Boston Properties, Inc.
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Corporate Governance Guidelines
The following Corporate Governance Guidelines (the “Guidelines”) have been adopted by the Board of Directors (the “Board”) of Boston Properties, Inc. (the “Company”) to assist and guide the Board in the exercise of its responsibilities. These Guidelines are in addition to, and should be interpreted in accordance with, any requirements imposed by federal or Delaware law, the New York Stock Exchange, and the Certificate of Incorporation and Bylaws of the Company, each as amended. The Guidelines are subject to modification from time to time by the Board as it deems appropriate.
- Composition of the Board
- Size of the Board
The Board believes that it should have no fewer than 7 and no more than 11 directors. However, the Board may review the appropriate size of the Board as part of its annual performance evaluation and in connection with its consideration of nominees for director.
- Percentage of Independent Directors
A majority of the Board shall satisfy the criteria for independence of a Board member established by the New York Stock Exchange (such directors are referred to herein as “Independent Directors”). The Board shall make its director independence determinations in accordance with the categorical standards attached hereto as Exhibit A.
- Board Membership Criteria
The Nominating and Corporate Governance Committee shall periodically review with the Board the minimum qualifications and the other appropriate skills and characteristics required of Board members in the context of the make up of the Board and its committees at that time.
- Changed Circumstances
The Board believes that when a non-employee director’s principal occupation or business association terminates for any reason or materially changes, it is appropriate for such director to offer in writing to resign from the Board, subject to the Board’s discretion whether to accept his or her resignation. This policy is intended to provide the Board the opportunity to review the continued appropriateness of Board membership under changed circumstances.
- Term Limits
The Board does not believe that arbitrary limits on the number of consecutive terms a director may serve is appropriate in light of the substantial benefits resulting from a sustained focus on the Company’s business, strategy and industry over a significant period of time.
- Retirement Age
Unless nominated by the Board pursuant to a written contract between the Company and a third party, no person shall be nominated by the Board for election as a director following his or her 75th birthday, unless the Board waives this policy for a specific director in special circumstances. In addition, the Board shall not fill a vacancy on the Board with a person who would, if appointed, attain the age of 75 years prior to the end of his or her term, unless the Board waives this policy for a specific director in special circumstances.
- Selection and Orientation of New Directors
The Nominating and Corporate Governance Committee shall identify and recommend to the Board director nominees for election by the shareholders. The Board shall, in consideration of the recommendation of the Nominating and Corporate Governance Committee, select director nominees based on the Board membership criteria previously discussed.
Management, working with the Board, shall design an orientation program which all new directors shall attend after their election. The orientation program shall, as appropriate, include background material on the Company and its business plan; meetings with members of senior management and management presentations designed to familiarize new directors with the Company’s principal officers, strategic plans, compliance programs and Code of Business Conduct and Ethics; and meetings with independent auditors and other outside advisors of the Company.
- Continuing Education
Management, working with the Board, shall periodically assess the continuing education needs of directors and shall design or identify programs to address specific needs. The goal of continuing education programs should be to assist the Board in fulfilling its duties and responsibilities and, to the extent practicable, to address areas for improvement, if any, that are identified as part of the Board’s annual performance evaluation.
- Director Resignation Policy
In accordance with the Bylaws of the Company, if none of the stockholders of the Company provides the Company notice of an intention to nominate one or more candidates to compete with the Board’s nominees in a director election, or if the stockholders of the Company have withdrawn all such nominations by the tenth day before the Company mails its notice of meeting to our stockholders, a nominee must receive more votes cast for than against his or her election or re-election in order to be elected or re-elected to the Board. The Board expects that an incumbent director shall tender his or her resignation to the Board for consideration if he or she fails to receive the required number of votes for re-election.
If an incumbent director fails to receive the required vote for re-election and tenders his or her resignation, the Nominating and Corporate Governance Committee will act on an expedited basis to determine whether it is advisable to accept the director’s resignation and will submit a recommendation for prompt consideration by the Board. The Board will act on the tendered resignation within 90 days following certification of the stockholder vote and will promptly and publicly disclose its decision. The Board expects that a director whose resignation is under consideration shall abstain from participating in any decision regarding his or her resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting and until the director’s successor is duly elected and qualified or until the director’s earlier resignation or removal. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation.
- Committees of the Board
- Number and Structure
The Board shall at all times have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. It is not anticipated that all independent directors will serve on all of these required committees. The Nominating and Corporate Governance Committee shall periodically review the structure and operations of committees of the Board in accordance with its charter. The Board may, from time to time, and upon the recommendation of the Nominating and Corporate Governance Committee establish or maintain additional committees.
- Appointment and Independence
All members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee shall be independent in accordance with the criteria established by these Guidelines. Committee members will be appointed and removed by the Board upon the recommendation of the Nominating and Corporate Governance Committee after considering the skills and qualifications of Board members and consultation with the Chairman of the Board and the Chief Executive Officer.
- Committee Charters
Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee shall, and each other committee of the Board may, have its own charter which shall set forth the purposes, goals and responsibilities of the committee, committee member qualifications, committee member appointment and removal, committee structure and operations, and committee reporting to the Board. Each committee charter shall also provide for an annual performance evaluation of the committee as a unit.
- Committee Meetings and Agenda The chairman of each committee, in consultation with committee members, shall have the right to determine the frequency and length of the committee meetings and to develop the committee’s agenda for specific committee meetings. The agendas, materials and meeting minutes of the committees shall be available to all directors upon request. Each committee chair shall give a meaningful report of the committee’s activities to the entire Board.
- Committee Advisors Each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee shall have the authority to hire independent legal, financial and other advisors as it deems necessary or appropriate, without consulting or obtaining the approval of the Board or any member of management.
- Board Leadership
- Chairman of the Board and Chief Executive Officer
The Board shall select a Chairman in the manner and upon the criteria which the Board deems appropriate at the time of selection. The Board does not have a policy with respect to whether or not the role of Chairman of the Board and Chief Executive Officer should be separate or combined.
- Lead Independent Director
At this time the Board does not believe it should designate an independent director (as determined in accordance with the criteria established by these Guidelines) to serve as a “Lead Independent Director,” although it may designate one in the future if the Board deems it appropriate under the circumstances. Should the Board from time to time choose to designate a Lead Independent Director, the Board shall also adopt a description of the responsibilities and authority of the Lead Independent Director relative to the Chairman of the Board and the other directors, including the chairs of the various Board committees.
- Responsibilities and Duties of the Board
The basic responsibility of the directors is to exercise their business judgment on behalf of the Company to act in what they reasonably believe to be in the best interests of the Company and its shareholders. Toward this objective, the Board has identified the following key responsibilities and duties of the Board. In discharging these responsibilities and duties, the Board may call on management and outside advisors and auditors to provide advice, counsel and other assistance. The Board may also delegate responsibilities to committees of the Board or the independent members of the Board, as it deems appropriate.
- Key Responsibilities
The Board, or a committee to which such responsibility is delegated, shall give special attention to the following key responsibilities:
- Strategy. The Board should review periodically management’s proposed strategy for the Company.
- Selection of Chief Executive Officer and Succession Planning. The Board shall select the Chief Executive Officer and develop, with the assistance of the Chairman of the Board (if he or she is a member of management) and the Chief Executive Officer, a management succession plan as contemplated by Section G of these Guidelines.
- Evaluation and Compensation of Key Executive Officers. The Board shall annually evaluate the performance of the Chairman of the Board (if he or she is a member of management), the Chief Executive Officer and such other executive officers that may be designated by the Chairman and/or the Chief Executive Officer (collectively, the “Designated Officers”), and determine and approve the compensation of such Designated Officers in consideration of such evaluation.
- Board Membership Criteria and Performance. The Board shall annually review the Board membership criteria contemplated by Section A of these Guidelines and evaluate its own performance and the performance of its committees as contemplated by Section F of these Guidelines.
- Company Systems and Procedures. The Board shall ensure that the Company has sufficient systems and procedures in place to prevent and detect wrongdoing by monitoring the audit and financial statement review functions, as well as the Company’s legal compliance policies.
- Meeting Attendance
Regularly scheduled Board and Committee meetings shall be scheduled in advance throughout the year. Directors should make every reasonable effort to attend all such meetings in person, it being recognized that attendance by telephone may be necessary in limited cases of unavoidable conflicts. In addition, all directors are expected to attend all annual meetings of shareholders in person unless doing so is impracticable due to unavoidable conflicts.
- Preparation of Meeting Agenda and Materials
The agenda for each Board meeting shall be prepared by the Chief Executive Officer, in consultation with the Chairman of the Board and, if one has been appointed, the Lead Independent Director, and be distributed in advance of the meeting to the entire Board. Each Board member is welcome to suggest items for inclusion on the agenda.
Material to be presented at any Board meeting shall be distributed to the entire Board in writing a sufficient time in advance of the meeting to allow for meaningful review, although the Board recognizes that this timing may not be possible in exceptional circumstances where the Board needs to meet on short notice or in order to preserve the confidential or sensitive nature of certain information. Materials to be presented by management should be concise and to the point while still communicating the important information.
- Participation in Meetings
Each director should sufficiently review and familiarize himself or herself with the materials presented in advance of meetings and the Company’s general business and operations to permit meaningful discussion at such meetings.
Each director owes his or her primary duty of loyalty to the Company. Consistent with the Company’s Code of Business Conduct and Ethics, each director should inform the Board of any actual or potential conflict of interest and, if necessary or appropriate, recuse himself or herself from any discussions or decisions involving such matters.
- Board Interaction with Institutional Investors, Press and Customers
The Board believes that management should serve as the spokesperson for the Company. Individual Board members may, from time to time at the request of the Board or management, meet or otherwise communicate with outside constituents on behalf of the Company. Directors should otherwise refer all inquiries from institutional investors, the press, customers, and other third parties to management.
Each director shall keep confidential the deliberations of the Board and its committees and any confidential or non public information received or learned in connection with his or her service as a director.
- Access to Management and Independent Advisors
Directors shall have complete access to officers and employees of the Company, as well as the Company’s outside counsel and auditors. Directors shall use their judgment to ensure that contacts with management or employees are not distracting to the business operation of the Company. In addition, the Board welcomes the attendance and/or participation of non-director members of management at Board or committee meetings upon the invitation of the Chairman of the Board, the Chief Executive Officer or one or more Independent Directors.
- Executive Sessions of Non-Management Directors
Directors who qualify as “non-management directors,” in compliance with the requirements of the New York Stock Exchange, shall meet on a regular basis in executive session, without management participation. The executive sessions shall occur after each regularly scheduled meeting of the entire Board and at such other times that the non-management directors deem appropriate. Each director shall have the right to call an executive session. In addition, at least once per year an executive session shall be held with only independent directors present.
The executive sessions shall be chaired by the chair of the Board committee having jurisdiction over the particular subject matter to be discussed at the particular session, or portion of a session. This methodology for determining which director will chair these executive sessions of non-management directors shall be disclosed in the Company’s annual proxy statement.
In order that interested parties may be able to make their concerns known to the non-management directors, the Company will disclose in its annual proxy statement a method for such parties to communicate directly with the non-management directors as a group.
- Director Evaluation, Compensation and Stock Ownership Guidelines
- Annual Performance Evaluation
The Board shall conduct an annual self evaluation. The Nominating and Corporate Governance Committee shall establish the evaluation criteria and process. The results of the evaluation shall be reported to the entire Board. The purpose of the annual self evaluation will be to improve the effectiveness of the Board as a unit. The evaluation should include a review of those areas in which the Board and/or management believes the Board can make a better contribution to the Company.
- Director Compensation Review
Director compensation shall be set annually by the Board upon consideration of the recommendation of the Compensation Committee. The Compensation Committee, with the assistance of management, shall review the form and amount of director compensation and make recommendations to the Board annually.
- Director Compensation Guidelines
In determining the form and amount of director compensation, the Board shall consider all relevant factors including the effort and time required of directors, the annual performance evaluation of the Board, the impact of compensation on a director’s actual or perceived independence, and periodic reports of senior management to the Compensation Committee on the status of the Company’s director compensation as compared to compensation of directors of comparable companies. In addition, a meaningful portion of a director’s total compensation shall be provided in equity of the Company in order to create a direct linkage between director compensation and the Company’s performance. Executive officers shall not receive any additional compensation for their service as directors.
- Director Stock Ownership Guidelines
The Board believes it is important to align the interests of the directors with those of the stockholders and for directors to hold equity ownership positions in the Company. Accordingly, each non-employee director is expected to retain an aggregate number of shares of common stock of the Company, deferred stock units (and related dividend equivalent rights) in the Company, and LTIP units, Series Two preferred units (on an as-converted basis) and common units in the Company’s operating partnership, whether vested or not, equal to at least the aggregate number of such shares or units received by the director as annual retainers during the first three years following the later of: (a) the 2007 annual meeting of stockholders of the Company or (b) the annual meeting of stockholders of the Company at which the director was initially elected or, if earlier, the first annual meeting of stockholders following the initial appointment of the director. Compliance with these ownership guidelines will be measured as oof the end of each fiscal year. Any director who is prohibited by law or by applicable regulation of his or her employer from owning equity in the Company shall be exempt from this requirement. The Nominating and Corporate Governance Committee may consider whether exceptions should be made for any director on whom this requirement could impose a financial hardship.
- Evaluation and Compensation of the Designated Officers; Chief Executive Officer Succession
- Evaluation and Compensation of the Designated Officers
The Compensation Committee shall annually review the performance of the Designated Officers based on the accomplishment of the Company’s long term and short term objectives and such other principles as the Compensation Committee may deem appropriate from time to time. The Compensation Committee shall use this evaluation in determining the compensation of the Designated Officers.
- Chief Executive Officer Succession Planning
The Nominating and Corporate Governance Committee, with the active participation of the Chairman of the Board and the Chief Executive Officer, shall prepare and distribute to the entire Board an annual report on succession planning for the Chief Executive Officer. The Chief Executive Officer shall review the succession plan and provide his or her recommendations and evaluation.
The succession plan shall include a plan for the Chief Executive Officer succession in the event of an emergency (e.g., who internally or externally could fill the position of Chief Executive Officer immediately) and in the ordinary course of business following his or her retirement.
- Related Person Transaction Approval and Disclosure Policy
All related person transactions must be reviewed and approved by a majority of the disinterested directors on the Board (i.e., directors that do not have a personal financial interest in the transaction that is adverse to that of the Company or its stockholders) in advance of the Company or any of its subsidiaries entering into the transaction; provided that, if the Company or any of its subsidiaries enters into a transaction without recognizing that such transaction constitutes a related person transaction, this approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on the Board promptly after the Company recognizes that such transaction constituted a related person transaction. The term “related person transaction” shall refer to a transaction required to be disclosed by the Company pursuant to Item 404 of Regulation S-K (or any successor provision) promulgated by the SEC, other than a transaction for which an obligation to disclose under Item 404 of Regulation S-K (or any successor provision) arises solely from the fact that a beneficial owner of more than 5% of a class of the Company's voting securities (or an immediate family member of any such beneficial owner) has an interest in the transaction. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed to be not material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to the Company’s categorical standards of director independence, attached hereto as Exhibit A. This policy will be in addition to, and not in substitution of, any other policy of the Company relating to the approval of conflict of interest transactions, including the policy set forth in Section III.F. of the Company’s Code of Business Conduct and Ethics, as amended from time to time.
The Nominating and Corporate Governance Committee (with the active participation of the Chairman of the Board and the Chief Executive Officer) shall have general responsibility for the Company’s approach to corporate governance matters and shall periodically review these Guidelines and, when appropriate, recommend changes for consideration by the Board.
Effective: February 24, 2012
Boston Properties, Inc.
Categorical Standards of Director Independence
For a member of the Board of Directors (the “Board”) of Boston Properties, Inc. (“Boston Properties” and, together with its subsidiaries, the “Company”) to be considered independent under the New York Stock Exchange rules applicable to Boston Properties, the Board must determine that a director does not have any direct or indirect material relationship with the Company. Any relationship with the Company shall be deemed not material if:
- The relationship does not preclude a finding of independence under Sections 303A.02(b)(i) through 303A.02(b)(v) of the New York Stock Exchange’s Listed Company Manual (the “NYSE Disqualifying Rules”);
- The relationship does not involve any of the following, whether currently existing or occurring since the end of the last fiscal year or during the past three fiscal years:
For purposes of this standard, immediate family member has the same meaning as in the NYSE Disqualifying Rules.
Relationships not specifically deemed not material by the above categorical standards may, in the Board’s judgment, be deemed not to be material.
- a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity that has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year).
- a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity to which the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year).
- a director or an immediate family member of the director being an officer, director or trustee of a charitable organization where the annual discretionary charitable contributions of the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in any single year to the charitable organization exceeded the greater of $1 million or two percent (2%) of that organization’s consolidated gross revenues for the fiscal year;
- a director or an immediate family member of a director being indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of $120,000;
- a director being an executive officer, partner or greater than 10% equity owner of an entity, or being a trustee or a substantial beneficiary of a trust or estate, indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of the greater of $120,000 or 5% of such entity’s total consolidated assets, or to whom the Company or an entity controlled by an executive officer of the Company is indebted (other than with respect to (i) any publicly traded debt securities of the Company or such entity or (ii) non-recourse loans secured by real estate where both the lender and the Company or such entity intend for the lender to transfer all right to, and control over, the loan within 12 months and the documentation includes customary provisions for loans targeted at the commercial mortgage backed securities (CMBS) or collateralized debt obligation (CDO) markets) in an amount in excess of 5% of the Company’s or such entity’s total consolidated assets;
- a transaction or currently proposed transaction (other than relating to the ownership of securities), which involved or involves the direct or indirect payment in a single year of in excess of $120,000 from the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company to a director or an immediate family member of a director;
- a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity that has a co-investment or is a joint venture partner with the Company where the amount of the entity’s equity investment in any single year exceeds the greater of $1 million or 2% of the total consolidated assets of the entity; or
- a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity (other than the Company) in which an executive officer of the Company or an entity controlled by an executive officer of the Company is an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of the entity.
EFFECTIVE: February 24, 2012