Ford Motor Company, a global automotive industry leader based in Dearborn (suburb of Detroit), Michigan, manufactures or distributes automobiles across six continents. With about 168,000 employees and about 65 plants worldwide, the company’s automotive brands include Ford and Lincoln. The company provides financial services through Ford Motor Credit Company. In the past it has also produced heavy trucks, tractors and automotive components. Ford owns small stakes in Mazda of Japan and Aston Martin of the United Kingdom.
1. Analysis of corporate governance
The Board of Directors of Ford Motor Company has adopted corporate governance practices to promote the effective functioning of the Board, its committees, and the Company:
1. Charter of the Audit Committee
2. Charter of the Compensation Committee
3. Charter of the Finance Committee
4. Charter of the Nominating and Governance Committee
5. Charter of the Sustainability Committee
6. Corporate Governance Principles
7. Code of Conduct Handbook
8. Code of Ethics for Senior Financial Personnel
9. Code of Ethics for the Board of Directors
1.2 Charter of the Audit Committee
The Audit Committee should provide assistance to the directors of the company in fulfilling their responsibility to the shareholders relating to corporate accounting matters, the financial reporting practices of the company and the quality and integrity of the financial reports of the company. The purposes of the Audit Committee’s is to assist the Board’s oversight of:
1. The reliability and integrity of the company’s accounting policies and financial reporting and disclosure practices
1. The establishment and maintenance of processes to assure compliance with all relevant laws, regulations, and company policy, also a process for receipt of complaints and concerns regarding management fraud and accounting, internal control or auditing matters
1. The independent auditor’s qualifications and independence
1. The performance of the company’s internal audit function and independent auditor.
Prepare the report of the audit committee to be included in the company’s annual proxy statement
1.3 Charter of the Compensation Committee
The Compensation Committee shall:
1. Assist the Board of Directors in discharging its responsibility to the shareholders with respect to the company’s compensation programs, compensation of the company’s executives and identify qualified persons to become company officers
1. Produce an annual report of the Compensation Committee on executive compensation for inclusion in the company’s annual proxy statement, in consistency with applicable rules and regulations
1.4 Charter of the Finance Committee
The Finance Committee should provide assistance to the Board of Directors of the company in fulfilling its responsibility to the shareholders in respect of the policies and practices that relate to the management of the financial affairs of the company. The Finance Committee should also perform functions and exercise such other powers as can be delegated to it from time to time by the Board of Directors.
The main purpose of the committee is:
1. Check management’s plans to manage the company’s exposure to financial risk
2. Review company’s business plan, cash plan, balance sheet, and capital structure
3. Recommend dividend actions to the Board of Directors
4. Review the company’s capital allocation strategy, also the cost of capital
5. Check the company’s capital appropriation matters, including recommending approval of those programs that require board approval and providing periodic oversight of board-approved programs
6. Review the company’s pension strategy and performance and health care costs and funding
1.5 Charter of the Nominating and Governance Committee
The Nominating and Governance Committee should provide assistance to the Board of Directors in fulfilling its responsibility to the shareholders by the following actions:
1. Identifying individuals qualified to become directors that are consistent with the criteria that is approved by the board and recommending to the board for selection the candidates for all directorships to be filled by the Board or by the shareholders
2. Developing and recommending to the Board a set of corporate governance principles suitable to the company
1. Evaluating, monitoring and making recommendations to the Board with respect to the corporate governance policies and procedures of the company.
1.6 Charter of the Sustainability Committee
The Sustainability Committee provides assistance to the Board of Directors of the company to fulfill its responsibility to the shareholders in respect of its policies and practices that relate to the sustainable growth of the company on a world-wide basis. It should also perform functions and exercises such as other powers that can be delegated to it from time to time by the Board of Directors
1.7 Corporate Governance Principles
1.7.1 Main idea
The corporate governance principles, that are adopted by the Board of Directors of the company, together with the charters of the Audit Committee, the Compensation Committee, the Sustainability Committee, the Finance Committee and the Nominating and Governance Committee of the Board, provide the framework for the governance of Ford Motor Company. The Board reviews these principles and other aspects of Ford governance annually or even more often, depending on the circumstances.
The Board of Directors of the Company is elected by and responsible to the shareholders. Ford’s business is conducted by its employees, managers and officers, under the direction of the chief executive officer (the CEO) and the oversight of the Board to enhance the long-term value of the company for its shareholders. The Board of Directors monitors the performance of the CEO and senior management to assure that the long-term interests of the shareholders are being served.
1.8 Board of Directors Structure and Operations/Board Compensation
1.8.1 The process of selection and the size of the board
The shareholders select the directors each year by at the annual meeting of shareholders. Shareholders may propose nominees (other than self-nominations) for consideration by the Nominating and Governance Committee of the Board by submitting the names, qualifications, and other supporting information to the Secretary. Properly submitted nominations must be received by the date set forth in the most recent proxy statement to be considered by the Nominating and Governance Committee for inclusion in the following year’s nominations for election.
The Board proposes a slate of nominees to the shareholders for election to the Board. The Board also determines the number of directors on the Board, provided that there are at least 10 and not more than 20 directors. Between annual shareholder meetings, the Board can choose directors to vacant Board positions to serve until the next annual meeting.
Directors should have the highest personal and professional ethical standards, integrity and values and commit to represent the long-term interests of the shareholders. They must also have practical wisdom and mature judgment, be objective and inquisitive. Ford recognizes the value of diversity and endeavor to have a diverse Board, with experience in business, government, education and technology. They must be willing to possess sufficient time to carrying out their duties and responsibilities effectively and should commit to serve on the Board for a long period of time. They should also prepare to offer their resignation in the event of any significant change in their personal circumstances that could affect the their responsibilities as directors of the company.
Usually it is wished that directors who also serve as CEOs or in similar positions should not serve on more than two boards of public companies in addition to the Ford board and other directors should not serve on more than four other boards of public companies in addition to the Ford board.
With the By-Laws of the Company, a director will not be nominated for election to the Board after his or her 72nd birthday, although a waiver of this limitation may be granted by the full Board.
1.8.3 Independence of Directors
A majority of the directors must be independent directors under the New York Stock Exchange (NYSE). According to the Board of Directors the directors who do not meet the NYSE’s independence standards have historically made, and can be expected to continue to make, valuable contributions to the Board and to the Company by reason of their experience, judgment, intelligence and wisdom. Independent means that under the NYSE rules, the Board must determine that a director does not have any direct or indirect material relationship with Ford. The following guidelines have been made by the Board to assist it in determining director independence with the guideline of the NYSE rules:
1. No director who is an employee/former employee of the company can be independent until 3 years after termination of employment
1. No director who is, or in the past 3 years has been, related with or employed by the
company’s present or former independent auditor can be independent until 3 years after the end of the affiliation, employment or auditing relationship
1. A director can´t be independent if he or she is or in the past 3 years has been a part of an interlocking directorship in which an executive officer of the company serves on the compensation committee of another company that employs the director.
1. No director can be independent if he or she is receives or in the last 3 years received more than $100,000 during any 12-month period in direct compensation from the company other than director and committee fees and pension or other deferred compensation for prior service
1. Directors with family members in the above mentioned categories have the same 3-year restriction
The next mentioned commercial, charitable and educational relationships are not considered to be material relationships that would weaken a director’s independence:
1. If within the previous three years a Ford director was an executive officer or employee of another company that did business with Ford and either: the annual sales to Ford were less than the greater of $1 million or two percent of the total annual revenues of such company, or then that the annual purchases from Ford were less than the greater of $1 million or two percent of the total annual revenues of Ford, in both cases for any of the three most recently completed fiscal years
1. If within the last three years a Ford director was an executive officer of another
company which was indebted to Ford or to which Ford was indebted, and either: the total amount of such other company’s indebtedness to Ford was less than two percent of the total consolidated assets of Ford or the total amount of Ford’s indebtedness to a nother company was less than two percent of the total consolidated assets of such other company, in both cases for any of the three most recently completed fiscal years
1. If within the previous three years a Ford director served as an executive officer, director or trustee of a charitable or educational organization, and Ford’s discretionary contributions to the organization were less than the greater of $1 million or two percent of that organization’s total annual discretionary receipts for any of the three most recently completed fiscal years.
The Board will check annually all commercial, charitable, and educational relationships between the company and its directors. The Board’s decision of every director’s independence will be decided annually in the company’s proxy statement.
For relationships that are not qualified within guidelines and above mentioned factors, the decision of whether the relationship is material, and therefore whether the director is independent, should be made by the directors who satisfy the above independence guidelines. The Company will explain in the next proxy statement the basis for any Board determination that a relationship was immaterial despite the fact that it did not meet the categorical standards of immateriality set forth in the above guidelines.
1.8.4 Board Committees
The Board has made the following Committees to help the Board in discharging its
The current charters of these Committees are published on the Ford public website and can also be mailed to shareholders on a request that should be written. The Committee chairs report at each of their meetings on the matters that are considered to the full Board of Directors following each Committee meeting. In addition to the requirement that a majority of the Board satisfy the independence standards discusses above, members of the Audit Committee should as well satisfy additional independence requirements. Specifically, Audit Committee members should not directly or indirectly receive any compensation from the company other than their directors’ compensation.
1.8.5 Compensation of Board
The Nominating and Governance Committee have the responsibility for recommend to the Board compensation for non-employee directors. In discharging this duty the Nominating and Governance Committee should be guided by: compensation should be competitive and fairly compensate directors for the time they have given and their effort required of Board and Committee members. Compensation should be simple, transparent and easy for shareholders to understand. Each year, the Nominating and Governance Committee review non-employee director compensations.
1.8.6 Director Orientation and Continuing Education
The Company provides an orientation for new directors, and periodically provides materials or briefing sessions for all directors on matters that would assist them in discharging their duties. Each new director should spend a day at corporate headquarters for personal briefings by senior management on the company’s strategic plans, its financial statements, and its key policies and practices. All directors have the opportunity to participate in educational programs. Non-employee directors have full and complete access to the senior managers of the company.
The Board of Directors have usually 7 meetings a year. Directors ordinarily are expected to attend all the meetings and to review the materials given to them in advance of each meeting. The Board is responsible for its agenda. Every year the Chairman will propose for the Board’s approval main points of strategy, risk and corporate reputation to be scheduled and discussed during the the year. The Board can give suggestions. As a result of this process, a schedule of main discussions for the each year will be made. The non-employee directors will meet for a period of time at each scheduled Board meeting without management present. A presiding director will preside at these meetings and also serve as the presiding director in performing such other functions as the Board may direct, including advising on committee selection and advising the Chairman on the agenda for Board
meetings. The non-employee directors can meet without management present at such other times as determined by the presiding director or at the request of any non-employee director.
1.8.8 Responsibilities and Duties
CEO/Management Oversight and Compensation
The Board is also responsible for:
1. selecting, evaluating and providing a compensation of the CEO and overseeing CEO succession planning
1. providing counsel and oversight on the selection, evaluation, development and compensation of the officers of the Company
1. maintaining a succession plan for the CEO and other main senior executives and also a emergency succession plan for the CEO
Business, Product and Strategic Matters/Compliance with Law and Company Policy
The Board should also:
1. review, approve and monitor basic financial and business strategies and significant company procedures
1. review and discuss reports by management on the performance of the company
1. assess major risks facing the company and review and approve strategies for handling such risks
1. secure procedures are in place to maintain a integrity and reputation of the company
1.8.9 Conflicts of Interest and Concern Reporting
The Board wants Ford directors, officers and employees to act ethically at all times and in accordance with company codes of ethics. If a conflict of interest arises for a director the director should immediately inform the Chairman and the presiding director. If the conflict is significant and could not be solved the director should resign
Any person who would want to send a written communication to the Board, including any person who has a concern about Ford’s conduct or about the company’s accounting, internal accounting controls or auditing matters, can do so by sending a communication to the Board, any non-employee director or to the Audit Committee. These communications are of course confidential or anonymous. They will be reviewed and addressed by Ford’s Compliance Office with the help of Human Resources, the General Auditor’s Office and Executive Operations.
The status of all the outstanding communications addressed will on a quarterly basis be reported to the directors, the Audit Committee or the Nominating and Governance Committee, as appropriate. The Board, the Audit Committee or the Nominating and Governance Committee can decide to address these communications outside a normal company practice and procedure.
1.9 Annual Performance Evaluation
The Board and each of the Committees perform always a annual self-evaluation. Every director should provide his or her assessment of the effectiveness of the Board and the Committees on which he or she serves.