Corporate Governance Guidelines
The Board of Directors (the “Board”) of Hudson’s Bay Company (the “Company”) is committed to adhering to the highest possible standards in its corporate governance practices. The Board has approved the following corporate governance guidelines which, together with the Board Mandate, the position descriptions for the Governor and for the Chief Executive Officer, and the charters of the committees of the Board, provide the general framework for the governance of the Company. The Board believes that these guidelines will continue to evolve to address all applicable regulatory and stock exchange requirements relating to corporate governance and will be modified and updated as circumstances warrant.
2.1 Board Mandate
The Board has responsibility for the stewardship of the Company and has adopted a formal written mandate setting out the Board's stewardship responsibilities, including:
- adopting a strategic planning process;
- risk identification and ensuring that procedures are in place for the management of those risks;
- review and approve annual operating plans and budgets;
- corporate social responsibility, ethics and integrity;
- succession planning, including the appointment, training and supervision of management;
- delegations and general approval guidelines for management;
- monitoring financial reporting and management;
- monitoring internal control and management information systems;
- corporate disclosure and communications;
- adopting measures for receiving feedback from stakeholders; and
- adopting key corporate policies designed to ensure that the Company, its directors, officers and employees comply with all applicable laws, rules and regulations and conduct their business ethically and with honesty and integrity.
The Corporate Governance and Nominating Committee (the “Committee”) will annually review and assess the adequacy of this Board Mandate and recommend any proposed changes to the Board for consideration.
2.2 Corporate Governance
The Board has delegated responsibility to the Committee for developing the Company’s approach to corporate governance, including recommending modifications to these Corporate Governance Guidelines for consideration by the Board.
3.1 Director Selection Criteria
The Committee is required under its charter to annually review the candidates for appointment or nomination to the Board based upon an assessment of the independence, skills, qualifications and experience of each candidate, and make recommendations to the Board for consideration. The objective of this review will be to maintain the composition of the Board in a way that provides, in the judgment of the Board, the best mix of skills and experience to provide for the overall stewardship of the Company. All directors are required to possess fundamental qualities of intelligence, honesty, integrity, ethical behavior, fairness and responsibility and be committed to representing the long-term interests of the shareholders. They must also have a genuine interest in the Company, the ability to be objective at all times about what is in the best interests of the Company, have independent opinions on all issues and be both willing and able to state them in a constructive manner and be able to devote sufficient time to discharge their duties and responsibilities effectively. The Committee is mandated to identify qualified candidates for nomination as directors and to make recommendations to the Board. Directors are encouraged to identify potential candidates.
The Board annually reviews and makes a determination on the independence of each director in light of all applicable securities laws and rules and stock exchange requirements, including section 1.4 of National Instrument 52-110 – Audit Committees. The determination of independence of the directors will be publicly disclosed in accordance with applicable securities laws. The Company will maintain a Board with at least a majority of directors determined by the Board to be independent.
3.3 Board Size
The Board has the ability to increase or decrease its size within the limits set out in the Company's articles and by-laws. The Board will determine its size with regard to the best interests of the Company. The Board believes that the size of the Board should be sufficient to provide a diversity of expertise and opinions and to allow effective committee organization, yet small enough to enable efficient meetings and decision-making and maximize full Board attendance. The Board will review its size if a change is recommended by the Committee.
3.4 Election by Shareholders
The members of the Board will be elected each year by the shareholders of the Company at the annual general meeting of shareholders. The Board will propose individual nominees to the shareholders for election to the Board at each such meeting. Between annual meetings of shareholders, the Board may appoint directors to serve until the next such meeting in accordance with the Company’s articles and by-laws.
3.5 Selection of Governor
The Governor of the Company will be appointed by the Board, after considering the recommendation of the Committee, for such term as the Board may determine. The Board has adopted and the Committee will annually review the position description for the Governor.
3.6 Lead Director
Where the Governor is not independent, the independent directors will select one of their number to be appointed lead director of the Board for such term as the independent directors may determine. If the Company has a non-executive Governor, then the role of the lead director will be filled by the non-executive Governor. The lead director or non-executive Governor will chair regular meetings of the independent directors and assume other responsibilities that the independent directors as a whole have designated.
The primary responsibilities of the lead director will be to seek to ensure that appropriate structures and procedures are in place so that the Board may function independently and to lead the process by which the independent directors seek to ensure that the Board represents and protects the interests of all shareholders.
3.7 Term Limits for Directors
The Board has determined that fixed term limits for directors should not be established. The Board is of the view that such a policy would have the effect of forcing directors off the Board who have developed, over a period of service, increased insight into the Company and who, therefore, can be expected to provide an increasing contribution to the Board. At the same time, the Board recognizes the value of some turnover in Board membership to provide fresh ideas and views, and the Committee is mandated to annually consider recommending changes to the composition of the Board.
4.1 Board Committees
The Board has determined that there should be five standing Board committees: (i) Audit Committee; (ii) Corporate Governance and Nominating Committee; (iii) Human Resources and Compensation Committee; (iv) Pension Committee and; (v) Disclosure Committee. The Board will change the Board committee structure and authorize and appoint other committees as it considers appropriate.
4.2 Committee Charters and Responsibilities
The Board will approve a written charter for each committee setting forth the purpose, authority, duties and responsibilities of each committee.
The responsibilities of the Audit Committee will include assisting the Board in fulfilling its oversight responsibilities with respect to: (a) financial reporting and disclosure requirements; (b) ensuring that an effective risk management and financial control framework has been implemented and tested by management of the Company; and (c) external and internal audit processes.
The responsibilities of the Corporate Governance and Nomination Committee will include assisting the Board in fulfilling its oversight responsibilities with respect to: (a) developing corporate governance guidelines and principles for the Company; (b) identifying individuals qualified to be nominated as members of the Board; (c) the structure and composition of Board committees; and (d) evaluating the performance and effectiveness of the Board.
The responsibilities of the Human Resources and Compensation Committee will include assisting the Board in fulfilling its oversight responsibilities with respect to: (a) the establishment of key human resources and compensation policies, including all incentive and equity based compensation plans; (b) the performance evaluation of the Chief Executive Officer and the Chief Financial Officer, and determination of the compensation for the Chief Executive Officer, the Chief Financial Officer and other senior executives of the Company; (c) succession planning, including the appointment, training and evaluation of senior management; and (d) compensation of directors.
The responsibilities of the Pension Committee will include assisting the Board in fulfilling its oversight responsibilities with respect to (a) investment management (b) pension benefits administration, and (c) the overall administration of the Pension Plans and funds under the Pension Plans.
The responsibilities of the Disclosure Committee will include assisting the Board in fulfilling its oversight responsibilities with respect to (a) determining whether information is material information, (b) the timely disclosure of material information in accordance with applicable securities laws and stock exchange rules and regulations, and (c) overseeing the Company’s disclosure controls and procedures.
4.3 Membership of Committees
The Board has determined the Audit Committee and the Human Resources and Compensation Committee will be comprised entirely of directors determined by the Board to be independent. The Corporate Governance and Nomination Committee will be comprised of a majority of independent directors. In addition, all members of the Audit Committee will be financially literate and if required by applicable laws, rules and regulations, at least one member will be a financial expert. Membership and independence of all committee members will be publicly disclosed.
After receipt of recommendations from the Committee, the Board will appoint the members of the committees annually, and as necessary to fill vacancies, and will appoint the chairman of each committee. Members of the committees will hold office at the pleasure of the Board.
4.4 Oversight of Committee Functions
The purpose of Board committees is to assist the Board in discharging its responsibilities. Notwithstanding the delegation of responsibilities to a Board committee, the Board is ultimately responsible for all matters assigned to a Board committee for its determination. Except as may be explicitly provided in the charter of a Board committee or a resolution of the Board, the role of a Board committee is to review and make recommendations to the Board with respect to the approval of matters considered by a Board committee.
5.1 Meeting Agendas
The Governor and Chief Executive Officer, in consultation with the Lead Director, as applicable and Committee chairmen, as appropriate, will establish the agenda for each Board meeting. Each director may suggest the inclusion of additional items on the agenda.
5.2 Meeting Materials
Board and committee meeting materials will be provided to directors before each Board or committee meeting in sufficient time to ensure adequate opportunity exists for review. If certain material is sensitive or confidential in nature, then the material will be distributed at the Board or committee meeting.
5.3 Participation of Management at Board Meetings
The Board believes there is value in having certain members of senior management attend each Board meeting to provide information and presentations regarding the business of the Company to assist the directors in their deliberations. Attendance by senior management will be determined by the Governor and Chief Executive Officer. Members of management will be excluded from Board meetings during discussions of matters reserved for directors only.
5.4 Meetings of Independent Directors
The independent directors of the Board will hold an in camera meeting in conjunction with every regular meeting of the Board.
6.1 Director Compensation
The Board has determined that the directors should be compensated in a form and amount that is appropriate and which is customary for comparative companies, having regard to such matters as time commitment, responsibility and trends in director compensation. The Human Resources and Compensation Committee is mandated to review the compensation of the directors on an annual basis. All compensation paid to directors will be publicly disclosed.
6.2 Loans to Directors
The Company will not make any loans to any of its directors.
7.1 Board Relationship with Management
The Board will support and encourage the members of management in the performance of their duties. Management will make appropriate use of the Board's skills before decisions are made on key issues. The Board has adopted and will annually review the position description for the Chief Executive Officer.
7.2 Limits on Management Authority
The Board will approve annual business plans and budgets and will also approve general authority guidelines that place limits on management's ability to approve contractual and financial arrangements and commitments both in accordance with and outside approved budgets. All transactions, arrangements and commitments outside approved budgets and defined limits will require approval by the Board.
7.3 Evaluation of the Chief Executive Officer and Chief Financial Officer
The Compensation Committee will conduct separate annual reviews of the performance of the Chief Executive Officer and the Chief Financial Officer against the goals and objectives which have been established by the committee and will review, assess and recommend the compensation of the Chief Executive Officer and the Chief Financial Officer to the Board. The Governor and the Chairman of Compensation Committee will advise the Chief Executive Officer of the results of the assessment.
7.4 Director Access to Management
All directors will have open access to the Company's senior management for relevant information. All written communications from directors to members of management will be copied to the Chief Executive Officer or, in the case of accounting and financial matters, to the Chief Executive Officer and the Chief Financial Officer. Individual directors are encouraged to make themselves available for consultations with management outside Board meetings in order to provide specific advice and counsel on subjects where such directors have special skills, knowledge and experience.
8.1 Director Responsibilities
Directors are expected to use their skill and experience to provide oversight of the business and affairs of the Company. Directors have a statutory duty to act honestly and in good faith with a view to the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would in comparable circumstances.
8.2 Attendance at Meetings
Directors are expected to attend all Board and committee meetings either in person or by conference call. A director will notify the Governor or the chairman of a committee or the Corporate Secretary if the director will not be able to attend or participate in a meeting. The Company will publicly disclose the Directors’ attendance record on an annual basis. Any director who has attended less than seventy-five percent of meetings of the board or meetings of the committees on which they sit, for more than two consecutive years, without valid reason for the absences will not be re-nominated.
8.3 Board and Committee Meeting Materials
Directors are expected to review and be familiar with Board and committee meeting materials which have been provided in sufficient time for review prior to a meeting. Directors are to advise the Governor or the chairman of a committee of matters which they believe should be added to a meeting agenda.
8.4 Outside Advisors for Individual Directors
Any director who wishes to engage an independent advisor to assist on matters involving the discharge of his duties and responsibilities as a director at the expense of the Company should review the request with, and obtain the authorization of, the Committee.
8.5 Assessment of Board and Committee Performance
The Committee is mandated to undertake an annual assessment of the overall performance and effectiveness of the Board and each committee of the Board and report on such assessments to the Board. The purpose of the assessments is to ensure the continued effectiveness of the Board in discharging its duties and responsibilities and to contribute to a process of continuing improvement.
8.6 Conflicts of Interest
Directors have a statutory responsibility to disclose all actual or potential conflicts of interest and generally to abstain from voting on matters in which the director has a conflict of interest. A director will recuse himself from any discussion or decision on any matter in which the director is precluded from voting as a result of a conflict of interest or which otherwise affects his personal, business or professional interests.
9.1 Annual Review of Corporate Policies
The Committee is mandated to conduct an annual review of the following principal corporate policies and recommend updates or amendments for consideration by the Board:
- Corporate Governance Guidelines
- Board Mandate
- Position Descriptions for the Governor
- Position Descriptions for the CEO
- Committee Charters
- Code of Conduct
- Corporate Disclosure Policy
- Corporate Governance Guidelines
- Insider Trading Policy, and
- Whistleblower Policy
9.2 Waivers of the Code of Conduct
The Board expects all directors, officers and employees to act honestly and ethically at all times and to adhere to the Company's Code of Conduct. The Board will not permit any waiver of the Code of Conduct for any director or executive officer. The Code of Conduct will be publicly disclosed.
10.1 Annual Governance Reporting
The Company will publicly disclose, on an annual basis, its corporate governance practices in compliance with all relevant securities laws, rules and regulations and stock exchange rules and regulations.
10.2 Access to Disclosure
Certain documents and information referred to in these Corporate Governance Guidelines may be accessed through the Company’s internal website http://myhbcnet. As required by applicable law, certain information is included in the Company’s annual information form and management proxy circular and posted on SEDAR at www.sedar.com.
Corporate Governance and Nominating Committee
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