the change impacts a director’s ability to devote the time and effort necessary to serve as an effective director of the Corporation.
The Board has not established term limits, but the Nominating and Governance Committee considers director tenure on a regular basis in connection with annual director nominations. The Nominating and Governance Committee makes recommendations to ensure that the Board consists of independent-minded members who are open to new ideas and willing to critically re-examine the status quo.
Each non-employee director must retire from the Board by not standing for re-election at the first annual meeting of stockholders following his or her 72nd birthday, unless the Board determines that it is in the best interests of the Corporation and its stockholders to extend the director's service for an additional period of time.
The Board expects that, when a director who is also an officer or an employee of the Corporation resigns or retires from the Corporation, he or she will resign from the Board at the same time, unless the Board determines that continued Board service for an additional period of time is in the best interest of the Corporation and its stockholders. Such resignation should be submitted to the Corporation’s General Counsel, the Secretary, or an assistant secretary.
The independent compensation consultant reports to the Nominating and Governance Committee annually on the status of the Corporation's director compensation in relation to peer companies.
Changes in director compensation are proposed from time to time by the Nominating and Governance Committee and are subject to discussion and approval by the Board.
As part of a director's total compensation, and to create a linkage with corporate performance, the Board believes that a meaningful portion of a director's compensation should be in the form of equity securities of the Corporation.
Within five years of joining the Board, each director is expected to accumulate an ownership position in Allstate securities equal to five times the value of the annual cash retainer paid for Board service.
Once a director meets this ownership guideline, the director is deemed to continue to meet it, provided the director does not dispose of securities that result in the director's ownership falling below the guideline immediately following the disposition. A subsequent decline in the stock price, by itself, does not affect compliance with the guideline. However, if a director's ownership is below the guideline due to a decline in the stock price, a director is restricted from executing a disposition until the ownership guideline can be satisfied based on the current stock price and after giving effect to the disposition. In the event the annual cash retainer increases, each director has five years from the time of the increase to acquire any additional securities needed to meet this guideline.
The following are considered securities for determining ownership:
The Chair develops in consultation with the Lead Director a proposed annual Board agenda for regularly recurring matters and planned special topics and reviews it with the Board to obtain input from the directors before it is finalized.
The Chair works with the Lead Director to establish agendas, schedules, and meeting materials for each Board meeting, consistent with the annual agenda and including such additional matters as may be appropriate. Meeting agendas, schedules, and materials are approved by the Lead Director in advance of distribution to the Board for each meeting. Directors may suggest additional agenda items and may raise at any meeting subjects that are not on the agenda. At least one Board meeting each year is devoted to a review of the Corporation's annual and long-term strategic plans and financial goals.
The Chair in consultation with the Lead Director ensures that information important to the Board's or a Committee's understanding of the business to be conducted at a meeting is distributed to the members in advance. This permits more meeting time to be spent on discussion and questions from directors. If the subject is too sensitive to be distributed in writing, the presentation will be made at the meeting.
It is expected that Board members review meeting materials in advance, attend meetings of the Board and the Committees on which they serve and actively participate in discussions. It is also expected that Board members make every effort to attend the annual meeting of stockholders.
There are typically three executive sessions held during each in-person Board meeting, with one session that is held with just the independent members of the Board, and two executive sessions held between the independent members of the Board and the CEO. One of the executive sessions with the CEO typically takes place before the Board meeting begins, and the other takes place as the last formal agenda item of the Board meeting. Generally, the independent members of the Board meet alone in executive session at the end of every in-person Board meeting. Executive sessions are chaired by the Lead Director. The Lead Director also has the authority to call meetings of the independent members of the Board that may or may not include the Chair.
Directors may initiate contact with the Corporation's management. The CEO is encouraged to invite key members of management to Board meetings on a regular basis so that they may provide additional insight into the items being discussed. The Board believes it is important for directors to know the Corporation's key senior officers and welcomes their attendance at and participation in Board meetings. The Board also expects that management will use this process to provide exposure to managers with senior leadership potential.
The Board and each of its Committees have the authority to seek legal or other expert advice from a source independent of management.
The Board has the following standing Committees: the Audit Committee, the Risk and Return Committee, the Compensation and Succession Committee, the Executive Committee, and the Nominating and Governance Committee.
The Audit, Risk and Return, Compensation and Succession, and Nominating and Governance Committees consist solely of independent directors as defined above and as defined in the Committee charters. The Chair of each of the Audit, Risk and Return, Compensation and 12 Succession, and Nominating and Governance Committees is an independent director who has served as a member of the Board for a period of at least two years. The Executive Committee consists of the Lead Director, the Chairs of the Audit, Risk and Return, Compensation and Succession, and Nominating and Governance Committees, and the Board Chair.
Each Committee maintains a charter, which is posted on the Corporation's website. The Board may form additional Committees.
The Nominating and Governance Committee recommends to the Board, and the Board designates, the members and the Chairs of the Committees, taking into account the preferences and experience of the individual directors.
The Board reviews Committee membership annually and considers whether membership changes should be made with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors. There are no fixed terms for Committee membership. The Board believes that rotation of Committee assignments should occur at periodic intervals but should not be mandated as a policy as there may be reasons to maintain an individual director's Committee membership for extended periods of time.
The Nominating and Governance Committee reviews and assesses the independence, experience, and financial literacy of nominees for the Audit Committee, including Audit Committee Financial Experts.
The Risk and Return, Compensation and Succession and Nominating and Governance Committees typically meet at least four times a year. The Audit Committee typically meets eight times a year. The Executive Committee meets on an as-needed basis. Many Committee meetings are scheduled to coincide with regular Board meetings. Committee Chairs may call additional meetings, as needed.
Each Committee, other than the Executive Committee, approves an annual agenda. The Chair of each Committee works with the Lead Director, the Board Chair, and other directors and management, as appropriate, prior to each meeting to discuss meeting agendas and materials. Each Committee Chair reviews and approves Committee materials in advance of distribution to Committee members, who receive the materials in advance of each meeting. During meetings, Committee members may raise subjects that are not on the meeting agenda.
From time to time the Compensation and Succession Committee may engage an independent compensation consultant to advise it. During the period of such consultant's engagement by the Compensation and Succession Committee, management will notify the Committee of any engagements of such consultant, including its affiliates, to provide additional services to the Corporation to the extent that the fees for such services exceed $120,000 in a fiscal year.
The Board has established a process for stockholders and other stakeholders to communicate directly with its members. The process is described in the Corporation's annual proxy statement and on the Corporation's website.
In addition, the CEO is responsible for establishing effective communications with the Corporation's stakeholder groups, including stockholders, policyholders, customers, employees, agency owners, communities, suppliers, distributors, creditors, and governmental authorities.
It is the policy of the Corporation to select individuals to communicate and interact with these stakeholders. The Lead Director is available for communications with significant stockholders and other stakeholders on matters involving broad corporate policies and practices when appropriate.
The Audit Committee has established procedures for complaints regarding accounting, internal controls, and auditing matters, including procedures for the confidential and anonymous submission of complaints by employees.
The Corporation is involved in the public policy arena at the state and federal levels. We support research associations, coalitions, industry trade associations, non-profit organizations, and other groups that seek to advance public policy initiatives which promote personal safety and property protection or address other issues that affect our stakeholders. Providing these resources helps inform public policy makers and consumers about key issues affecting our customers and the insurance marketplace.
The decision to use corporate resources in this arena is made consistent with the Corporation's annual operating plan as well as its strategic vision. The specific deployment of corporate resources is presented formally to the Board each year and is always guided by the principle of what is best for the Corporation's stockholders, employees, agents, and customers.
Senior leadership determines which candidates and organizations to support financially. These contributions are then subject to further oversight by the Corporation’s Board. In addition to the Corporation's internal guidelines and procedures governing public advocacy and political activities, direct corporate political contributions are made as permitted under federal, state, and local laws to help elect candidates whose views and positions will improve the insurance market place for the Corporation, the insurance industry, and the insurance consumer. All contributions are publicly disclosed as required by applicable state or federal law.
The Board will obtain stockholder approval prior to adopting any stockholder rights plan; provided, however, that the Board may act on its own to adopt a stockholder rights plan if, under the then current circumstances, in the reasonable business judgment of the independent directors, the fiduciary duties of the Board would require it to adopt a rights plan without prior stockholder approval. The retention of any rights plan so adopted by the Board will be submitted to a vote of stockholders as a separate ballot item at the next subsequent annual meeting of stockholders and, if not approved, such rights plan will expire within one year after such meeting.
The Corporate Governance Guidelines are publicly disclosed and posted on the Corporation's website. As amended, effective November 18, 2016.
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