|  | Corporate Governance Guidelines
The board of directors of Imperial Oil Limited (Imperial) has adopted these guidelines to promote the effective functioning of the board and its committees.
Role of the board
The business and affairs of Imperial are managed by or under the direction of its board of directors in accordance with Canadian law. The directors' duty is to exercise their business judgment in the best interests of the company.
Board structure
Board size
The size of the board will provide for sufficient diversity among non-employee directors while also facilitating substantive discussions in which each director can participate meaningfully. The board size will be within the limits prescribed by Imperial's articles of incorporation, which currently provide that the board may have no fewer than 5 and no more than 15 members.
Independent directors
A majority of the board consists of directors whom the board has determined to be independent. In general, an independent director must have no material relationship with Imperial, directly or indirectly.
Election of directors
All directors will stand for election at the annual meeting of shareholders.
Chairman and chief executive officer
The board believes it is appropriate and efficient for Imperial's chief executive officer (CEO) also to serve as chair of the board. However, the board retains the authority to separate those functions if it deems such action appropriate in the future.
Term limits
The board believes that experience as an Imperial director is a valuable asset, especially in light of the size and scope of the company's operations. Therefore, directors are not subject to term limits except as a result of reaching the board's mandatory retirement age.
Mandatory retirement
No director may stand for election after reaching age 70.
Other directorships
Recognizing the substantial time commitment required of directors, it is expected that directors will serve on the boards of other public companies only to the extent that, in the judgment of the board, such services do not detract from the directors' ability to devote the necessary time and attention to Imperial. The nominations and corporate governance committee of the board will annually review all directors' service on the boards of other public companies.
Change in status
A non-employee director will tender his or her resignation for consideration by the board in the event of retirement or other substantial change in the nature of the director's employment or other significant responsibilities.
Former officers
The board does not believe that former officers of Imperial should continue to serve on the board after they no longer hold that officer position.
Director selection, qualifications and education
Director candidates
The nominations and corporate governance committee of the board will nominate a slate of director candidates for election at each annual meeting of shareholders and the board will elect directors to fill vacancies, including vacancies created as a result of any increase in the size of the board, between annual meetings. The nominations and corporate governance committee of the board will review and update the selection and tenure guidelines for directors from time to time and make recommendations to the board as appropriate.
Orientation
New directors will receive a comprehensive orientation from appropriate executives regarding Imperial's business and affairs.
Continuing education
Reviews of particular aspects of Imperial's operations will be presented by appropriate executives from time to time as part of the agenda of regular board meetings. The board will also normally conduct an on-site visit to an Imperial or related facility other than the corporate headquarters in conjunction with a regular board meeting every year. Other continuing education events, including the review of best practices in corporate governance, will also be undertaken periodically.
Board Meetings
Number of regular meetings
The board normally holds eight regular meetings per year. Additional meetings may be scheduled as required.
Agenda and briefing material
An agenda for each board meeting and briefing materials will, to the extent practicable in light of the timing of matters that require board attention, be distributed to each director approximately one week prior to each meeting. Briefing materials should be concise and yet sufficiently detailed to permit directors to make informed judgments. The chairman will normally set the agenda for board meetings. Any director may request the inclusion of specific items.
Meeting attendance
It is expected that each director will make every effort to attend each board meeting and each meeting of any committee on which he or she sits. Attendance in person is preferred but attendance by teleconference is permitted if necessary.
Director preparedness
Each director should be familiar with the agenda for each meeting, have carefully reviewed all other materials distributed in advance of the meeting, and be prepared to participate meaningfully in the meeting and to discuss all scheduled items of business.
Confidentiality
The proceedings and deliberations of the board and its committees are confidential. Each director will maintain the confidentiality of information received in connection with his or her service as a director.
Independent non-employee director executive sessions
An executive session of the board composed of the independent non-employee directors will be held immediately following each meeting of the board. The executive session is chaired by an independent non-employee director chosen by the independent non-employee directors. Any independent non-employee director may raise issues for discussion at an executive session. The independent non-employee directors will maintain such records of executive sessions as they deem appropriate.
Board self-evaluation
The board will evaluate its performance and effectiveness annually.
Committees
Committees
The board appoints from among its non-employee members the committees it determines are necessary or appropriate to conduct its business. Currently, the standing committees of the board are audit committee, the nominations and corporate governance committee, the executive resources committee and the environment, health and safety committee. In addition, the board of directors of the Imperial Oil Foundation serves, in effect, as the charitable contributions committee of the board.
Committee composition
The current standing committees of the board consist solely of independent directors.
Committee charters
Each committee has a written charter setting out its responsibilities. Charters will be adopted by the board based on the recommendation of the applicable committee.
Committee self-evaluation
At least annually, each of the board committees will conduct an evaluation of its performance and effectiveness and will consider whether any changes to the committee's charter are appropriate.
Committee reports
Each board committee will report to the full board on the activities of the committee, ordinarily by the circulation of the minutes of meeting to all of the members of the board.
CEO performance review
At least annually, the executive resources committee will review the performance of the CEO in light of the company's goals and objectives.
Succession planning
At least annually, the executive resources committee will review succession plans for the CEO and other senior executives. Succession planning will address both succession in the ordinary course of business and contingency planning in case of unexpected events.
Board resources
Access to employees
Non-employee directors will have full access to senior management of the company and other employees on request to discuss the business and affairs of the company. The board expects that there will be regular opportunities for directors to meet with the CEO and other members of management in board and committee meetings and in other formal or informal settings.
Authority to retain advisors
It is normally expected that information regarding the company's business and affairs will be provided to the board by Imperial management and staff and by the company's independent auditor. However, the board and each director and each committee of the board and each member of a committee has the authority to retain such outside advisors, including accountants, legal counsel, or other experts, as it deems appropriate. The fees and expenses of any such advisors will be paid by Imperial.
Non-employee director compensation
Compensation for non-employee directors will be determined by the board on the recommendation of the nominations and corporate governance committee, and will be reviewed annually. Non-employee director compensation will be set at a level that is consistent with market practice, taking into account the size and scope of Imperial's business and the responsibilities of its directors.
The directors are expected to hold a meaningful number of shares of the company. The non-employee directors receive part of their compensation in an equity-related form.
Code of conduct and ethics
Imperial has adopted comprehensive standards of business conduct and implementing guidelines. The standards include an ethics policy calling for strict observance of all laws applicable to Imperial's business and a conflict-of-interest policy. Each director is expected to be familiar with and to follow these policies. In addition, directors must avoid any conflict between their own interests and the interests of Imperial in dealing with suppliers, customers, and other third parties, and in the conduct of their personal affairs, including transactions in securities of the company, any affiliate, or any nonaffiliated organization.
The nominations and corporate governance committee will review any allegation that an executive officer or director may have violated the code of conduct and ethics and will report their findings to the full board. The board does not envision that any waiver to this code will be authorized. However, should any waiver of the code for executive officers or directors be made by the board, such waiver will be promptly disclosed to shareholders.
Corporate disclosure policy
Imperial Oil Limited is committed to a policy of full, true and plain public disclosure of all material information in a timely manner, in order to keep security holders and the investing public informed about the company's operations. Read our corporate disclosure policy.
Shareholder matters
Voting rights
Each share of the company's common stock is entitled to one vote. Imperial's articles of incorporation will not impose voting requirements for actions by holders of its common stock higher than the minimum requirements of Canadian law and will not restrict the ability of shareholders to act by written consent.
Confidential voting
In accordance with a decision previously adopted by the board, a shareholder's vote will be counted by independent transfer agency personnel and will be kept confidential from management unless special circumstances exist. For example, proxy cards will be forwarded to the company for appropriate response if a shareholder writes comments on the card.
Appointment of auditors
The audit committee will recommend the external auditors to be appointed by the shareholders at each annual meeting.
Shareholder proposals receiving majority approval
If a shareholder proposal that is not supported by the board receives a majority of the votes cast at a meeting at which a quorum is present, the proposal will be reconsidered by the board. Action taken on the proposal will be reported in the next annual proxy statement.
Corporate governance guidelines revision
The nominations and corporate governance committee and the board will review and revise these corporate governance guidelines as and when appropriate.
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