The role of the Board of Directors (“Board”) of Ascent Solar Technologies, Inc. (the “Company”) is to oversee the business and affairs of the Company for the benefit of its stockholders. In addition, the Board considers the interests of its other interested parties, including its employees, customers, suppliers, creditors and the communities in which the Company does business. The Board has adopted these corporate governance guidelines, as well as committee charters, to provide a framework for the functioning of the Board and Board Committees.
I. Board Composition and Structure
A. Size of Board. The number of members of the Board generally should range from three to nine members, recognizing that retirements, resignations and recruiting delays may result, periodically, in the Board consisting, for some transitional period, of a greater or lesser number of directors than the Board may have targeted.
B. Mix of Directors; “Independent” Directors. A majority of the Board must be “independent,” within the meaning of Nasdaq and Pacific Exchange (“PCX”) rules. No director will be deemed independent unless the Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company).
1. Categorical Standards. The Board has established the following standards to assist it in determining director independence. The following will not be deemed independent:
- a director who is, or at any time during the past three years was, employed by the Company or by any parent or subsidiary of the Company;
a director who accepted or has a family meber who accepted any payments from the Company or any parent or subsidiary of the Company in excess of $60,000 during the current or any of the past three fiscal years, other than the following: (i) compensation for board or board committee service, (ii) payments arising solely from investments in the Company’s securities, (iii) compensation paid to a family member who is a non-executive employee of the Company or a parent or subsidiary of the Company, (iv) benefits under a tax-qualified retirement plan, or non-discretionary compensation or (v) loans permitted under Section 13(k) of the Securities Exchange Act of 1934;
- a director who is a family member of an individual who is, or at any time during the past three years was, employed by the Company or by any parent or subsidiary of the Company as an executive officer;
- a director who is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed 5 percent of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than the following: (i) payments arising solely from investments in the Company’s securities or (ii) payments under non-discretionary charitable contribution matching programs;
- a director who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company have served on the compensation committee of such other entity; or
- a director who is, or has a family member who is, a current partner of the Company’s outside auditor, or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at any time during any of the past three years.
2. Board Determinations. For relationships not addressed by the guidelines in subsection (1) above, the determination of whether the director is independent or not shall be made by the Board of Directors, subject to applicable exchange rules or legal requirements.
3. Audit Committee Independence Requirements. Audit Committee members may not accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any Company subsidiary. For the purpose of this paragraph, compensatory fees do not include fees for service on the Board or a Board committee, or the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service). In addition, Audit Committee members may not be affiliated persons of the Company or any Company subsidiary.
C. Selection of Directors. In connection with its proxy solicitation relating to the Company’s annual stockholders’ meeting, the Board recommends a slate of nominees for election by stockholders. In addition, the Board fills vacancies on the Board when necessary or appropriate. The Board’s recommendations or determinations typically are based on the recommendations of, and information supplied by, the Nominating and Governance Committee, taking into account the criteria described below and other factors, including the requirements for Board committee membership. In recommending nominees, the Board will consider nominees recommended by stockholders.
D. Board Membership Criteria. The Nominating and Governance Committee is responsible for reviewing with the Board, on an annual basis, the size, function and needs of the Board, so that the Board as a whole collectively possesses a broad range of skills, expertise, industry and other knowledge, and business and other experience useful to the effective oversight of the Company’s business. The Board also seeks members from diverse backgrounds so that the Board consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. 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 that they can make to the Company. In considering candidates for nomination, the Nominating and Governance Committee may, at the request of the Board from time to time, review the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board.
E. Additional Directorships. Directors are encouraged to limit the number of other boards of directors (excluding non-profit and non-public boards of directors) on which they serve, taking into account potential meeting attendance, participation and other commitments with respect to these other boards of directors. It is generally advisable to limit outside directorships to three. The Nominating and Governance Committee and the full Board will take into account the nature of and the time involved in a director’s service on other boards of directors in evaluating the suitability of individual director candidates. Prior to accepting any invitation to serve on another public company board of directors, a director must seek and receive the consent of the Nominating and Governance Committee. In determining whether to provide such consent, the Nominating and Governance Committee will consider any actual or potential conflict that would result from the director’s service on such board of directors.
F. Compensation of Non-Employee Directors. Company management should report periodically to the Compensation Committee as to how the Company’s non-employee directors’ compensation practices compare with those of comparable public companies. The Board should make changes in non-employee director compensation practices only upon the recommendation of the Nominating and Governance Committee after discussion and concurrence by a majority of the independent directors of the full Board. Both the Board and the Nominating and Governance Committee should be guided by the following principles: compensation should align directors’ interests with the long-term interests of stockholders while not calling into question their objectivity; and the structure of the compensation should be simple, transparent and easy for stockholders to understand.
II. Board Meetings and Procedures
A. Board Meetings.
1. Number of Meetings; Attendance and Preparation. The Board holds a minimum of four regularly scheduled meetings per year. Directors are expected to attend all regularly scheduled meetings in person or telephonically and to have, prior to the meetings, reviewed all written meeting materials distributed to them in advance.
2. Selection of Agenda Items. The Chairperson of the Board and the Chief Executive Officer (“CEO”) should establish the agenda for Board meetings; however, directors may at any time suggest that particular items be placed on the agenda by providing the suggested item to the Chairperson of the Board at least one week prior to the relevant Board meeting.
3. Distribution of Materials. The Company will distribute written materials, including the agenda, for use at Board meetings sufficiently in advance of meetings to permit meaningful review. It is recognized, however, that under certain circumstances written materials may be unavailable to directors in advance of the meeting. On those occasions in which information regarding a matter to be considered at a Board meeting is too sensitive to provide in writing, the Chairman of the Board may elect to contact each director by telephone in advance of the meeting to discuss the subject and the principal issues the Board will need to consider.
4. Attendance of Non-Directors. Attendance at Board meetings is typically limited solely to Board members. However, the Board retains the authority to invite executive officers, key personnel and other persons to attend Board meetings when deemed appropriate.
5. Executive Sessions of Non-Employee Directors. The non-employee directors will meet in executive session at least once a year outside of the presence of any management directors and any other members of the Company’s management who may otherwise be present. During at least one session per year, only independent directors may be present. During executive sessions, the directors may consider such matters as they deem appropriate. Following each executive session, the results of the deliberations and any recommendations should be communicated to the full Board. The Board will establish, or direct a committee of the Board to establish, a method for interested parties to communicate directly with the non-employee directors.
B. Access to Senior Management/Independent Advisors. Board members have complete and open access to senior members of management. The CEO will invite other key employees to attend sessions prior to the Board meeting if the CEO believes they can provide meaningful information to the Board. The Board, including the independent members of the Board, have the authority, in their discretion and at the Company’s expense, to retain independent advisors.
C. Access to Stockholders and Other Interested Parties. The Chairperson of the Board and the CEO are responsible for establishing effective communications with the Company’s stockholders, customers, associates, communities, suppliers, creditors and corporate partners. Directors are not precluded from meeting with such parties, but any such meetings generally should be held with management present.
D. Confidentiality. The Board believes that maintaining confidentiality of information and deliberations is an imperative.
III. Board Duties and Responsibilities
A. Oversight. To accomplish its mission to maximize long-term stockholder value, the Board must:
1. Confirm that the Company has processes in place designed to ensure that the Company operates in a legal, ethical, and socially responsible manner;
2. Select, evaluate, and offer substantive advice and counsel to the CEO and work with the CEO to develop effective measurement systems that facilitate an evaluation of the Company’s degree of success in creating long-term economic value for its stockholders;
3. Review, approve, and monitor fundamental financial and business strategies and major corporate actions;
4. Oversee the Company’s capital structure and financial policies and practices;
5. Assess major risks facing the Company and review options for their mitigation; and
6. Provide counsel and oversight on the selection, evaluation, development, and compensation of executive officers and provide candid feedback on their successes and failures.
B. Corporate Governance. The Board will review and, if it deems appropriate, approve changes to these Corporate Governance Guidelines that have been recommended to the Board by the Nominating and Governance Committee.
C. Charters. The Board will review and, if it deems appropriate, approve changes to the Company’s Audit, Compensation and Nominating and Governance Committee charters, including such changes as have been recommended to the Board by such committees.
D. Education. The Company has an educational program for new Board members that includes extensive materials and meetings with key management. Additionally, all directors may periodically participate in continuing education programs designed to improve their ability to perform their duties.
E. Assessing Board and Committee Performance. The Board will conduct an annual self-evaluation of its performance and an evaluation of each of the Board committees’ performance to determine whether it and its committees are functioning effectively. The Board’s evaluation will be based, in part, on the Nominating and Governance Committee’s evaluation of the Board, and the self-evaluations conducted by each of the committees.
F. Assessing CEO Performance. The Board believes that the CEO’s performance should be evaluated annually and as a regular part of any decision with respect to CEO compensation. The Board has delegated the responsibility to the Compensation Committee to evaluate the CEO’s performance in the course of approving CEO salary, bonus, and long-term incentives such as stock and stock option awards. The Compensation Committee is responsible for setting annual and long-term performance goals for the CEO and for evaluating his or her performance against such goals. The Compensation Committee meets annually with the CEO to receive his or her recommendations concerning such goals and to evaluate his or her performance against the prior year’s goals.
G. Succession Planning. The Board plans for the succession to the positions of CEO and other executive officers of the Company. To assist the Board, the CEO will periodically provide the Compensation Committee with an assessment of the executive officers and their potential to succeed him or her. The results of this assessment will be reported to and discussed with the Board.
H. Business Conduct and Ethics. The Board believes that, in order to maintain the highest ethical, legal, and socially responsible conduct, the Company should maintain appropriate codes of ethics and business conduct that collectively will address: (i) conflicts of interest, (ii) corporate opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection and proper use of Company assets, (vi) compliance with laws, rules, and regulations, and (vii) such other matters as the Board deems appropriate. Such codes also collectively will include standards of conduct applicable to designated persons, including the CEO and the senior financial officers, that are reasonably designed to deter wrongdoing and to promote: (i) honest and ethical conduct, (ii) full, fair, accurate, timely, and understandable disclosure in the periodic reports, proxy statements, and other Company filings under the Securities Exchange Act, (iii) compliance with applicable governmental rules and regulations, (iv) the prompt internal reporting of violations of the codes and (v) accountability for adherence to the codes.
IV. Board Committees
A. Board Committees; Committee Charters. The Board has the authority to establish committees, temporary or permanent, as the Board deems advisable. Each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee will consist of three or more directors, each of whom will satisfy the independence requirements set forth herein and any additional requirements set forth in their respective charters and any other applicable listing or regulatory requirements. The Nominating and Governance Committee will recommend, and the Board will designate, a chairperson of each committee. Each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee will have appropriate written charters.
B. Committee Agendas. The chairperson of each committee, in consultation with the appropriate members of the committee and management, will oversee the development of his/her committee’s agenda.
C. Board Oversight; Committee Reports. The Board is responsible for overseeing the activities of its committees (except where such committees have sole authority to act pursuant to applicable law or a listing standard) and for ensuring that the committees are fulfilling their duties and responsibilities. The Board will regularly receive reports from its committees regarding their activities and will take such actions as it deems necessary and appropriate in response to these reports.
V. Other Principles
A. Disclosure and Review of Corporate Governance Principles. These Corporate Governance Guidelines will be made available on the Company’s website. The Nominating and Governance Committee will review these Corporate Governance Guidelines from time to time, but not less frequently than annually, and will report on the results of its review to the full Board.
B. Disclosure Policy. The Board believes that it is imperative that the Company promote full, fair, accurate, timely, and understandable disclosure in the periodic reports and other statements and reports required to be filed by the Company under the securities laws.