The following guidelines have been adopted by the Board of Directors to provide a structure within which directors can effectively represent the stockholders and pursue the Company's objectives for the benefit of its stockholders, employees, customers and other stakeholders. They are intended to be flexible, not a set of binding legal obligations except to the extent that a particular guideline is also a legal requirement. These guidelines are subject to applicable laws, rules and regulations, as well as to the Company's Certificate of Incorporation, By-laws, and policies.
The Board may at any time and from time to time amend any one or more of the guidelines, and may approve a waiver of one or more of the guidelines when the Board deems it necessary, appropriate or advisable to do so.
The Board's Primary Responsibility
The Board's primary responsibility consists of the oversight of the management of the Company.
Members of the Board understand that their oversight responsibility, first and foremost, is to exercise their business judgment in pursuing the best interests of the Company.
The Board takes into account not only the common interests of our stockholders, but also the interests of our employees, creditors, customers, suppliers, and the communities in which we operate.
By fulfilling its primary responsibility in this manner, the Board believes that it will maximize the return to our stockholders.
Key Areas of Oversight
Among the Company's most important areas of oversight are the Company's strategy and risks.
In evaluating strategy, directors, among other things, monitor the Company's performance against its operating plan or budget, as well as against the performance of its peer group of companies.
Risk oversight is performed through ensuring that the Board receives regular management reports on the Company's key risk areas, and through risk assessment by the Board's standing committees on matters that fall within their jurisdiction.
The Board believes that a board composed of between six and nine directors is appropriate given the size of the Company. The range may change according to circumstances and the qualifications of proposed candidates identified from time to time.
Board Membership Criteria
The Corporate Governance & Nominating Committee identifies and recommends for nomination by the Board, as well as by a majority of independent directors, qualified candidates for election as directors of the Company. Candidates may be suggested by other directors, members of management, shareholders, and by other third parties, including a search firm retained by the Board.
The Committee seeks to achieve a Board that is composed of individuals who have experience that is relevant to the needs of the Company, who have a high level of professional and personal ethics, and who contribute to the diversity of the Board.
In making recommendations to the Board, the Committee considers, among other things, the qualifications of the incumbent directors to determine if there are any gaps in the experience, skills and diversity of the Board that need filling to promote and protect the interests of the Company.
The Board is composed of a majority of independent directors, as required by the Nasdaq Stock Market.
The Corporate Governance & Nominating Committee makes recommendations to the Board as to the independence of non-employee directors, and the Board determines whether those directors are independent.
The Board will maintain a balance of independent and non-independent directors, including current and possibly former members of management, that it believes is effective for the promotion of stockholder interests and the governance of the Company.
The Board has not established term limits or a retirement age for directors.
The Board believes that directors who have served on the Board for an extended period of time can provide valuable insight into the operations and strategy of the Company based on their experience and understanding of the Company's history, policies, and objectives.
The tenure and age of an incumbent director is taken into account by the Corporate Governance & Nominating Committee when it considers whether to recommend that the director be re-nominated.
Change in Status
If a director's job responsibilities or position held when he or she became a director change materially, the director is expected to notify the Chair of the Corporate Governance & Nominating Committee.
The Committee then evaluates whether the individual continues to satisfy the Board's membership criteria, and takes the change into account when it decides whether to recommend the re-nomination of the director.
A non-employee director who becomes an employee of the Company is expected to tender his or her resignation to the Board.
Upon leaving the Company's employ, directors who are also employees are expected to tender their resignation to the Board.
Conflicts of Interest
Each director is expected to inform the Audit Committee promptly of any direct or indirect transaction between the director and the Company.
All related-party transactions are subject to review and approval by the Audit Committee in accordance with its charter, as well as under applicable laws and the rules of the Nasdaq Stock Market.
Directors are expected to invest the time and effort necessary to understand and oversee the Company's business, strategies, and risks.
Directors are expected to attend the meetings of the Board and of the committees on which they serve; to prepare for meetings by reviewing in advance the materials distributed to them; and to actively participate in Board and committee discussions.
Directors are expected to attend in person the Annual Meeting of Stockholders, which is scheduled to coincide with a regularly-scheduled Board meeting.
Directors are expected to make themselves available outside of Board and committee meetings for advice and consultation with the Chief Executive Officer and other directors.
Outside Directorships and Committee Participation
The number of other public-company boards on which a director serves is expected not to exceed four.
The number of other public-company audit committees on which members of the Board's Audit Committee serve is expected not to exceed two.
The number of public-company boards on which the Chief Executive Officer serves (other than the Company's Board) may not exceed one.
The Chairman of the Board
The Chairman of the Board is elected from among the independent directors by the independent directors.
The Chairman of the Board is responsible for leading the Board and ensuring it operates to the highest governance standards, including encouraging a culture of openness and debate to foster a high-performing team of directors.
In leading the Board, the Chairman of the Board ensures that the Board focuses its attention on management and strategic issues and stockholder interests, and facilitates the relationship between the Chief Executive Officer and the Board to ensure the provision of timely and accurate information to the Board.
In addition, the Chairman of the Board -
- Presides at all meetings of the Board and its independent directors;
- Presides at the Annual Meeting of Stockholders;
- Approves the agenda of all Board meetings;
- Serves as a liaison between the independent directors and senior management; and
- Has the authority to call meetings of the independent directors.
Board & Committee Meetings
An annual schedule of Board and committee meetings is approved each year by the Board in advance of the beginning of a fiscal year. The schedule is established, to the extent possible, so that every director will be able to attend every meeting in person.
The frequency, length and agenda of Board and committee meetings is determined by the Chairman of the Board and the chairs of the committees, with suggestions from the other directors.
The Board and each standing committee of the Board meet at least four times a year in person.
The independent directors meet in regularly-scheduled executive sessions without management present during each regularly-scheduled Board meeting, and more often as the independent directors determine to be appropriate.
Board & Committee Meeting Materials
All Board and committee meeting materials that relate to items on the agenda are to be distributed at least two business days in advance of the meeting, except in special circumstances.
At all regularly-scheduled Board and committee meetings, management is to be available to report on agenda items as requested by the Chairman and committee chairs.
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Corporate Governance & Nominating Committee. Each committee has a written charter that is reviewed annually by the members of the committee with a view to recommending to the Board any changes to the charter that committee members deem appropriate.
The Board may form other, ad hoc, committees as needed, and the members of those committees may include non-independent directors unless prohibited by law or regulations.
The Compensation Committee determines the compensation, if any, for service on an ad hoc committee. Directors who are also employees receive no additional compensation for service on the Board or on any ad hoc committee.
The Board determines the number of members of each committee, with a required minimum of three members for each standing committee.
The Board elects all members of all committees and may remove one or more of them at any time.
The number, structure, and function of the Board's committees are reviewed periodically by the Corporate Governance & Nominating Committee with a view to recommending to the Board any changes that committee members deem appropriate.
The chairs of the standing committees of the Board report on a regular basis to the full Board on the proceedings and deliberations of their committees, and make recommendations to the Board on committee matters requiring the approval of the full Board.
The Corporate Governance & Nominating Committee, working with the chairs of the committees, is responsible for providing an orientation program to new directors, including materials and other assistance when they join the Board.
The Board believes that on-going education is important for maintaining an effective Board. Accordingly, directors are expected to attend at least one continuing education program a year that relates to service on a board of directors or on a board committee, and to report to the other directors on any insights gained from the program.
The Company reimburses directors for their expenses incurred in connection with attending educational programs, but not for the time spent attending the program.
The Board believes that it is in the best interests of the Company and its stockholders that directors have a proprietary stake in the Company so that their interests are aligned with the interests of stockholders.
Accordingly, within five years of initial election to the Board, each non-employee director is expected to own shares of the Company's common stock equal in value to five times the annual cash retainer payable to all directors. Market value is determined by the acquisition price or the closing market price at the time of acquisition, as the case may be.
In the event of an increase in the annual retainer, the Corporate Governance & Nominating Committee reviews this guideline to determine if there is a need for a change to reflect the increase.
Election of Directors
Under the Company's By-laws, directors are elected by majority vote. As a condition to nomination for re-election to the Board, an incumbent director must submit in advance of the Annual Meeting a resignation that becomes effective if the director fails to receive a majority vote and the Board accepts the resignation.
Director compensation is reviewed annually by the Corporate Governance & Nominating Committee. Among other considerations, the Committee determines how the Company's director compensation compares to the director compensation of its peer group.
Directors who are also employees of the Company do not receive any additional compensation for serving on the Board.
Board & Committee Evaluations
The Board and each standing committee of the Board annually conducts a self-evaluation through an anonymous survey.
The Chair of the Corporate Governance & Nominating Committee collects the results of the survey and summarizes them for a report to the independent directors in an executive session.
The evaluations constitute one way that the extent of the Board's and its committees' compliance with the principles set forth in these guidelines and in the committees' charters are assessed, and that areas for Board and committee improvement are identified.
The Chair of the Corporate Governance & Nominating Committee confers each year with each director individually to solicit comments about nominations for election and re-election to the Board, and to permit each director to express any concerns about the functioning of the Board, its committees and its members. Any comments a director may have about the Corporate Governance & Nominating Committee and its Chair are directed to the Chairman of the Board.
Evaluation of the Chief Executive Officer
The Board believes that the evaluation of the performance of the Chief Executive Officer is one of the Board's important functions. The evaluation is made annually by the independent directors in a formal appraisal process that is overseen by the Chairman of the Board.
Access to Senior Management
Members of the Company's senior management are to be available to discuss matters of concern to directors at all reasonable times.
As a general matter, the Board and each committee of the Board has the authority to retain independent advisors that it deems appropriate in its sole discretion on any matter connected with the discharge of its duties, as well as the authority to approve the fees, expenses and other retention terms of those consultants and advisors.
In addition, the Compensation Committee, in particular, has sole authority to retain and terminate compensation consultants, including outside counsel, and any other compensation advisors it deems appropriate, as well as the sole authority to approve the fees and other retention terms of those consultants and advisors.
Before retaining any compensation consultant, outside counsel or other advisor, the Compensation Committee evaluates their independence consistent with applicable laws, rules, regulations and listing standards
Chief Compliance Officer & Succession Planning
The Company has a Chief Compliance Officer who reports regularly to the Audit Committee.
The report covers the extent to which the Company and its employees are in compliance with the Code of Business Conduct and other Company policies, as well as the state of continuing compliance education for employees.
The report also covers the Company's management succession plans, both for senior management and for the management of its operating divisions.
The Board maintains an emergency succession plan should an unforeseen event occur, such as the death or disability of the Chief Executive Officer.
Communications with Stockholders
The Chairman of the Board, with the assistance of senior executives, will represent the Board to the stockholders, and will communicate the Board's position on significant issues.
Shareholders may contact the Board as a group, the independent directors as a group, a Board committee, or an individual director as follows:
By mail to:
Sterling Construction Company, Inc.
℅ Corporate Secretary
1800 Hughes Landing Blvd. - Suite 250
The Woodlands, Texas 77380
By e-mail to: Reports@Lighthouse-Services.com
Each communication should specify the addressee as well as the general topic of the communication. The Secretary will give these communications to the directors as they are received unless they are frivolous. If the communications are voluminous, the Secretary will summarize them and furnish the summary to the Board.
Concerns about questionable accounting or auditing matters or possible violations of the Code of Business Conduct should be reported pursuant to the procedures outlined in the Code, which is available on the Company's website at www.strlco.com/investor-relations/corporate-governance.
Review of These Guidelines
The Corporate Governance & Nominating Committee annually reviews and evaluates the effectiveness of these guidelines through the Board and committee self-evaluations, as well as through other means, and recommends for adoption by the Board those changes that the members of the Committee believe are necessary, appropriate or advisable.