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Corporate Governance Guidelines

CKE Inc.
Corporate Governance Guidelines

The Board of Directors (the “Board”) of CKE Inc. (the “Company”) is responsible for overseeing the exercise of corporate powers, ensuring that the Company’s business being conducted by its officers and directors, under the direction of the Company’s Chief Executive Officer (the “CEO”), is meeting the Company’s goals and objectives, and acting in the best interests of all of the Company’s stockholders.  In order to assist the Board in the fulfillment of its responsibilities, the Company believes that it is important to establish corporate governance guidelines.  The Company believes that the establishment of these guidelines, and the publishing thereof, will help promote better investor understanding of the Company’s policies and procedures and will promote a more conscientious adherence to such policies and procedures by the directors and management.  Accordingly, the Company has adopted these Corporate Governance Guidelines in compliance with the Listed Company Manual of the New York Stock Exchange (the “NYSE”).  These Guidelines, however, (i) should be interpreted in the context of all applicable laws and regulations, the Company’s Certificate of Incorporation and Bylaws, and the charter documents of all Committees of the Board, (ii) are intended to serve as a flexible framework within which the Board may conduct business and not as a legally binding obligation, and (iii) are subject to modification from time to time as the Board may deem appropriate, or as required by applicable law or regulation.

These Guidelines reflect the Company’s status as a “controlled company” as defined by Section 303A.00 of the Listed Company Manual of the NYSE.

Duties of the Board

The primary responsibility of the Board is to oversee and monitor Company management for the benefit of the Company stockholders.  To that end, the primary duties of the Board (acting through its committees in certain instances) are as follows:

  • representing the interests of the Company’s stockholders in maintaining and enhancing the success of the Company’s business, including optimizing long-term returns to increase stockholder value;
  • selecting, evaluating and compensating a well-qualified CEO of high integrity, and overseeing CEO succession planning, and providing counsel and oversight on the selection, evaluation, development and compensation of other senior management;
  • overseeing the conduct of the Company’s business, including reviewing, approving and interacting with senior management with respect to the Company’s fundamental operating, financial and business strategies and major corporate actions, including strategic planning, operating performance, major plans and transactions and stockholder returns;
  • assessing major risks facing the Company and reviewing alternatives for their mitigation;
  • ensuring processes are in place for maintaining the integrity of the Company, its financial statements and its compliance with law and ethics, its relationships with customers and suppliers and its relationships with stockholders;
  • providing general advice and counsel to the CEO and other senior management personnel; and
  • evaluating the overall effectiveness of the Board, as well as selecting and recommending to stockholders qualified candidates for election to the Board.

While not limiting their obligations under applicable law, directors, in their capacity as such, are expected to use their reasonable business judgment in overseeing the management of the Company.  However, the Board is not responsible for managing the Company on a day-to-day basis nor does it guarantee in any way the management or operations of the Company.

Board Composition and Selection; Director Independence

Classified Board

The Board is divided into three classes, with one class subject to election at each annual meeting of stockholders.  Each director is elected for a three-year term, with vacancies filled as provided in this Corporation’s Certificate of Incorporation (as amended from time to time, the “Certificate”) and the Bylaws.

Board Size

The Company’s Bylaws provide that the Board shall consist of no less than eight and no more than fifteen directors, as determined by the Board.  The Board will set its size so that the Board will possess, in the aggregate, the strategic, managerial and financial skills and experience necessary to fulfill its duties and to achieve its objectives, and to maintain a sufficient number of independent directors.  The specific number of Board members will be reviewed from time to time and adjusted as necessary and appropriate to promote the best overall interests of the Company and its stockholders and to comply with specific rights, if any, held by Apollo Management, as that term is defined in the Nominating Agreement effective as of the close of the Company’s initial public offering of common stock pursuant to the Securities Act of 1933, as amended, among the Company and Apollo Management VII, L.P. (the “Nominating Agreement”), to appoint Board members or increase the size of the Board.

Chairperson

The Board shall elect a Chairperson who shall have responsibility, along with the CEO, relating to scheduling Board meetings, calling special meetings when necessary, and setting or proposing the agenda for each meeting, and shall lead the conduct of Board meetings.  The Chairperson shall also carry out such other duties as are specified for such office in the Company’s Bylaws.  This responsibility does not, however, diminish the responsibilities of each Board member to raise appropriate agenda items, or to propose meetings.

The Company has no formal policy regarding the separation of the position of Chairperson and CEO; however, it believes that in the Company’s current circumstances it is advantageous to separate those positions.

Director Qualification Standards; Service on Other Boards

In addition to further criteria that may be developed from time to time pursuant to these Guidelines and the Compensation and Corporate Governance Committee Charter, the Board has established certain criteria for directors that are set forth on Appendix A.  The Compensation and Corporate Governance Committee of the Board shall be responsible for applying such general and specific criteria for Board membership.

The Company values the experience directors bring from other boards on which they serve, but recognizes that affiliations with public, private or governmental entities may create conflicts of interest, embarrassment to the Company or inconsistency with Company policies or values.  Directors should advise the Chairperson of the Board and the Chairperson of the Compensation and Corporate Governance Committee in advance of accepting an invitation to serve on another board.  Directors are expected to devote sufficient time to fulfill their responsibilities to the Company.  A non-executive director of the Board may serve as a director of another public company only to the extent such position does not conflict or interfere with such person’s service as a director of the Company.  An executive director may not serve as a director of another public company without the Board’s consent.

Selection of Board Members

Except to the extent otherwise provided in the Certificate, the Compensation and Corporate Governance Committee shall be responsible for identifying individuals qualified to become directors of the Company, consistent with criteria approved by the Board, and shall recommend to the Board nominees to be members of the Board.

The Compensation and Corporate Governance Committee will consider proposed nominees to the Board submitted by stockholders in accordance with the criteria set forth in these Guidelines and the Compensation and Corporate Governance Committee Charter, and will consider proposed nominees submitted by Apollo Management, in accordance with provisions contained in the Certificate, the By-Laws or the Nominating Agreement as long as the Company is subject to such provisions.  Any recommendations for consideration by the Compensation and Corporate Governance Committee should be sent to the Corporate Secretary in writing together with appropriate biographical information concerning each proposed nominee.  The Company’s Bylaws also set forth certain requirements for stockholders wishing to nominate director candidates directly for consideration by stockholders.  With respect to director nominees submitted by Apollo Management in accordance with the provisions of the Certificate, the Bylaws or the Nominating Agreement, the Company will follow the procedures set forth therein as long as the Company is subject to any such provisions.

Independence of Directors

To at least the extent required of a “controlled company” under NYSE rules, certain directors shall qualify as independent directors.  The independence of directors shall be determined annually by the Board using applicable NYSE and Securities and Exchange Commission (“SEC”) rules as criteria, in addition to any other factors that the Board believes are appropriate.

Change in Employment

If a director experiences a significant change in status (including retirement, a job change, an extraordinary promotion or a significant decrease in job responsibilities) from the status when that director was most recently elected to the Board, that director shall inform the Chairperson of the change and offer a letter of resignation.  The Compensation and Corporate Governance Committee shall evaluate the director’s job change to determine if it will adversely impact the Board or the individual director’s service on the Board.  The Board will then decide to accept or decline the director’s resignation.

As a general policy, executive officers of the Company who are directors will resign from the Board upon the termination of their employment with the Company.  However, the Board may ask a former CEO to remain on the Board if it believes that an exception to this policy is in the best interests of the Company and its stockholders.

Retirement Age

The Board does not believe that it should establish age limits.  The Board believes that each director candidate should be evaluated based upon what he or she can contribute to the Board.

Director Tenure

The Board does not believe that it should establish term limits.  Term limits have the disadvantage of causing the loss of 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 Compensation and Corporate Governance Committee will review each director’s continuation on the Board before the annual meeting at which a director is to be proposed for re-election.

Stock Ownership

Although it is desirable that a director have a financial interest in the Company through stock ownership, the Company does not require such ownership as a condition to being a director.

Communications with Directors

Communications by stockholders or others to the Board or individual directors shall be sent in care of the Company’s Corporate Secretary at the Company’s headquarters, 6307 Carpinteria Avenue, Suite A, Carpinteria, CA  93013-2601.  Any communication sent to the Board in care of the Corporate Secretary or any other corporate officer will be forwarded to the Board.  There is no screening process, and any such communication will be delivered directly to the director or directors to whom it is addressed.

Executive Sessions of the Board

Normally, members of management who are not members of the Board will participate in Board and committee meetings to present information, make recommendations, and be available for direct interaction with Board members.

However, the Board will hold an executive session at each regularly scheduled meeting without members of the Company’s management present.  Additionally, upon request of any independent director, and in any event not less than annually, the Board will hold an executive session without any director who is not an independent director.

Board Committees

Subject to applicable law and the Company’s Bylaws, the Board has the authority to establish committees for any purpose it deems appropriate.  The Board currently has the following standing committees:  Audit, Compensation and Corporate Governance, and Executive, the duties and responsibilities of which shall be set forth in their respective charters.  The Compensation and Corporate Governance Committee, in consultation with the Chairperson, will recommend committee assignments and committee rotation to the entire Board for final approval.

The committee chairs shall determine the frequency of meetings of their respective committees consistent with any requirements contained in each such committee’s charter and, in consultation with management, shall set meeting times and develop committee agendas.  The committee chairs shall report to the Board on the committees’ actions and shall present recommendations based thereon.

Members of all committees shall satisfy any independence standards or requirements for those committees that may be imposed by the NYSE, the SEC or the Internal Revenue Service (“IRS”), to the extent that any such standards or requirements apply to the Company as a current or former “controlled company” or a newly-public company.  In addition, each committee member shall meet such other applicable requirements as may be established by the NYSE, the SEC, the IRS or the Company for serving on particular committees.

Number and Scope of Board and Committee Meetings

The Board of Directors shall have regular meetings at least four times per year, including a meeting substantially concurrently with the annual stockholders meeting.  The Board shall meet between its regularly scheduled meetings as necessary or appropriate.  Committees of the Board will meet as needed and as provided in the committee charters.

Each director is expected to attend all meetings of the Board and any committee(s) of which he or she is a member.  Although the Company’s Bylaws authorize members of the Board of Directors and members of any committee of the Board of Directors to participate in and act at a meeting through the use of telephonic or other communication equipment, the personal attendance of directors is preferred.  Board members are also expected to attend the Company’s annual meeting of stockholders each year.

The Chairperson, in consultation with the CEO, shall set or propose the agenda for the Board’s meetings.  Any member of the Board may, however, recommend the inclusion of specific agenda items.  Such recommendations shall be accommodated unless it is not practicable to do so.

Materials important to the Board’s understanding of agenda items shall be distributed to the members of the Board, in a timely manner, before the Board meets.  Each member of the Board shall review distributed materials prior to each meeting of the Board.  Members of the Board are also encouraged to keep themselves informed of the Company’s affairs between Board meetings through direct contact with members of senior management of the Company.

Director Compensation

The Board believes that the Company should offer compensation, in cash and/or awards of equity-based compensation, and benefits to directors for their service on the Board at a level that will attract director candidates who satisfy the Company’s selection criteria for board members.  The Compensation and Corporate Governance Committee will periodically review the compensation arrangements in effect for the non-management members of the Board of Directors and recommend to the Board any changes deemed appropriate.  Any director who is an employee of the Company shall not receive any additional compensation for serving as a Company director.

Director Access to Management and Independent Advisors

The Board shall regularly interact with the Company’s management and employees.  The Board and the directors individually have access to individual senior executives and other employees of the Company.  The Company shall maintain an environment that permits senior management and employees to contact Board members directly.

The Board shall periodically hold a strategic planning meeting, and/or devote a portion of other meetings, to review the Company’s long-term strategic plan and business initiatives.

Executive officers, other members of senior management and employees shall be present at Board and/or committee meetings at the invitation of the Board or the committee.  The Board encourages the executive officers and senior management to make presentations, or to include in discussions at Board meetings managers and other employees who (i) can provide insight into the matters being discussed because of their functional expertise and/or personal involvement in such matters and/or (ii) are individuals with high potential whom such executive officers and senior management believe the directors should have the opportunity to meet and evaluate.

Directors may, when they believe it to be necessary or appropriate, hire or engage independent advisors, outside consultants and experts, without consulting management.

Audit Committee Matters

All directors who serve on the Audit Committee shall meet all independence standards and requirements under law, SEC rules and NYSE listing requirements (to the extent applicable to the Company as a current or former controlled company or newly-public company), and any other requirements for membership in the Audit Committee Charter.  Directors who are members of the Audit Committee and who are required to be independent may receive no compensation from the Company other than the fees they receive for serving as directors and members of Board committees.

The Audit Committee’s selection of an independent accounting firm will annually be put to the stockholders for ratification at the annual stockholder’s meeting.

Director Orientation, Continuing Education and Evaluation

The Board conducts an informal orientation process for a new director that includes information on the Board’s policies and procedures, written materials concerning the Company and its operations, and meetings with senior management.

The Board encourages continuing education for Board members, including the presentation of educational topics at Board meetings.

The Board has an annual evaluation and assessment process for the Board and individual directors.  The annual review shall include a review of each director’s compliance with the Board’s membership criteria.  If the Compensation and Corporate Governance Committee, in conjunction with the Chairperson, finds that any director is not fulfilling responsibilities of a director or no longer complies with the selection criteria, such director will be asked to resign from, or not stand for re-election to, the Board.

Management Succession

The Board shall develop and maintain an appropriate succession plan with respect to the position of CEO and other key executive positions.  The Compensation and Corporate Governance Committee shall from time to time, as appropriate, review and recommend to the Board a succession plan for the CEO and development plans for other key corporate positions.

Ethical Conduct

The Board expects the Company’s directors, as well as its officers and employees, to act ethically at all times.  Directors, officers and employees shall comply with the policies set forth in the Company’s Code of Business Conduct and Ethics.  The Board and/or the Compensation and Corporate Governance Committee shall periodically review the Code of Business Conduct and Ethics to help maintain its effectiveness and to foster an atmosphere of ethical conduct at the Company.

All dealings between the Company and its directors, officers and employees shall be conducted in the best interests of the Company.  The Board shall also establish and maintain a policy for related-party transactions involving the Company and its directors, officers and employees, and their related parties.  The policy shall include disclosure and independent review and approval requirements for any such transactions.

Effect of the Guidelines; Revisions

These Guidelines are intended to clarify and define the expectations for directors and management in their governance of the Company, beyond those expectations and requirements in the Bylaws, committee charters, the Company’s Code of Business Conduct and Ethics and the rules and standards of the SEC and NYSE.  These Guidelines will be changed from time to time as necessary or appropriate.  Nothing in these guidelines is intended to expand or limit the fiduciary obligations of directors or executive officers beyond those provided for under applicable law.