Cogent Communications Holdings, Inc.
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the “Board”) of Cogent Communications Holdings, Inc. (the “Company”) has adopted the following Corporate Governance Guidelines (the “Guidelines”) to assist the Board in the exercise of its responsibilities and to serve the interests of the Company and its stockholders. These Guidelines should be interpreted in the context of all applicable laws and the Company’s certificate of incorporation, bylaws and other corporate governance documents. These Guidelines acknowledge the leadership exercised by the Board’s standing committees and their chairs and are intended to serve as a flexible framework within which the Board may conduct its business and not as a set of legally binding obligations. The Guidelines are subject to modification from time to time by the Board as the Board may deem appropriate and in the best interests of the Company and its stockholders or as required by applicable laws and regulations.
I. THE BOARD
A. Independence of the Board
Except as otherwise permitted by the applicable NASDAQ rules, the Board will be comprised of a majority of directors who qualify as independent directors (the “Independent Directors”) as required under NASDAQ rules.
B. Separate Sessions of Independent Directors
The Independent Directors will meet in executive session without non-Independent Directors or management present on a regularly scheduled basis, but no less than twice per year.
C. Lead Independent Director
If the Chair of the Board is a member of management or does not otherwise qualify as independent, the Independent Directors may elect a lead director (“Lead Independent Director”). The Lead Independent Director shall serve for at least one year. The Lead Independent Director’s responsibilities include:
- presiding over all meetings of the Board at which the Chair of the Board is not present, including any executive sessions of the Independent Directors;
- approving Board meeting schedules and agendas; and
- acting as the liaison between the Independent Directors and the Chief Executive Officer and Chair of the Board.
At such times as the Chair of the Board is an Independent Director, the Chair of the Board will serve as Lead Independent Director. The Board may modify its leadership structure in the future as it deems appropriate.
In addition, the Lead Independent Director is expected to:
- call separate meetings of the Independent Directors, as appropriate;
- ensure that the Independent Directors have adequate opportunities to meet and discuss issues in executive session without non-Independent Directors or management present;
- communicate feedback from executive sessions to the Company’s senior management and Chair of the Board;
- communicate to management, as appropriate, the results of private discussions among Independent Directors;
- advise the Chair as to the quality, quantity and timeliness of the information submitted by management that is necessary or appropriate for the Independent Directors to effectively and responsibly perform their duties;
- respond directly to stockholder and other stakeholder questions and comments that are directed to the Lead Independent Director or to the Independent Directors as a group, with such consultation with the Chair and other directors as the Lead Independent Director may deem appropriate;
- ensure the Chief Executive Officer development and succession planning;
- assist the Board and management in implementing and assuring compliance with the Company’s governance principles; and
- perform such other duties as the Board of Directors may from time to time delegate.
D. Director Qualification Standards and Additional Selection Criteria
The Nominating and Corporate Governance Committee, in recommending director candidates, and the Board, in nominating director candidates, will evaluate candidates in accordance with the qualification standards set forth in the Nominating and Corporate Governance Committee charter.
E. Director Orientation and Continuing Education
Management will provide an orientation process for new directors, including background material on the Company and its business. As appropriate, management will provide opportunities for additional educational sessions for directors on matters relevant to the Company and its business.
F. Service on Other Boards
The Board does not believe that its members should be prohibited from serving on boards of other organizations and has not adopted any guidelines limiting such activities. However, the Nominating and Corporate Governance Committee may take into account the nature of and time involved in a director’s service on other boards and/or committees in evaluating the suitability of individual director candidates and current directors. Prior to accepting any position on the board of directors of any organization, whether for-profit or not-for-profit, current directors should notify the Chair of the Board. The Chair of the Board shall review the proposed board membership to ensure compliance with applicable laws and policies.
Service on other boards and/or committees should be consistent with the Company’s conflict of interest policies.
G. Directors Who Resign or Materially Change Their Current Positions with Their Own Company or Become Aware of Circumstances that May Adversely Reflect upon the Director or the Company
When a director, including any director who is currently an officer or employee of the Company, resigns or materially changes his or her position with his or her employer or becomes aware of circumstances that may adversely reflect upon the director or the Company, such director should notify the Chair of the Nominating and Corporate Governance Committee of such circumstances. The Nominating and Corporate Governance Committee will consider the circumstances, and may in certain cases recommend that the Board request that the director submit his or her resignation from the Board if, for example, continuing service on the Board by the individual is not consistent with the criteria deemed necessary for continuing service on the Board.
H. Term Limits
As each director is periodically subject to election by stockholders, the Board does not believe it is in the best interests of the Company to establish term limits. Additionally, such term limits may cause the Company to lose the contribution of directors who have been able to develop, over a period of time, increasing insight into the Company’s business and therefore can provide an increasingly significant contribution to the Board. The Board believes it is in the long-term benefit of the Company to have a mix of short-, mid-, and long-tenured directors to facilitate orderly successions without the loss of institutional knowledge. The Board realizes that new directors bring new ideas to the boardroom, which may help the Company keep pace with a changing market. The Board also realizes that regular Board revitalization encourages the Company to look for directors with expertise in areas of developing importance and provides opportunities to tap into underrepresented talent pools and increase Board perspective.
I. Director Responsibilities
Each director is expected to spend the time and effort necessary to properly discharge his or her responsibilities. The responsibilities of each director include, but are not limited to:
- exercising his or her business judgment in good faith;
- acting in what he or she reasonably believes to be the best interest of all stockholders;
- becoming and remaining well-informed about the Company’s business and operations and general business and economic trends affecting the Company; and
- ensuring that the business of the Company is conducted so as to further the long-term interests of its stockholders.
In addition, each director is expected to:
- periodically review the Company’s fundamental business and financial strategies;
- periodically review the material risks the Company confronts and methods to mitigate or manage these risks;
- periodically review the Company’s procedures for compliance with legal and other requirements;
- act in a manner consistent with professional and industry standards of good conduct and business ethics; and
- notify the Chair of the Board of any potential conflict of interest.
The Board believes that director compensation should fairly pay directors for work required in a business of the Company’s size and scope, and that compensation should align directors’ interests with the long-term interests of stockholders. The Compensation Committee will review and make recommendations to the Board regarding the cash and equity compensation of directors.
Except as otherwise permitted by the applicable NASDAQ rules, all directors who are not officers of the Company may not directly or indirectly receive any compensation from the Company other than their directors’ compensation, including any compensation for service on committees of the Board and the receipt of equity incentive awards.
A director who is also an officer of the Company shall not receive additional compensation for service as a director.
K. Stock Ownership
The Company has adopted a stock ownership policy. Each member of the Board of Directors is responsible for accumulating and maintaining a level of ownership of the Company’s common stock consistent with the terms of such policy.
L. Board Access to Senior Management
The Board will have complete access to Company management and other employees in order to ensure that directors can ask any questions and receive all information necessary to perform their duties. Directors should exercise judgment to ensure that their contact with management does not distract managers from their jobs or disturb the business operations of the Company. Any meetings or contacts that a director wishes to initiate may be arranged through the Chief Executive Officer, the Chair of the Board or the Lead Independent Director, or if none are available or none are appropriate, directly by the director. To the extent appropriate, such contact, if in writing, should be copied to the Chief Executive Officer of the Company.
M. Board Access to Independent Advisors
The Board committees may hire independent advisors as set forth in their applicable charters. The Board as a whole shall have access to any independent advisor retained by the Company, and the Board may hire any independent advisor it considers necessary to discharge its responsibilities.
The Nominating and Corporate Governance Committee will oversee a periodic assessment of the Board and its committees as set forth in the Nominating and Corporate Governance Committee charter.
II. BOARD MEETINGS
A. Frequency of Meetings
The Board will meet at least four (4) times annually. In addition, special meetings may be called from time to time as determined by the needs of the business. It is the responsibility of the directors to attend meetings. Independent directors have the right to call meetings of the Board without the approval of the Chair of the Board or of management.
B. Director Attendance
A director is expected to spend the time and effort necessary to properly discharge his or her responsibilities. Accordingly, a director is expected to regularly prepare for and attend meetings of the Board and all committees on which the director sits, including separate meetings of the Independent Directors, with the understanding that, on occasion, a director may be unable to attend a meeting. All directors are encouraged to attend the annual meeting in person. A director who is unable to attend a meeting of the Board or a committee of the Board is expected to notify the Chair of the Board or the Chair of the appropriate committee in advance of such meeting, and, whenever possible, participate in such meeting via teleconference in the case of an in-person meeting.
C. Attendance of Non-Directors
The Board encourages the Chair of the Board or of any committee to invite Company management and outside advisors or consultants from time to time to participate in Board and/or committee meetings to (i) provide insight into items being discussed by the Board which involve the manager, advisor or consultant, (ii) make presentations to the Board on matters which involve the manager, advisor or consultant, and (iii) bring managers with high potential into contact with the Board. Attendance of non-directors at Board meetings is at the discretion of the Board.
D. Meeting Agenda
Any director has the right to add items to the agenda for a meeting. With respect to items added by a director, the Chair of the Board shall not remove such items from the agenda. For a meeting called by the Independent Directors, the Independent Directors shall establish the agenda for such meeting.
E. Advance Receipt of Meeting Materials
Information regarding the topics to be considered at a meeting is essential to the Board’s understanding of the business and the preparation of the directors for a productive meeting. To the extent feasible, the meeting agenda and any written materials relating to each Board meeting will be distributed to the directors sufficiently in advance of each meeting to allow for meaningful review of such agenda and materials by the directors. Directors are expected to have reviewed and be prepared to discuss all materials distributed in advance of any meeting.
III. COMMITTEE MATTERS
The Board currently has three (3) standing committees: (i) the Audit Committee, (ii) the Compensation Committee, and (iii) the Nominating and Corporate Governance Committee. Each committee will perform its duties as assigned by the Board in compliance with the Company’s bylaws and the committee’s charter. It is the responsibility of the directors to attend the meetings of the committees on which they serve.
IV. SUCCESSION PLANNING
The Board has delegated the responsibility of succession planning for the Chief Executive Officer to the Nominating and Corporate Governance Committee. The Board and the Nominating and Corporate Governance Committee will (i) work together on a periodic basis with the Chief Executive Officer to evaluate the Company’s succession plans upon the Chief Executive Officer’s retirement and in the event of an unexpected occurrence, and (ii) periodically review the performance of the Chief Executive Officer.