Exhibit 99.2
HILLENBRAND, INC.
(THE COMPANY)
CORPORATE GOVERNANCE STANDARDS
FOR
THE BOARD OF DIRECTORS
(As approved by Board of Directors on February 8, 2008)
The following corporate governance standards established by the Board of Directors of the Company
(the Board) provide a structure within which directors and management can effectively pursue the
Companys objectives for the benefit of its shareholders and other constituencies. The Companys
business is managed under the direction of the Board, but the conduct of the Companys business has
been delegated by the Board to the Companys senior management team.
1. The Board will consider all major decisions of the Company. However, the Board has
established the following standing Committees so that certain important areas can be addressed in
more depth than may be possible in a full Board meeting: Audit Committee, Nominating/Corporate
Governance Committee and Compensation and Management Development Committee. Each standing
Committee has a specific written charter that has been approved by the Board.
2. At all times, at least a majority of the directors of the Company shall be independent, as
determined pursuant to numbered paragraph 3 below.
3. The Board, after receiving a recommendation from the Nominating/Corporate Governance
Committee, must determine annually, based on a consideration of all relevant facts and
circumstances, whether each director is independent. A director does not qualify as independent
unless the Board has affirmatively determined that the director has no material relationship with
the Company1 (either directly or as a partner, shareholder or officer of an organization
that has a relationship with the Company). In assessing the materiality of a directors
relationship with the Company and each directors independence, the Board shall consider the issue
of materiality not only from the standpoint of the director but also from that of the persons or
organizations with which the director has an affiliation and shall consider whether the
relationship represents a potential conflict of interest or otherwise interferes with the
directors exercise of his or her independent judgment from management and the Company. Material
relationships can include, among others, commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships. In assessing a directors independence, the
Board shall also consider the directors ownership, or affiliation with the owner, of less than a
controlling amount of voting securities of the Company. The basis for the Boards determination
that a relationship is not material shall be disclosed in the Companys annual proxy statement.
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For purposes of this numbered paragraph 3,
all references to the Company include the Companys subsidiaries. |
Further, the Board cannot conclude that a director is independent if:
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The director is, or has been within the last three years, an employee of the
Company, or an immediate family member2 of the director is, or has been
within the last three years, an executive officer of the Company. Employment as an
interim Chairperson or CEO or other executive officer shall not disqualify a director
from being considered independent following that employment. |
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The director has received, or has an immediate family member who has received,
during any twelve-month period within the last three years, more than $100,000 per year
in direct compensation from the Company, other than director and committee fees and
pension or other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service). Compensation received
by a director for former service as an interim Chairperson or CEO or other executive
officer need not be considered in determining independence under this test.
Compensation received by an immediate family member for service as an employee of the
Company (other than an executive officer) need not be considered in determining
independence under this test. |
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(A) The director or an immediate family member of the director is a current partner
of a firm that is the Companys internal or external auditor; (B) the director is a
current employee of such a firm; (C) the director has an immediate family member who is
a current employee of such a firm and who participates in the firms audit, assurance
or tax compliance (but not tax planning) practice; or (D) the director or an immediate
family member was within the last three years (but is no longer) a partner or employee
of such a firm and personally worked on the Companys audit within that time. |
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The director or an immediate family member of the director is, or has been within
the last three years, employed as an executive officer of another company where any of
the Companys present executives at the same time serves or served on that companys
compensation committee. |
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The director is a current employee, or an immediate family member of the director is
a current executive officer, of a company 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, exceeds the greater of $1 million, or 2% of such other
companys consolidated gross revenues. The look-back provision for this test applies
solely to the financial relationship between the |
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As used in these Corporate Governance
Standards, immediate family member includes a persons spouse, parents,
children, siblings, mothers and fathers-in-law, sons and daughters-in-law,
brothers and sisters-in-law, and anyone (other than domestic employees) who
shares such persons home. When applying the three-year lookback provisions
described in this numbered paragraph 3, the Board need not consider individuals
who are no longer immediate family members of the director as a result of legal
separation or divorce, or those who have died or become incapacitated. |
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Company and the director or immediate family members current employer; the Board
need not consider former employment of the director or immediate family member.
Contributions to tax exempt organizations shall not be considered payments for
purposes of this provision, but the Company shall disclose in its annual proxy
statement any such contributions made by the Company to any tax exempt organization
in which any independent director serves as an executive officer if, within the
preceding three years, contributions in any single fiscal year exceeded the greater
of $1 million, or 2% of such tax exempt organizations consolidated gross revenues.
In addition, the Board must consider the materiality of any such relationship in
making its determination of independence. |
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A director who owns, or is affiliated with the owner, of a controlling amount of
voting stock of the Company may not be considered independent. |
The disqualification of one director from being independent pursuant to these provisions shall not
automatically disqualify any other director on the Board who is an immediate family member of such
disqualified director but the disqualification of an immediate family member shall be one of the
facts and circumstances considered by the Board in assessing such other directors independence.
Moreover, the Board discourages the following types of transactions with or on behalf of
non-officer directors:
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the making of substantial charitable contributions to any organization in
which a director is affiliated; |
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the entering into of consulting contracts with (or providing other indirect
forms of compensation to) directors; or |
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the entering into of other compensatory arrangements with directors that may
raise questions about their independence. |
4. The Audit Committee, the Nominating/Corporate Governance Committee and the Compensation and
Management Development Committee of the Board will consist entirely of independent directors.
5. Each member of the Board will act in accordance with the criteria for selection and
discharge the responsibilities set forth in the Position Specifications3 for a director
of the Company.
6. In addition to evaluations to be performed by the Compensation and Management Development
Committee, the Board will evaluate the performance of the Companys Chief Executive Officer and
certain other senior management positions at least annually in meetings of independent directors
that are not attended by the Chief Executive Officer. As a general rule, the Chief Executive
Officer should not also hold the position of Chairperson of the Board. However, if, with the
Boards approval, the Chief Executive Officer also holds the position of
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See Position Specification for Member of
Board of Directors of Hillenbrand, Inc. |
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Chairperson of the Board, the Board will elect a non-executive Vice Chairperson (or a
non-executive director who is the Lead Director). The Vice Chairperson or Lead Director will
preside at meetings to evaluate the performance of the Chief Executive Officer.
7. Every year the Board will engage management in a discussion of the Companys strategic
direction and, based on that discussion, set the Companys strategic direction and review and
approve a three-year strategic framework and a one-year business plan.
8. On an ongoing basis during each year, the Board will monitor the Companys performance
against its annual business plan and against the performance of its peers. In this connection, the
Board will assess the impact of emerging political, regulatory and economic trends and developments
on the Company. The Board will hold periodic meetings devoted primarily to the review of the
Companys strategic plan and business plan and its performance against them.
9. The Nominating/Corporate Governance Committee will annually assess the Boards
effectiveness as a whole as well as the effectiveness of the individual directors and the Boards
various Committees, including a review of the mix of skills, core competencies and qualifications
(including independence under applicable standards) of members of the Board and its various
committees, which should reflect expertise in one or more of the following areas: accounting and
finance, product and technology development, death care or other low growth industry,
manufacturing, services businesses, sales and market development, international operations,
international governance, mergers and acquisitions related business development, strategic
oversight, government relations, investor relations, executive leadership development, public
company governance, and executive compensation design and processes. In order to make these
assessments, the Nominating/Corporate Governance Committee shall solicit annually the opinions of
each director regarding the foregoing matters. The Nominating/Corporate Governance Committee shall
present its findings and recommendations to the Board of Directors for appropriate corrective
action by the Board. Ineffective directors shall be replaced as promptly as practicable and
inefficient Committees of the Board shall be restructured or eliminated promptly.
10. Directors are expected to own shares of common stock of the Company. The Board of
Directors may from time to time adopt, revise or terminate director stock ownership guidelines.
Specifically, any non-employee director who from and after March 31, 2008 is awarded restricted
shares of the Companys common stock or deferred stock shares (otherwise known as restricted stock
units) with respect to shares of the Companys common stock shall be required to hold any vested
shares of the Companys common stock under such awards until at least the six month anniversary
from the date such director ceases to be a director of the Company.
Directors are encouraged to limit the number of directorships that they hold in public companies so
that they can devote sufficient time to the discharge of their responsibilities to each public
company for which they serve as a director, including the Company. The Nominating/Corporate
Governance Committee shall make recommendations to the Board regarding the membership of the
several Board committees and the chairs of such committees. The members of the several Board
committees shall be elected by the Board, after consideration of the recommendation of
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the Nominating/Corporate Governance Committee, at the annual meeting of the Board to serve until
the next annual meeting of the Board or until their successors shall be duly elected and qualified.
Unless the Chair of any Committee is elected by the Board, after consideration of the
recommendation of the Nominating/Corporate Governance Committee, the members of the Committee may
designate a Chair by majority vote of the Committee membership. The several Committee Chairs will
periodically report the Committees findings and conclusions to the Board. When any director
intends to become a director of another board of directors, that director shall provide advance
notice to the Chairperson of the Board and the Secretary. Upon termination of or significant
change in a member of the Boards principal employment or acceptance of a position as a director on
a public company board that results in a director serving on more than four more public company
boards he or she shall notify the Chairperson of the Board and tender his or her resignation from
the Board, which may be rejected by the Board if the change in status is satisfactory and the Board
believes that the director will continue to be a valuable contributor to the Board. No more than
half the members of the Board may be over seventy years of age.
11. Succession planning and management development will be reviewed annually by the Chief
Executive Officer with the Board. The Board will review at least annually the succession plan for
the Companys Chief Executive Officer.
12. All executive officers and designated members of management are expected to own shares of
the Companys common stock. Specifically, the Chief Executive Officer of the Company, his or her
executive officer or Grade Level V Employee direct reports, each of their direct reports who are
officers or Grade Level V Employees of the Company or any of its subsidiaries, and all other Grade
V level employees of the Company or any of its subsidiaries from and after the later to occur of
(i) March 31, 2008 or (ii) the date on which any such individual first became an officer or Grade
Level V Employee of the Company or any of its subsidiaries (Start Date) shall be required to hold
shares of the Companys common stock or equivalents described below at the following levels
(Required Ownership Level):
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Required Ownership Level (Expressed as |
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Position
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Base Annual Salary Multiple)
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Company Chief Executive Officer (CEO)
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4 x Base Annual Salary |
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CEO Executive Officer Direct Reports
who are Officers or Grade Level V
Employees
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2 x Base Annual Salary |
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Officer or Grade V Level Direct
Reports of CEO Executive Officer or
Grade Level V Direct Reports
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1 x Base Annual Salary |
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Other Grade V level Employees
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0.75 x Base Annual Salary |
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Shares owned outright (including vested deferred shares) and deferred stock shares (otherwise known
as restricted stock units) under the Companys Stock Incentive Plan (RSUs)) with respect to
shares of the Companys common stock (whether vested or unvested) will count as share equivalents
towards the Required Ownership Level. The Required Ownership Level must be achieved within five
years from the Start Date.
Failure to achieve or maintain the Required Ownership Level may result in (i) the applicable
individual being required to hold all after tax vested RSUs and shares acquired upon exercise of
stock options or (ii) suspension of future restricted stock or RSU grants until the Required
Ownership Level is achieved. The Compensation and Management Development Committee (or its
designee) may make exceptions, in its (his or her) sole discretion, in the event of disability or
great financial hardship.
13. Shareholders of the Company will be given an opportunity to vote on the adoption of all
equity-compensation plans and any material revisions to such plans. Brokers may not vote a
customers shares on any equity compensation plan unless the broker has received that customers
instructions to do so.
14. Subject to limited exceptions permitted by law, the Company will not directly or
indirectly grant loans to executive officers or directors of the Company that are not available to
outsiders.
15. Stock options will not be repriced, that is, the exercise price for options will not be
lowered even if the current fair market value of the underlying shares is below their exercise
price.
16. Analyses and empirical data that are important to the directors understanding of the
business to be conducted at a meeting of the Board or any Committee will be distributed, to the
extent practicable, in writing to all members in advance of the meeting. Management will make
every reasonable effort to assure that this material is both concise and in sufficient detail to
provide a reasonable basis upon which directors may make an informed business decision. In many
cases, significant items requiring Board or Committee approval may be reviewed in one or more
meetings, with the intervening time being used for clarification and discussion of relevant issues.
Outside directors shall be encouraged to provide input into the development of Board and Committee
meeting agenda.
17. Directors shall have complete access to the Companys management. It is assumed that
directors will exercise reasonable judgment to assure that contact of this sort is not distracting
to the business operations of the Company and that any such contact, if in writing, will be copied
to the Chief Executive Officer and the Chairperson of the Board. Furthermore, the Board encourages
the Chief Executive Officer to bring managers into Board meetings from time to time who: (a) can
provide additional insight into the items being discussed because of personal involvement in these
areas, and/or (b) represent potential members of future senior management that the Chief Executive
Officer believes should be given exposure to the Board.
18. The Nominating/Corporate Governance Committee shall assess, from time to time, the
adequacy and suitability of the compensation package for members of the Companys
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Board of Directors in relation to competitive market and sound corporate governance practices.
The Chief Executive Officer or other members of the senior management team or other persons
appointed by the Nominating/Corporate Governance Committee shall report to the Nominating/Corporate
Governance Committee from time to time regarding the adequacy and suitability of the Companys
Board compensation package in relation to other comparable U.S. companies. Changes in Board
compensation, if any, should be suggested by the Nominating/Corporate Governance Committee and
approved only after a full discussion among the members of the Board.
19. The Board, with the recommendation of the Nominating/Corporate Governance Committee, will
modify from time to time the compensatory arrangements with the Companys non-officer, non-employee
directors.
20. The Board is responsible for the enactment and approval of changes in the Companys Code
of Business Conduct and Ethics (Policy Statement). The Boards Audit Committee has
responsibility for the oversight of the implementation and administration of the Policy Statement,
the review and assessment at least annually of the effectiveness of the Policy Statement and the
recommendation to the Board of suggested changes in the Policy Statement.
21. The Board will consider from time to time its optimum size and will increase or decrease
from time to time, as appropriate, the number of its members.
22. Proposed agendas for each regularly scheduled Board meeting shall be developed by the
Chairperson of the Board, Chief Executive Officer and Secretary, revised, as appropriate after
joint review by those individuals together with the Chairs of each Board committee, and revised
again, as appropriate after review by each member of the Board. Likewise, proposed agendas for
each regularly scheduled Board committee meeting shall be developed by the Chair of the applicable
Board committee, management liaison and Secretary, revised, as appropriate after joint review by
those individuals together with the Chairperson of the Board and Chairs of each other Board
committee, and revised again, as appropriate after review by each member of the Board.
23. The Board is committed to the continuing orientation and training of new and incumbent
directors at the Board and Committee levels.
24. Any related party transactions between the Company or any of its subsidiaries and any
director or executive officer of the Company shall be reviewed and preapproved by the
Nominating/Corporate Governance Committee.
25. The non-management directors regularly shall conduct executive sessions without
participation by any employees of the Company. The Chairperson of the Board, or, in his or her
absence, the Vice Chairperson of the Board, shall preside over such executive sessions at each
regularly scheduled meeting of the Board of Directors. The Chairperson of each of the
Nominating/Corporate Governance, Compensation and Management Development and Audit Committees of
the Board, or, in his or her absence, the Vice Chairperson of each of those committees, shall
preside over executive sessions of those committees without participation by any employees of the
Company at each regularly scheduled meeting of those committees. The
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names of the directors who will preside at those regularly scheduled executive sessions shall
be publicly disclosed.
26. While the information needed for the Boards decision making generally will be found
within the Company, from time to time the Board may seek legal or other expert advice from sources
independent of management. Generally such advice will be sought with the knowledge and concurrence
of the Chief Executive Officer. Accordingly, the Board shall have the sole authority to engage,
compensate, oversee and terminate external independent consultants, counsel and other advisors as
it determines necessary to carry out its responsibilities. The Company shall provide appropriate
funding (as determined by each committee) for payment of compensation to advisors engaged by the
Board.
27. Likewise, each committee of the Board shall have the sole authority to engage, compensate,
oversee and terminate external independent consultants, counsel and other advisors as it determines
necessary to carry out its duties, including the resolution of any disagreements between management
and the auditor regarding financial reporting. The Company shall provide appropriate funding (as
determined by each committee) for payment of compensation to advisors engaged by the committees.
28. These Corporate Governance Standards have been developed and approved by the Board. The
Board will review at least annually the practices incorporated into these Corporate Governance
Standards by comparing them to the standards identified by leading governance authorities and the
evolving needs of the Company and determine whether these Corporate Governance Standards should be
updated. These Corporate Governance Standards shall be published on the Companys website.
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