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Corporate Governance:
Corporate Governance Principles
CORPORATE GOVERNANCE GUIDELINES
(Adopted January 27, 2004 As Amended February 24, 2005)
The Board of Directors of Whiting Petroleum Corporation (the “Company”),
acting on the recommendation of its Nominating and Governance Committee,
has developed and adopted certain corporate governance principles
(these “Guidelines”) establishing a common set of expectations
to assist the Board and its committees in fulfilling their responsibilities
to the Company’s stockholders to oversee the work of management
and the Company’s results. These Guidelines are intended to
ensure that the Board will have the necessary authority and practices
in place to review and evaluate the Company’s business operations
as needed. In recognition of the continuing discussions about corporate
governance, the Board will review and, if appropriate, revise these
Guidelines from time to time.
Role of the Board of Directors and
Management
The Company’s business is conducted by its employees, managers
and officers, under the direction of the Company’s Chairman
of the Board of Directors and Chief Executive Officer (“CEO”)
and the oversight of the Board of Directors, to enhance the long-term
value of the Company for its stockholders. The Board of Directors
is elected by the Company’s stockholders to oversee management
and to assure that the long-term interests of the stockholders are
being served.
Responsibilities of the Board of Directors
The Board of Directors reviews and discusses reports by management
on the performance of the Company, its plans and prospects, as well
as immediate issues facing the Company. Directors are expected to
attend scheduled meetings of the Board and its committees on which
they serve. In addition to its general oversight of management, the
Board (either directly or through its committees) also performs a
number of specific functions, including:
1. 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;
2. Selecting, evaluating and compensating a well-qualified CEO of
high integrity, and overseeing CEO succession planning;
3. Providing counsel and oversight on the selection, evaluation, development
and compensation of senior management, including, with respect to
the compensation of senior management, the review and approval of
compensation plans and awards granted under those plans;
4. Reviewing and approving the Company’s fundamental financial
and business strategies, including strategic plans, management development
and succession plans, and financial and capital budgets;
5. Reviewing and evaluating the processes in place to assess the major
risks facing the Company, and periodically reviewing management’s
assessment of major risks, as well as the options for their mitigation;
6. Reviewing and assessing the processes in place for maintaining
the integrity of the Company, including the integrity of its financial
statements, the integrity of its compliance with law and ethics, the
integrity of its relationships with employees, customers and suppliers
and the integrity of its relationships with other stakeholders; and
7. Providing general advice and counsel to the Chairman of the Board,
CEO and other senior management personnel in the performance of their
duties.
Board Composition and Selection; Director
Independence
Board Size
Board size and composition will be set 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.
The Board shall consist of no less than five and no more than twelve
members. 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.
Board Leadership
The Board of Directors shall elect a Chairman of the Board who shall
have primary responsibility for scheduling Board meetings, calling
special meetings when necessary, setting or proposing the agenda for
each meeting, and leading the conduct of Board meetings, as well as
for carrying out such other duties as are specified for such office
in the Company’s By-laws. This responsibility does not, however,
diminish the responsibilities of each Board member to raise appropriate
agenda items, or to propose meetings. In addition, a presiding director
shall be designated to preside over each executive session of the
Board of Directors. The role of the presiding director shall rotate
among the chairs of the Audit Committee, Nominating and Governance
Committee and Compensation Committee.
Communication with Directors
Stockholders and other interested parties may communicate with the
full Board of Directors, non-management directors as a group or individual
directors, including the presiding director, by submitting such communications
in writing to the Secretary of the Company. Such communications will
be delivered directly to the Company’s Board of Directors.
Selection of Board Members
The Nominating and Governance Committee of the Board of Directors
shall be responsible for developing and refining general and specific
criteria for Board membership for approval by the Board of Directors.
Also, the Nominating and Governance Committee is responsible for evaluating
on an ongoing basis all directors and director candidates based on
such general and specific criteria and for seeking to assure that
specific talents, skills and other characteristics that are needed
to increase the Board’s effectiveness are possessed by an appropriate
combination of directors.
The Nominating and Governance Committee shall be responsible for identifying
individuals qualified to become members of the Board, consistent with
criteria approved by the Board, and shall recommend to the Board nominees
to be members of the Board. The Nominating and Governance Committee,
with the input of the Chairman of the Board and the CEO, will recommend
to the Board of Directors (i) nominees for Board membership to fill
vacancies or newly created directorships, (ii) the persons to be nominated
by the Board for election by the Company’s stockholders at the
annual or special meetings of stockholders, and (iii) Board committee
assignments and rotation of Board committee members. The Board shall
be responsible for selecting nominees to be members of the Board and
for recommending them for election by the stockholders at annual or
special meetings of stockholders.
The Nominating and Governance Committee will consider persons recommended
by stockholders to become nominees for election as directors in accordance
with the criteria set forth in these principles and the Nominating
and Governance Committee Charter. Recommendations for consideration
by the Nominating and Governance Committee should be sent to the Secretary
of the Company in writing together with appropriate biographical information
concerning each proposed nominee. The Company’s By-laws also
set forth certain requirements for stockholders wishing to nominate
director candidates directly for consideration by stockholders.
In addition to other criteria that the Board of Directors and the
Nominating and Governance Committee may develop from time to time
pursuant to these principles and the Nominating and Governance Committee
Charter, the Board and the Nominating and Governance Committee have
established certain criteria for director candidates that are set
forth in Appendix A.
The Board of Directors shall be responsible for determining the qualifications
of an individual to serve on the Audit Committee as a designated “audit
committee financial expert,” as defined by applicable rules
of the Securities and Exchange Commission (the “SEC”).
Independence of Directors
A majority of the directors shall be independent directors under the
rules of the New York Stock Exchange, Inc. (the “NYSE”).
Directors who do not meet the NYSE’s independence standards
also make valuable contributions to the Board and to the Company by
reason of their experience and knowledge.
To be considered independent under the NYSE’s proposed rules,
the Board must determine that a director does not have any direct
or indirect material relationship with the Company or its affiliates
(including, without limitation, subsidiaries in the Company’s
consolidated group). The Board has established the categorical standards
set forth in Appendix B to assist it in determining director independence.
The Board shall undertake an annual review to evaluate the independence
of all non-employee directors. In advance of the meeting at which
this review occurs, each non-employee director shall be asked to provide
the Board with full information regarding the director’s business
and other relationships with the Company and its affiliates and with
senior management and their affiliates to enable the Board to evaluate
the director’s independence.
Term Limits, Retirement Policy and Change of Status
The Board of Directors believes it is appropriate to require, and
the Company’s By-Laws require, directors to retire from Board
service no later than the annual meeting of stockholders after directors
reach the age of 75, except for certain directors who were serving
as directors at the time of the Company’s initial public offering
for whom the Company’s By-Laws provide a limited exception from
this requirement.
The Company’s By-Laws provide that if any director experiences
a material change in employment status (including termination of employment,
retirement or a material decrease in job responsibilities) from that
when the director was most recently elected to the Board of Directors,
then such director shall be deemed to have automatically tendered
his or her resignation as a director, which may be accepted by the
remainder of the Board of Directors, in its sole discretion. As a
general policy, the CEO and other senior executives of the Company
who are Board members will offer to tender his or her resignation
from the Board upon the termination of their employment with the Company.
However, the Board may ask the 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.
A director who intends to be elected to an additional board of directors
of a public company shall provide notice to the Board of Directors
prior to accepting such additional directorship.
The CEO shall not serve on the board of any for profit entity without
the consent of the Board of Directors.
Executive and Private Sessions of
the Board
Normally, members of senior executive management who are not members
of the Board of Directors will participate in Board and Board committee
meetings to present information, make recommendations, and be available
for direct interaction with Board members.
However, the Board of Directors will have at least two regularly scheduled
meetings a year for the non-employee directors without members of
the Company’s management being present; such meetings may occur
either independent of or in conjunction with regularly scheduled meetings
of the Board of Directors. The non-employee directors may meet without
management present at such other times as they determine appropriate.
In addition, the Board of Directors will have at least one regularly
scheduled meeting each year that is limited to independent directors.
Board Committees
The Board of Directors shall at all times have an Audit Committee,
a Nominating and Governance Committee and a Compensation Committee,
each comprised solely of independent directors. In addition, the Board
of Directors shall at all times have an Executive Committee, which
shall be comprised of a majority of independent directors. The Board
shall evaluate and determine the circumstances under which it will
form or disband other Board committees.
In addition to the requirement that a majority of the Board satisfy
the independence standards discussed above, members of the Audit Committee
must also satisfy any additional independence requirements imposed
by the NYSE or the SEC. Specifically, directors serving on the Audit
Committee may not directly or indirectly receive any compensation
from the Company other than the fees they receive for serving as directors.
Board committee chairs shall be recommended by the Nominating and
Governance Committee in consultation with the Chairman of the Board
and the CEO, and approved by the Board. Board committee chairs will
be responsible, in consultation with the Chairman of the Board and
the CEO, for scheduling committee meetings, setting meeting agendas,
leading the conduct of each meeting, reporting the committee’s
findings and making recommendations to the full Board, and presenting
resolutions requiring Board action.
Committee Assignment and Rotation
The Nominating and Governance Committee, in consultation with the
Chairman of the Board and the CEO, will recommend Board committee
assignments and rotation to the entire Board for final approval. Board
members will rotate among Board committees from time to time as the
Board deems appropriate.
Number and Scope of Board and Committee
Meetings
The Board of Directors will meet at least four times per year, including
in connection with the annual meeting of stockholders, and otherwise
as necessary or appropriate. Board committees will meet as set forth
in their charters. Each director is expected to attend meetings of
the Board of Directors and any Board committee(s) of which he or she
is a member and to review all meeting materials circulated prior to
each meeting. Board members are also expected to attend the Company’s
annual meeting of stockholders.
Each Board meeting will include a financial and operating review.
In addition, at least once annually, the Board will devote substantial
time to reviewing the following matters: senior executive succession
planning; the personal objectives and performance of the CEO; corporate
controls and financial reporting policies and procedures (in consultation
with the Audit Committee); the Board’s effectiveness; and the
Company’s overall business strategy and strategic plan.
Director Compensation
Non-employee directors and Board committee chairs shall receive reasonable
compensation for their services, as may be determined from time to
time by the Board of Directors upon recommendation of the Compensation
Committee. Compensation for non-employee directors and Board committee
chairs shall be consistent with the market practices of other similarly
situated companies. The Compensation Committee of the Board shall
periodically review and report to the Board with respect to director
compensation and benefits.
Directors who are employees of the Company shall receive no additional
compensation for serving as directors.
Director Access to Management and Independent
Advisors
The Board of Directors is expected to be highly interactive with members
of the Company’s senior management, and the Board and its individual
members shall have access to individual senior executives of the Company.
The Company also maintains an environment that permits senior managers
to contact Board members directly.
It is policy of the Board that executive officers and other members
of senior management who report directly to the CEO be present at
Board and/or Board committee meetings at the invitation of the Board
or Board committee members. The Board encourages such 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 are authorized to consult with independent advisors, as
is necessary and appropriate, without consulting management.
Ethics and Conflicts of Interest
The Board of Directors expects the Company’s directors, as well
as its officers and employees, to act ethically at all times. If an
actual or potential conflict of interest arises for a director, the
director shall promptly inform the CEO and the Chairman of the Board.
If a significant conflict exists and cannot be resolved, the director
should resign. All directors will recuse themselves from any discussion
or decision affecting their personal, business or professional interests.
The Board shall resolve any conflict of interest question involving
any executive officer of the Company, and the CEO shall resolve any
conflict of interest issue involving any other officer of the Company.
Director Orientation and Continuing
Education
The Board of Directors shall ensure that an orientation program for
newly elected directors is implemented. The Nominating and Governance
Committee shall oversee and maintain the orientation program implemented
by the Board.
Directors are required to continue educating themselves with respect
to various matters, including domestic and international markets,
accounting and finance, leadership, crisis response, industry practices,
general management, and strategic planning.
Management Succession and CEO Compensation
The Board of Directors shall develop and maintain an appropriate succession
plan with respect to the position of CEO. The Nominating and Governance
Committee is responsible for making recommendations to the Board about
succession planning. The Nominating and Governance Committee also
shall recommend to the Board succession plans in the event of an emergency
or the retirement of the CEO.
The Compensation Committee is responsible for establishing annual
and long-term performance goals for the CEO and for evaluating his
or her performance against such goals.
Annual Performance Self-Assessment
of the Board
The Board of Directors will conduct a self-assessment at least annually
to evaluate whether it and its committees are functioning effectively.
The Nominating and Governance Committee will oversee, and communicate
to the Board of Directors the results of, such self-assessments.
Limitation
Nothing in these Guidelines is intended to expand the fiduciary obligations
of Board members beyond those provided for under applicable law.
APPENDIX A
CRITERIA FOR DIRECTOR NOMINEES
In making recommendations to the Company’s Board of Directors
of nominees to serve as directors, the Nominating and Governance Committee
will examine each director nominee on a case-by-case basis regardless
of who recommended the nominee and take into account all factors it
considers appropriate, which may include strength of character, mature
judgment, career specialization, relevant technical skills or financial
acumen, diversity of viewpoint and industry knowledge. However, the
Board of Directors and the Nominating and Governance Committee believe
the following minimum qualifications must be met by a director nominee
to be recommended by the Nominating and Governance Committee:
1. Each director must display the highest personal and professional
ethics, integrity and values.
2. Each director must have the ability to exercise sound business
judgment.
3. Each director must be highly accomplished in his or her respective
field, with superior credentials and recognition and broad experience
at the administrative and/or policy-making level in business, government,
education, technology or public interest.
4. Each director must have relevant expertise and experience, and
be able to offer advice and guidance to the Chief Executive Officer
based on that expertise and experience.
5. Each director must be independent of any particular constituency,
be able to represent all stockholders of the Company and be committed
to enhancing long-term stockholder value.
6. Each director must have sufficient time available to devote to
activities of the Board of Directors and to enhance his or her knowledge
of the Company’s business.
The Board of Directors and the Nominating and Governance Committee
also believe the following qualities or skills are necessary for one
or more directors to possess:
1. At least one director should have the requisite experience and
expertise to be designated as an “audit committee financial
expert” as defined by applicable rules of the SEC.
2. Directors generally should be active or former chief executive
officers of public companies or leaders of major complex organizations,
including commercial, scientific, government, educational and other
non-profit institutions.
3. Directors should be selected so that the Board of Directors is
a diverse body, with diversity reflecting age, gender, race and professional
experience.
APPENDIX B
The Board of Directors has established categorical standards to assist
it in making determinations of director independence. Under these
categorical standards, the following relationships that currently
exist or that have existed, including during the preceding three years,
will not be considered to be material relationships that would impair
a director’s independence:
1. A family member of the director is or was an employee (other than
an executive officer) of the Company.
2. A director, or a family member of the director, has received less
than $100,000 during each twelve-month period in direct compensation
from the Company, other than director and committee fees and pension
or other forms of deferred compensation for prior service (provided
that such compensation is not contingent in any way on continued service
with the Company). Compensation received by (a) a director for former
service as an interim Chairperson, Chief Executive Officer or other
executive officer of the Company or (b) a family member of the director
for service as an employee of the Company (other than an executive
officer) need not be considered.
3. A director or a family member of a director is or was affiliated
with or employed by a firm that is the Company’s internal or
external auditor, so long as (a) the director or the family member
is not a current partner of a firm that is the Company’s internal
or external auditor; (b) the director is not a current employee of
such a firm; (c) the family member is not a current employee of such
a firm who participates in the firm’s audit, assurance or tax
compliance (but not tax planning) practice; and (d) the director or
the family member, if he or she was within the past three years (but
is no longer) a partner or employee of such a firm, did not personally
work on the Company’s audit within that time.
4. A director, or a family member of the director, is or was employed
other than as an executive officer of another company where any of
the Company’s present executive officers at the same time serves
or served on that company’s compensation committee.
5. A director is a current employee of, or has any other relationship
(including through a family member) with, another company (including
any tax exempt organization), that has made payments to, or received
payments from, the Company for property or services in an amount which,
in any of the last three fiscal years, does not exceed the greater
of $1 million or 2% of such other company’s consolidated gross
revenues. Both the payments and the consolidated gross revenues to
be measured shall be those reported in the last completed fiscal year.
This test applies solely to the financial relationship between the
Company and the director’s (or family member’s) current
employer. Former employment of the director or family member need
not be considered.
6. A director is or was an executive officer, employee or director
of, or has or had any other relationship (including through a family
member) with, a tax exempt organization to which the Company's discretionary
contributions in any of the last three fiscal years do not exceed
the greater of $1 million or 2% of such organization's consolidated
gross revenues.
7. In addition, any relationship that a director (or an “immediate
family member” of the director) previously had that constituted
an automatic bar to independence under NYSE listing standards will
not be considered to be a material relationship that would impair
a director’s independence three years after the end of such
relationship in accordance with NYSE listing standards.
For relationships not covered by the guidelines above, the determination
of whether the relationship is material or not, and therefore whether
the director would be independent or not, shall be made by the directors
who satisfy the independence guidelines set forth in above.
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