||I. Board Issues:
- Size of Board.
The Board's optimum size is 10-12 members.
- Mix of Directors; "Independent" Directors.
A majority of the Directors shall satisfy the independence
requirements of Section 10A of the Securities Exchange
Act of 1934, the New York Stock Exchange and any other
regulatory authority. (To see the Board's Categorical
Standards for determining independence... click
The Board believes that it should not have more than three management Directors.
- Board Membership Criteria.
The Board seeks members from diverse professional backgrounds
who combine a broad spectrum of experience and expertise
with a reputation for integrity and who will be able
to serve at least 10 years as a Director prior to reaching
the age of 72. Exceptional candidates who do not meet
all of these criteria may still be considered. Directors
should have experience in positions with a high degree
of responsibility, be leaders in the companies or institutions
with which they are affiliated, and be selected based
upon contributions they can make. Directors should
plan to make a significant time commitment to the Company.
- New Directors.
The Nominating/Corporate Governance Committee has,
as one of its responsibilities, the recommendation
of Director candidates to the full Board. The Nominating/Corporate
Governance Committee will maintain an orientation program
for new Directors.
- Retirement; Resignation.
- Term Limits.
The Board does not favor term limits for Directors,
but believes that it is important to monitor overall
- Retirement Policy.
No person shall be nominated by the Board to serve
as a Director after he or she has passed his or her
72nd birthday, unless the Nominating/Corporate Governance
Committee has voted, on an annual basis, to waive,
or continue to waive, the mandatory retirement age
of such person as a Director. Notwithstanding the
foregoing, all persons who first become Directors
after May 14, 2002 shall automatically retire from
the Board at the Company's annual meeting of stockholders
following the date he or she turns 72, without the
possibility of obtaining a waiver. In addition and
notwithstanding the first sentence of this subsection,
the oldest member of the Board shall retire at the
Company's 2003 annual meeting of stockholders. The
next oldest member of the Board shall retire at the
Company's 2004 annual meeting of stockholders. This "then
oldest Board member" retirement process shall continue
until there are no Board members over the age of
72. Thereafter, all Board members will automatically
retire from the Board at the Company's annual meeting
of stockholders following the date he or she turns
72. This automatic retirement policy shall not apply
to Henry Taub, the Company's founder.
- Resignation Policy - Management Directors.
Management Directors shall offer to resign from the
Board upon their resignation, removal or retirement
as an officer of the Company. However, Company's
Chief Executive Officer may, provided the Board approves,
continue to serve as a Director after his resignation
or retirement for a transition period of up to one
year after the date he or she ceases to be the Company's
Chief Executive Officer.
- Directors Changing Their Present Job Responsibilities.
The Board expects Directors to offer to resign from
the Board upon a change in their business position
including, without limitation, retirement from the
position on which their original nomination was based.
- Board Meetings.
- Selection of Agenda Items and Executive Sessions.
The Chairman and Chief Executive Officer should establish
the agenda for Board meetings. The non-management
Directors of the Board will meet in executive session
during each of the Board's regularly scheduled meetings
without any management Directors and any other members
of the Company's management who may otherwise be
present; at least one of such executive sessions
will include only independent Directors. The independent
Directors will designate, and publicly disclose the
name of the Director, who will preside at the executive
- Distribution of Materials.
The Company shall distribute, sufficiently in advance
of meetings to permit meaningful review, written
materials for use at Board meetings.
- Attendance of Non-Directors.
The Board believes that attendance of key executive
officers augments the meeting process.
- Number of Meetings; Attendance and Preparation.
The Board of Directors shall hold a minimum of five
meetings per year. Directors are expected to attend
all meetings and to have, prior to the meetings,
reviewed all written meeting materials distributed
to them in advance. Directors are expected to be
physically present at all meetings. Conference telephone,
video conference, or similar communication equipment
attendance at a meeting will generally only be permitted
if it is necessary to constitute a quorum.
- Conflicts of Interest.
Directors are expected to avoid any action, position
or interest that conflicts with an interest of the
Company, or gives the appearance of a conflict. The
Company annually solicits information from Directors
in order to monitor potential conflicts of interest
and Directors are expected to be mindful of their fiduciary
obligations to the Company.
- Consulting Agreements with Directors.
The Board believes that the Company should not enter
into paid consulting arrangements with outside Directors
or their employers, without obtaining the Board's approval.
Such approval may, in appropriate circumstances, be
granted on an annual basis.
- Share Ownership by Directors.
The Board believes that the number of shares of the
Company's stock owned by each Director is a personal
decision, and encourages stock ownership.
- Compensation Review.
The Compensation Committee will annually review, and
(when it deems appropriate) recommend to the full Board
changes in, Director compensation and benefits with
equity ownership in the Company encouraged.
- Assessing Board and Committee Performance.
The Board shall conduct an annual self-evaluation to
determine whether it and its committees are functioning
effectively. The Board's self-evaluation shall be based,
in part, on the Nominating/Corporate Governance Committee's
- Access to Senior Management.
Board members have complete and open access to senior
members of management. The Chief Executive Officer
shall invite key employees to attend Board sessions
at which the Chief Executive Officer believes they
can meaningfully contribute to Board discussion.
- Interaction with Third Parties.
The Board believes that management should speak for
the Company and that the Chairman should speak for
The Board believes maintaining confidentiality of information
and deliberations is an imperative.
- Board of Directors' Resources .
The Board of Directors shall have the authority to
obtain advice and seek assistance from internal and
external legal, accounting, and other advisors and
consultants. The Board of Directors shall determine
the extent of funding necessary for the payment of
compensation to any advisor and/or consultant retained
to advise it.
II. Committee Issues:
- Board Committees; Committee Charters.
The Board currently has the following four Committees: the Audit Committee;
the Compensation Committee; the Nominating/Corporate Governance Committee;
and the Executive Committee. The Audit Committee, the Compensation Committee
and the Nominating/Corporate Governance Committee shall each consist of three
or more Directors, each of whom shall satisfy the independence (and, in the
case of the Audit Committee, the financial literacy and experience) requirements
of Section 10A of the Securities Exchange Act of 1934, the New York Stock
Exchange and any other regulatory requirements.
Each Committee shall meet in executive session during each of its regularly
The Audit Committee, the Compensation Committee and the Nominating/Corporate
Governance Committee shall each have appropriate written charters. These
committee charters will be made available on the Company's Web site at: "www.adp.com."
- Rotation of Committee Assignments and Chairs.
Committee assignments and the designation of Committee Chairs should be based
on the Director's knowledge, interests and areas of expertise. The Board
does not favor mandatory rotation of Committee assignments or Chairs. The
Board believes experience and continuity are more important than rotation.
Board members and Chairs should be rotated only if rotation is likely to
increase Committee performance.
- Frequency of Committee Meetings; Attendance.
The Audit Committee has four regularly scheduled meetings each year. The
Compensation Committee and the Executive Committee each have three regularly
scheduled meetings each year. The Nominating/Corporate Governance Committee
has three regularly scheduled meetings each year. Committee members are expected
to be physically present at all meetings. Conference telephone, video conference
or similar communication equipment attendance at a meeting will generally
only be permitted if it is necessary to constitute a quorum.
III. Duties and Responsibilities
of the Committees:
- Executive Committee.
During the intervals between Board meetings, the Executive Committee shall,
except as otherwise provided in Section 3.02 of the By-Laws, have and may
exercise all the powers and authority of the Board in the management of the
Company's business, including the power to declare dividends and to authorize
the issuance of stock.
- Audit Committee.
The Audit Committee has the powers and responsibilities
set forth in its Charter (which is available on the Company's
Web site at "www.adp.com"). The
role of the Audit Committee is oversight. The members of the Audit Committee
are not employees of the Company and may or may not be accountants or auditors
by profession or experts in the fields of accounting or auditing and, in
any event, do not serve in such capacity. Consequently, it is not the duty
of the Audit Committee to conduct audits or to determine that the Company's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of Management and the Company's
- Compensation Committee.
The Compensation Committee shall have the powers and
responsibilities set forth in its Charter (which is available
on the Company's Web site at "www.adp.com").
- Nominating/Corporate Governance Committee.
The Nominating/Corporate Governance Committee shall have
the powers and responsibilities set forth in its Charter
(which is available on the Company's Web site at "www.adp.com").
IV. Other Principles:
- Confidential Voting.
The Board has adopted a policy whereby stockholders' proxies are received
by the Company's independent tabulators and the vote is certified by independent
inspectors of election. Proxies and ballots that identify the vote of individual
stockholders will be kept confidential from the Company's management and
Directors, except as necessary to meet legal requirements, in cases where
stockholders request disclosure, or in a contested election.
- Disclosure of Corporate Governance Principles.
These Corporate Governance Principles will be made available
on the Company's Web site at "www.adp.com."