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(As amended through December 10, 2015)
These Principles of Corporate Governance (the "Principles") have been adopted by the Board of Directors (the "Board") of Medtronic plc (the "Company") to assist the Board in the exercise of its responsibilities. These Principles, along with the Company's Memorandum and Articles of Association and the charters of the Board committees, provide the overall framework for the governance of the Company and are not intended to limit, enlarge or change in any way the responsibilities of the directors as determined by applicable law and such Memorandum and Articles of Association and charters.
These Principles are reviewed by the Board periodically and may be amended from time to time by the Board on the recommendation of the Nominating and Corporate Governance Committee (the "Committee").
General. The business and affairs of the Company shall be managed under the direction of the Board. The Board may, by resolution, delegate its authority to Company management or to committees of the Board, subject to the Company's Articles of Association, applicable laws, rules and listing standards.
The Board's responsibilities include risk oversight (both as a full Board and through its committees), evaluation of the Company's strategic direction, overseeing and engaging in succession planning for the Company's senior management, and attention to matters affecting the Company's corporate governance and shareholder relations.
Board Size. The Board periodically reviews the number of director positions with the intent of keeping the Board small enough to promote substantive discussions in which each director can actively participate, and large enough to offer a diversity of backgrounds and expertise. The Company's Articles of Association currently provide that the Board shall have no fewer than three and no more than fifteen directors.
Director Independence. Independent directors shall always constitute a majority of the Board and there shall be no more than two directors who are then employed by the Company serving on the board at any time. An "independent" director is a director who, as determined by the Board, meets the New York Stock Exchange definition of "independent director." The Board makes an affirmative determination regarding the independence of each director annually, based upon the recommendation of the Committee, and monitors its compliance with the New York Stock Exchange requirements and other applicable standards (including enhanced independence requirements issued by applicable regulators and advisory services) for director independence on an ongoing basis.
Disclosure of Relationships. Each independent director is expected to promptly notify the chairperson of the Committee, as soon as reasonably practicable, of any existing or proposed relationships with the Company that may require review under the Company's Related Party Transaction Policies and Procedures, and of any changes to personal circumstances which could affect the independence of the director under applicable listing standards or any additional standards as may be applicable to the Company or established by the Board from time to time, including independence requirements issued by applicable regulators and advisory services and by the Company's Director Independence Standards.
Board Leadership. The Board does not have a firm policy as to whether the position of the Chairman and the position of the Chief Executive Officer ("CEO") should be separate and intends to preserve the freedom to decide what is in the best interest of the Company at any point in time.
However, the Board strongly endorses the concept of having one of the independent directors serve in a position of leadership for the rest of the non-management directors. If at any time the CEO and Chairman roles are combined or if the Chairman is not otherwise an independent director, the Board annually will elect a lead independent director ("Lead Independent Director") and such director shall also serve as Chair of the Committee. Although elected annually, the Lead Independent Director is generally expected to serve for five years. If the Chairman is an independent director, then the duties of the Lead Independent Director described herein shall be a part of the duties of the Chairman.
The principal duties of the Chairman are attached as Exhibit 1 and the principal duties of the Lead Independent Director are attached as Exhibit 2.
Director Selection Criteria. The Committee is responsible for recommending candidates for election to the Board, including recommending incumbent directors for reelection. The Company is of the view that the continuing service of qualified incumbents promotes stability and continuity in the board room, giving the Company the benefit of the familiarity and insight into the Company's affairs that its directors have accumulated during their tenure, while contributing to the Board's ability to work as a collective body. Accordingly, the process of the Committee for identifying nominees shall reflect the Company's practice of re-nominating incumbent directors who continue to satisfy the Board's criteria for membership on the Board, whom the Committee believes will continue to make important contributions to the Board and who consent to continue their service on the Board.
In evaluating director candidates, the Committee will consider the person's reputation for honesty and ethical conduct in his or her personal and professional activities, all relevant experience and qualifications, and whether such person has demonstrated, by significant accomplishment in his or her field or by holding positions that require significant responsibility and decision-making, an ability to make a meaningful contribution to the Board's oversight of the business and affairs of the Company. Additional factors which the Committee will consider include a candidate's specific experiences and skills, relevant industry background and knowledge, time availability in light of other commitments, age, potential conflicts of interest, material relationships with the Company, independence from management and the Company and record of service (for incumbent directors). The Committee also will seek to have the Board represent a diversity of backgrounds and experience.
If the Committee identifies a need to replace a current member of the Board, to fill a vacancy in the Board, or to expand the size of the Board, the Committee considers candidates from a variety of sources. The process followed by the Committee to identify and evaluate candidates may include (a) identification of potential candidates from shareholders, Board members, potential candidates themselves, and other sources, (b) use of external search firms to organize the Committee's consideration and evaluation of candidates, (c) meetings to evaluate biographical information and background material relating to candidates, and (d) interviews of selected candidates by members of the Committee. Recommendations by the Committee of candidates for inclusion in the Board slate of director nominees are based upon the criteria set forth in these Principles as well as any other relevant factors that the Committee may from time to time deem appropriate, including the current composition of the Board, the balance of management and independent directors, the need for financial experts on the Audit Committee, and the evaluation of all prospective nominees.
After completing interviews and the evaluation process, the Committee makes a recommendation to the full Board as to persons who should be nominated by the Board. The Board determines the nominees after considering the recommendations and report of the Committee and making such other evaluation as it deems appropriate.
The Committee considers any candidate proposed by a shareholder in the same manner and in accordance with the same criteria as other possible candidates. Any shareholder who wishes to recommend a prospective nominee for the Board for consideration by the Committee shall notify the Company's Company Secretary in writing at the offices of the Company, 710 Medtronic Parkway, Minneapolis, MN 55432. Any such recommendations should provide whatever supporting material the shareholder considers appropriate, but should at a minimum include such background and biographical material as will enable the Committee to make an initial determination as to whether the nominee satisfies the criteria for directors set out in these Principles.
Alternatively, shareholders intending to appear at the annual general meeting of shareholders to nominate a candidate for election by the shareholders at such general meeting (in cases where the Board does not nominate the candidate or where the Committee was not requested to consider his or her candidacy), must comply with the procedures in the Company's Articles of Association.
Election of Directors. At every annual general meeting of the Company, all the directors shall retire from office unless re-elected. Directors are elected if they receive an affirmative vote of a majority of the votes cast in person or by proxy at the annual general meeting.
To the extent that one or more directors' are not re-elected, the Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.
Other Public Company Directorships. The Company does not have a policy limiting the number of other public company boards of directors upon which a director may sit, in general. However, when evaluating director candidates, the Committee considers the number of other public company boards and other boards (or comparable governing bodies) on which a prospective nominee or a director is a member. Directors shall provide prior written notice to the Chair of the Committee of any proposed service on the board of a public or private company.
Regardless of the number of boards on which a director serves, board members are expected to devote sufficient time and attention to carrying out their director duties and responsibilities and ensure that their other responsibilities, including service on other boards, do not materially interfere with their responsibilities as directors of the Company.
Material Change in Director Occupation. An employee director shall submit his or her resignation from the Board upon termination of his or her active service as an employee of the Company.
All directors shall tender a written offer to resign from the Board after a material change in that director's full-time position or responsibilities. The Committee shall review the director's continuation on the Board and recommend to the Board whether the Board should accept such proposed resignation or request that the director continue to serve on the Board.
Director Retirement and Term Limits. The Company has not established term limits for directors. However, subject to waiver in the Board's discretion, it is the general policy of the Company that a director shall retire from the Board at the annual general meeting of shareholders immediately following his or her attaining the age of 72 and shall not be nominated for re-election or reappointment by the Board.
General. The standing committees of the Board are:
The purpose and responsibilities for each of these committees shall be outlined in committee charters approved by the Board. Each committee assesses the adequacy of its charter annually and recommends changes to the Board as appropriate. All committees report regularly to the full Board with respect to their activities.
Committee Independence. Each of the committees shall consist solely of independent directors satisfying applicable legal, regulatory and stock exchange requirements necessary for an assignment to any such committee. In addition, in affirmatively determining the independence of any director who will serve on the Compensation Committee, the Board will consider all factors specifically relevant to determining whether a director has a relationship to the Company which is material to that director's ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Company to such director; and (ii) whether such director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.
Assignment and Rotation of Committee Members. Committee members are appointed annually by the Board upon a recommendation by the Committee. As a general rule, independent directors shall serve on at least two committees. Membership on committees shall be rotated as appropriate to provide directors experience on committees; however, this principle of rotation should not deprive a committee of expertise that a director possesses.
Committee Chairs. In the interest of rotating committee leadership as determined by the Board to be appropriate (taking into account all relevant circumstances), the Board shall consider rotation of committee chairs after a chairman has served for five successive years.
Attendance at Meetings. Directors are expected to attend all Board meetings and meetings of Board committees on which they serve, as well as the annual general meeting of shareholders, absent exigent circumstances.
Board Meetings. Currently, the Board holds six regular meetings each year, and the Board (considering any recommendations from the Committee) shall determine from time to time whether fewer or more meetings shall be held. Appropriate officers of the Company may be invited to attend the general session of Board meetings when appropriate.
Agenda for Board Meetings. The Chairman of the Board and the Lead Independent Director or the CEO, if the CEO is not also the Chairman of the Board, shall prepare an agenda for Board meetings. Directors may request that additional subjects be placed on the agenda.
Board Materials Distributed in Advance. Information and materials that are important to the Board's understanding of the agenda items and other topics to be considered at a Board meeting should, to the extent practicable, be distributed sufficiently in advance of the meeting to permit prior review by the directors. In the event of a pressing need for the Board to meet on short notice or if such materials would otherwise contain highly confidential or sensitive information, it is recognized that written materials may not be available in advance of the meeting.
Executive Sessions of Non-Management Directors. The non-management directors meet in executive session without management present at each regularly scheduled Board meeting. If the non-management directors include directors who are not independent directors, the independent directors shall meet in executive session at least annually. The Lead Independent Director, or the CEO, if the CEO is not also the Chairman of the Board, presides at these sessions of non-management directors and independent directors. Members of the Board's standing committees meet in executive session without management present at each committee meeting.
Director Access to Management, Employees and Advisors. Directors have full and free access to members of management and employees of the Company. The Board and each of its standing committees has the authority to engage outside counsel, accountants, experts and other advisors as it determines appropriate to assist it in the performance of its functions.
Director Orientation and Continuing Education. The Company has an orientation process for new directors, which includes materials and meetings with key management designed to familiarize new directors with the Company's business, operations, finances, and governance practices. The Board encourages directors to participate in continuing education programs to assist them in performing their responsibilities as directors.
Annual Performance Evaluation. The Board conducts an annual self-evaluation to assess its performance. Each of the standing committees also conducts an annual self-evaluation.
Director Compensation. The Board, considering the recommendations of the Committee, reviews and determines the philosophy underlying directors' compensation and any potential impact of compensatory or other arrangements on director independence. The Committee reviews and establishes the components of compensation for directors and recommends changes in compensation to the Board. A director who is also an officer of the Company shall not receive additional compensation for such service as a director.
Stock Ownership or Retention Guidelines. To more closely align their interests with those of shareholders generally, directors must own stock of the Company as provided in stock ownership or retention guidelines adopted by the Board from time to time. The Committee reviews and establishes the stock ownership guidelines for directors and recommends changes to the Board.
Selection and Oversight of the CEO and Senior Management. The Board shall be responsible for identifying potential candidates for, and selecting, the CEO and for electing all other executive officers on the recommendation of the CEO. The Board acts as an advisor and counselor to the CEO and the executive management team, and ultimately monitors their performance.
Management Evaluation. The Board conducts an annual review of the performance of the CEO and senior management. The results of the reviews are shared with the CEO and the Compensation Committee, which considers the evaluation and establishes the compensation of the CEO and other senior management based on this evaluation.
Succession Planning. The Board plans for succession to the position of the CEO, including succession in the event of an emergency or the retirement of the CEO. The Board shall ensure that successors are identified or that a plan is in place to identify successors for the CEO and for the top management positions. The Board also periodically reviews the Company's succession plans for senior management.
Carry out other duties as set forth in the Company's Articles of Association or as requested by the Board as a whole, depending on need and circumstances.