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| Tenneco Inc. recognizes that sound principles
of corporate governance are essential to obtaining and retaining the trust and
respect of investors and other persons and groups interested in the company and
its activities, including employees, customers, suppliers, communities in which
its does business, government officials and the public generally. The Board of
Directors has approved the following Corporate Governance Principles, as well
as Charters for its key committees, that are intended to provide a framework
for the governance of the company. |
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| 1. |
Role of Directors
The business of the company is conducted by its employees, managers and
officers, under the direction of the Chief Executive Officer and oversight of
the Board of Directors. The Board of Directors is elected by the stockholders
to oversee management and to ensure that the long-term interests of the
stockholders are being served.
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| 2. |
Director Qualification Standards
Directors should possess the highest personal and professional ethics,
integrity and values, and be committed to representing the long-term interests
of the stockholders. Directors must be willing to devote sufficient time to
carrying out their duties and responsibilities effectively and should be
committed to serving on the Board of Directors for an extended period of time.
The following sets forth other qualification requirements applicable to the
Board of Directors. The Compensation/Nominating/Governance (CNG) Committee will
be responsible for reviewing and proposing to the Board of Directors additional
qualifications for directors as determined to be necessary or appropriate,
taking into account the composition and skills of the entire Board of
Directors.
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a. |
A majority of the members of the
Board of Directors must qualify as "independent" for purposes of Section 10A of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. A majority of the members of the Board of Directors must also
qualify as "independent" as determined under the applicable rules of the New
York Stock Exchange (NYSE), no later than the end of any applicable grace or
"phase-in" period adopted by the NYSE with respect to those rules. |
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b. |
As provided in the company's
by-laws, no person who shall have attained the age of 72 shall be eligible for
election or reelection as a director, except as may otherwise be determined in
the good faith judgment of the Board of Directors. |
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c. |
Directors are encouraged to
restrict the number of public company boards on which they serve. Directors
shall advise the Chairman of the CNG Committee, Chairman of the Board and
General Counsel promptly upon accepting any other public company directorship
or any assignment to the audit committee or compensation committee (or any
committees performing similar functions) of the board of directors of any
public company of which such director is a board member. If a director serves
on the audit committee of more than three public companies, the Board must
determine whether or not such simultaneous service impairs such director's
ability to effectively serve on the Company's Audit Committee, and the Board's
decision shall be disclosed in the Company's annual proxy statement.
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d. |
Directors are expected to report
changes in their business or professional affiliations or responsibilities,
including retirement, to the Chairman of the Board and the Chairman of the CNG
Committee. A director should offer to resign if the remaining members of the
Board of Directors, by majority vote, conclude that the director no longer
meets the company's requirements for service on the Board of Directors. |
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e. |
No director shall serve as a
director, officer or employee of a competitor of the company, unless
specifically approved by the other members of the Board of Directors by
majority vote and otherwise as permitted by applicable law. |
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f. |
The Chief Executive Officer and
any other officer of the company who is a director shall offer to resign from
the Board of Directors when such individual ceases to be the Chief Executive
Officer or other officer of the company. |
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g. |
The Board of Directors does not
deem it advisable to mandate fixed rotation of committee members and/or
chairpersons since at any time there may be reasons for maintaining continuity.
The Board of Directors believes that ideally there should be some rotation over
time on a staggered basis to foster diverse views while at the same time
ensuring continuity. |
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| 3. |
Independence of Directors
As described above, a majority of the members of the Board of Directors must
qualify as "independent" for purposes of Section 10A of the Securities Exchange
Act of 1934, as amended, and the rules promulgated thereunder, and as
determined under the applicable rules of the NYSE (no later than the end of any
applicable grace or "phase-in" period adopted by the NYSE).
To be considered independent under the NYSE rules, the Board of Directors must
affirmatively determine that a director does not have any direct or indirect
material relationship with the company, and must disclose that determination in
the manner proscribed by the NYSE. The Board will review all commercial and
charitable relationships of directors at least annually. The Board of Directors
has established the following guidelines to assist it in determining director
independence in accordance with the NYSE rules:
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a. |
The following commercial or
charitable relationships will not be considered to be material relationships
that would impair a director's independence: |
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i. |
if the director is an executive officer of
another company that (directly or indirectly through its subsidiaries or
affiliates) does business with the company (or its subsidiaries or affiliates)
and the annual sales to, or purchases from, the company (or its subsidiaries or
affiliates) are less than 1% of the annual consolidated revenue of both the
company and the other company he or she serves as an executive officer; |
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ii. |
if the director is an executive officer
of another company that (directly or indirectly through its subsidiaries or
affiliates) is indebted to the company (or its subsidiaries or affiliates), or
to which the company (or its subsidiaries or affiliates) is indebted, and the
total amount of either company's consolidated indebtedness to the other is less
than 1% of the total consolidated assets of the indebted company;
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iii. |
if the director is an executive officer
of another company in which the company (directly or indirectly) owns a common
equity interest, and the amount of the company's ownership is less than 5% of
the total outstanding voting power of the other company; and |
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iv. |
if the director serves as an officer,
director or trustee of a charitable organization, and the company's
discretionary charitable contributions to the organization are less than 1% of
that organization's total annual charitable receipts. |
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b. |
For relationships not covered by
the guidelines in subsection (a) 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 independence
guidelines set forth in subsection (a) above. If the Board of Directors
determines that a relationship was immaterial despite the fact that it did not
meet the categorical standards of immateriality set forth in subsection (a)
above, the company would explain in the next proxy statement the basis for that
determination. |
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| 4. |
Size of Board and Selection Process
The size of the Board of Directors is currently nine directors, established by
the Board of Directors as provided in the company's charter documents and
by-laws. Subject to any limitations set forth in the company's by-laws, the
Board of Directors would be willing to have a larger number of directors to
accommodate the availability of outstanding candidates. Similarly, the Board of
Directors is willing to reduce the size of the Board of Directors, or to
maintain a vacancy, if it cannot identify available candidates meeting the
directors' qualification standards (subject, however, to the limitation in the
company's charter documents that the Board of Directors must include a minimum
of eight directors).
The directors are elected each year by the stockholders at the company's annual
meeting. The Board of Directors, upon consideration of the recommendation of
the CNG Committee, proposes a slate of nominees to the stockholders for
election. Stockholders may propose nominees for consideration as director in
the manner set forth in the company's by-laws.
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| 5. |
Director Responsibilities
Directors should exercise their business judgment to act in what they
reasonably believe to be in the best interests of the company in a manner
consistent with their fiduciary duties. In considering the best long-term and
short-term interests of the company, where appropriate the directors may
consider the needs and concerns of stakeholders and interested parties other
than stockholders, including employees, suppliers, customers and communities in
which the company conducts business, and other pertinent factors.
Directors must disclose to other directors any potential conflicts of interest
they may have with respect to any matter under discussion and, if appropriate,
refrain from voting on a matter in which they may have a conflict.
Except in unusual circumstances or as required by committee charters or as
requested by senior management, directors are expected to follow the principle
that senior management, as opposed to individual directors, provides the public
voice of the company. Directors receiving inquiries from institutional
investors, the press or others should refer them to the Chief Executive Officer
or other appropriate officer of the company.
Directors should regularly attend meetings of the Board of Directors and of all
committees upon which they serve. Information and data that is important to the
directors' understanding of the business to be discussed at meetings will be
distributed in advance of meetings to the extent practicable, except when such
material is too sensitive to be put in writing. To prepare for meetings,
directors should review the materials that are sent to them in advance of those
meetings.
The Board of Directors will schedule regular executive sessions where
non-management directors (i.e., directors who are not company officers) shall
meet without management participation. The non-management directors shall
either select a non-management director to preside at any or all executive
sessions (for a specified period of time) (a "presiding" or "lead" director) or
shall establish a procedure by which the presiding director for each executive
session shall be selected. In addition, if the company has any non-management
directors who are not independent under the NYSE rules, the independent
directors will meet at least once per year in executive session. The Board of
Directors, or the company, will establish methods by which interested parties
may communicate directly with the presiding or lead director or with the
non-management directors of the Board of Directors as a group and cause such
methods to be disclosed as required by applicable rules of the Securities and
Exchange Commission and NYSE.
The Board of Directors will at all times maintain an Audit Committee, a
Compensation Committee and a Nominating and Governance Committee (the
Compensation and Nominating and Governance Committees may be combined into one
committee), as well as a written charter for each. These committees must
operate in accordance with applicable law, their respective charters as adopted
and amended from time to time by the Board of Directors and the applicable
rules of the Securities and Exchange Commission and NYSE. The Board of
Directors may also establish such other committees as it deems appropriate and
delegate to those committees any authority to the extent permitted by
applicable law, the company's by-laws and applicable NYSE rules.
The Board of Directors will hold regular meetings each year as often as it
deems appropriate. The Chairman of the Board will approve an agenda in advance
of each meeting. Except as expressly provided in the by-laws of the company or
these Corporate Governance Principles, or as otherwise provided by law or the
rules of the NYSE, the Board of Directors may fix its own rules of procedure.
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| 6. |
Director Access To Management And Independent Advisors
The company will provide each director with complete access to the management
of the company, subject to reasonable advance notice to the company and
reasonable efforts to avoid disruption to the company's management, business
and operations. The Board of Directors and its committees have the ability to
retain, at the company's expense, special legal, accounting, compensation or
other consultants or experts they deem necessary in the performance of their
duties.
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| 7. |
Director Compensation
The Board of Directors or an authorized committee thereof will determine and
review at least annually the form and amount of director compensation and
benefits, including cash, equity-based awards and other director compensation.
The following basic principles will be applied in determining the compensation
and benefit of the company's directors:
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a. |
the company's directors should be
fairly compensated for work required as a director and, as applicable,
committee member for a public company of size and scope similar to the company;
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b. |
compensation should be designed
to align directors' interests with the long-term interests of stockholders. |
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In determining directors' compensation and benefits, the Board of Directors and
its committees will recognize that questions may be raised when directors'
fees, equity incentives and benefits exceed what is customary. Similarly, the
Board of Directors and its committees will recognize that the independence of
directors could be questioned if substantial charitable contributions are made
to organizations in which a director is affiliated or if the company enters
into consulting contracts with, or provides other indirect compensation to, a
director. The Board of Directors or, if applicable, its designated committee
will critically evaluate each of these matters when determining the form and
amount of director compensation and benefits, and the independence of a
director.
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| 8. |
Director Orientation And Continuing Education
The General Counsel and Chief Financial Officer of the company will establish,
or identify and provide access to, appropriate orientation programs, sessions
or materials for newly elected directors of the company for their benefit
either prior to or within a reasonable period of time after their nomination or
election as a director. In any event, each new director will, within six months
of election, spend a day at corporate headquarters for personal briefing by
senior management regarding the company's strategic plans, its financial
statements and its key policies and practices. The Board of Directors, or the
company, will encourage, but not require, directors to periodically pursue or
obtain appropriate programs, sessions or materials as to the responsibilities
of directors of publicly traded companies.
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| 9. |
Management Evaluation And Succession
The Board of Directors (not including any members of management of the company)
will conduct an annual review of the performance and compensation of the Chief
Executive Officer, taking into account the views and recommendations of the CNG
Committee.
The Chief Executive Officer will provide an annual report on succession
planning and related development recommendations to the Board of Directors and
CNG Committee, including a short-term succession plan delineating temporary
delegation of authority in the event that the Chief Executive Officer or any
other executive officer is unexpectedly unable to perform his or her duties. In
light of that report and other factors they determine are appropriate, the
Board of Directors and CNG Committee will establish (and from time to time)
review formal or informal policies and procedures regarding succession to the
Chief Executive Officer or other executive officers in the event of emergency
or retirement.
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| 10. |
Annual Performance Evaluation Of The Board
The Board of Directors will conduct a self-evaluation at least annually,
typically in connection with its regular meeting to be held in March or May, to
determine whether it and its committees are functioning effectively. The Board
of Directors, or its designee, will prepare or cause to be prepared a report
regarding the conclusions of that evaluation. The full Board of Directors will
discuss the evaluation report to determine what, if any, action could improve
performance of the Board of Directors and its committees. The Board of
Directors, with the assistance of the CNG Committee, as appropriate, will
review these Corporate Governance Principles at least annually to determine
whether any changes are appropriate.
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| 11. |
Amendment, Modification And Waiver
These Corporate Governance Principles may be amended, modified or waived by the
Board of Directors, subject to the disclosure and other provisions of the
Securities and Exchange Act of 1934, the rules promulgated thereunder and the
applicable rules of the NYSE.
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