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I. The Mission of the CME Board of Directors
IV. Chairman, Chief Executive Officer, President
CME Group Inc.
BOARD OF DIRECTORS
CORPORATE GOVERNANCE PRINCIPLES
The following Corporate Governance Principles have been adopted by the Board of Directors (the "Board") of CME Group Inc. (the "Company") to assist the Board in the exercise of its responsibilities. These Corporate Governance Principles reflect the Board's commitment to monitor the effectiveness of policy and decision making both at the Board and management level. These governance principles are not intended to change or interpret any Federal or state law or regulation, including the Delaware General Corporation Law, or the Certificate of Incorporation or By-laws of the Company. These governance principles are subject to modification from time to time by the Board.
I. THE MISSION OF THE CME BOARD OF DIRECTORS
The Board of Directors represents the shareholders' interest in perpetuating a successful business and optimizing long-term financial returns consistent with legal requirements and ethical standards. The Board is responsible for general oversight of the Company, including identifying and taking reasonable actions so that the Company is managed in a way designed to achieve this goal. The Board's principal oversight functions are to:
- Review, approve and monitor the Company's major strategic, financial and business activities, including declarations of dividends and major transactions;
- Review, approve and monitor the Company's annual budget;
- Review, monitor and take reasonable actions with respect to the Company's financial performance;
- Assess major risks and opportunities facing the Company and review options for addressing them;
- Select, evaluate and compensate the Chief Executive Officer and, if necessary, replace the Chief Executive Officer;
- Review and monitor plans for the succession of the Chief Executive Officer and other executive officers;
- Oversee the processes for maintaining the ethical conduct of the Company, including the integrity of its financial statements and its compliance with applicable laws and regulations; and
- Identify, evaluate and nominate candidates for Equity Director.
- Membership
- Size of Board
The Company's Certificate of Incorporation states that the size of the Board is 30 Directors, consisting of 20 directors that were designated by the Board of Directors of Chicago Mercantile Exchange Holdings Inc. (collectively, the "CME Directors") and 10 directors that were designated by the Vice Chairman of the Company (collectively, the "CBOT Directors"). The Governance Committee is responsible for making recommendations to the Board regarding the size of the Board, as appropriate. In the event the Board determines it is appropriate to change its size, it will seek shareholder approval of an amendment to the Certificate of Incorporation.
- Board Composition; Mix of Independent and Employee Directors.
At least a majority of the Directors will be independent directors ("Independent Directors") as required by the New York Stock Exchange ("NYSE") and The NASDAQ Global Select Market. ("NASDAQ"). The Board has adopted and disclosed categorical standards to assist it in determining a Director's independence. The expectation of the Board is that the number of Employee Directors should not exceed two.
- Board Membership Criteria.
The Board seeks Directors from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have the highest professional and personal ethics and values, the relevant expertise and experience required to offer advice and guidance to the Chief Executive Officer, the ability to make independent analytical inquiries, a commitment to enhancing long-term shareholder value, an understanding of the Company's business and should be willing to devote adequate time and effort to Board responsibilities. Each Board member is expected to ensure that his or her other commitments do not materially interfere with his or her service overall as a Director. The Nominating Committee shall take the foregoing criteria into account in connection with its recommendations for nomination of Directors to be elected by the Class A and Class B shareholders voting together as a class at the Company's Annual Meeting of Shareholders (the "Equity Directors"). In addition, in determining whether to recommend an Equity Director for re-election, the Nominating Committee also considers the Director's past performance, including attendance at meetings and participation and contributions to the activities of the Board as well as the Director's ability to make contributions after any significant change in circumstances (including changes in employment or professional status).
- Determination of "Independent" Directors.
The Board shall review annually the relationships that each Director has with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). Following such annual review, only those Directors who the Board affirmatively determines have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) will be considered Independent Directors, subject to additional qualifications prescribed by NYSE and/or NASDAQ listing standards or under applicable law. The Board has adopted and disclosed categorical standards to assist it in determining director independence. Each Director shall notify the Executive Chairman of the Board or the Chairman of the Governance Committee and the Corporate Secretary as soon as practicable of any event, situation or condition that may affect the Board's evaluation of his or her independence. If warranted, following the receipt of such information, the Governance Committee shall make a recommendation to the Board as to such Director's independence.
- Selection of New Directors.
The Executive Chairman shall recommend and the Board shall appoint a Nominating Committee in accordance with Article X of the Company's Bylaws to review the qualifications and backgrounds of potential directors and to recommend to the Board the slate of Equity Director nominees. The Nominating Committee will consider candidates proposed by members of the Committee, other Directors, management and shareholders. All candidates will be evaluated in the same manner, subject to the restrictions set forth in Article X of the Bylaws. Subject to the requirements set forth in Article X of the Bylaws, the Board shall be responsible for nominating persons for election to the Board and for filling vacancies on the Board that may occur between annual meetings of shareholders.
- Extending Invitation to New Board Member.
The Executive Chairman of the Board should extend the invitation to potential candidates to stand for election to the Board.
- Retirement.
- Term Limits.
The Board does not favor term limits for Directors, but believes that it is important to monitor overall Board performance. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, term limits risk losing the contribution of Directors who have been able to develop valuable insight into the Company and its operations and, therefore, provide an important contribution to the Board as a whole. The Board believes that, as an alternative to strict term limits, it can ensure that the Board continues to evolve and adopt new viewpoints through the evaluation and nomination process described in these guidelines.
- Retirement Policy.
The Board does not favor a mandatory retirement age for Directors.
- Retirement Policy – Employee Directors.
Employee Directors should resign from the Board upon their resignation, removal or retirement as an officer of the Company.
- Non-Employee Directors Changing Their Present Job Responsibility.
The Board does not believe that non-employee Directors who retire or change from the position they held when they came on the Board should necessarily leave the Board. Promptly following such event, the Director must notify the Executive Chairman, who shall review the continued appropriateness of the affected Director remaining on the Board under the circumstances and shall make a recommendation to the Board as to whether the Director should remain on the Board. The affected Director is expected to act in accordance with the Board's decision following such review. The Nominating Committee, in accordance with Article X, is responsible for recommending a replacement in the event that any such resignation is accepted by the Board.
- Other Board Commitments.
Non-employee directors may not serve on the board of directors of more than six public companies. Non-employee Directors should advise the Executive Chairman of the Board in advance of accepting an invitation to serve on another board.
Employee Directors should not accept an invitation to serve on another board without prior approval of the Executive Chairman of the Board.
- Term Limits.
- Nomination and Election of Chairman and Vice Chairman.
- Nomination and Election.
In accordance with the Company's By-laws, the Board shall have a Chairman and a Vice Chairman. Terrence A. Duffy shall serve as Chairman of the Board of Directors until the 2010 Annual Meeting of Shareholders. Charles P. Carey shall serve as Vice Chairman of the Board until the 2010 Annual Meeting of Shareholders. Any vacancy in the position of the Chairman during such time shall be filled by a majority of the CME Directors then in office and any vacancy in the position of Vice Chairman during such time shall be filled by a majority of the CBOT Directors then in office. The Board of Directors shall also determine whether the Chairman should hold the title of Executive Chairman.
- Employee Director Participation in Board Nomination and Election Processes.
It is the policy of the Board that Employee Directors should not participate in the nomination or voting process for the Chairman or the Vice Chairman.
- Nomination and Election.
- Size of Board
- Conduct
- Board Meetings.
- Selection of Agenda Items.
The Executive Chairman, in consultation with the Vice Chairman, the Chief Executive Officer, the President, as well as the Corporate Secretary, should establish the agenda for Board meetings. Any Director may request that an item be included on any meeting agenda.
- Attendance.
Directors are expected to prepare for, attend, and participate in all Board and applicable committee meetings. Directors should use their best efforts to attend Board and committee meetings in person. When necessary, a director who is unable to attend in person may attend by telephone if appropriate under the circumstances. A Director who is unable to attend a meeting (which it is understood will occur on occasion) or who wishes to participate telephonically is expected to notify the Corporate Secretary or the Chairman in advance of such meeting. Directors should review material distributed in advance of such meetings.
- Distribution of Materials; Board Presentations.
It is important for Directors to have materials on topics to be discussed sufficiently in advance of the meeting date and for Directors to be kept abreast of developments between Board meetings. The Company regularly informs Directors of internal and competitive developments and shall distribute written materials for use at Board meetings sufficiently in advance of meetings to permit meaningful review.
Directors can generally expect to receive summaries/slides of presentations several business days in advance of a meeting to enable them to prepare for the meeting. 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. In such cases, the materials will subsequently be made available for inspection by Directors through the Corporate Secretary.
- Attendance of Non-Directors.
The Board believes that attendance of key executive officers augments the meeting process. Members of the Company's senior management team and other CME employees may attend Board meetings at the invitation of the Executive Chairman, the Vice Chairman, the Chief Executive Officer or the President.
The Chief Executive Officer and the President encourage the management team to respond to questions posed by Directors relating to their areas of expertise. Such persons shall not attend Executive Sessions either of the Board or any Committee thereof, unless requested. The Board also believes that executive officers of the Company and its subsidiaries can assist the Board with its deliberations and provide critical insights and analyses, particularly when the Board hears presentations on the business plan for the upcoming year. Attendance of such officers allows the most knowledgeable and accountable executives to communicate directly with the Board. It also provides the Board direct access to individuals critical to the Company's succession planning.
- Participation in Strategic Issues Discussions.
The Board should engage in discussions on strategic issues and ensure that there is sufficient time devoted to Director interchange on these subjects.
- Number of Meetings.
The Board of Directors shall hold a minimum of six meetings per year.
- Selection of Agenda Items.
- Ethics and Conflicts of Interest.
The Governance Committee and the Board of Directors have adopted a Conflict of Interest Policy. The Conflict of Interest Policy incorporates various provisions of Delaware General Corporation Law and other standards adopted by the Company to insure that Board and committee decisions are not impacted by 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.
When faced with a situation involving a potential conflict of interest, Directors are encouraged to seek advice from the General Counsel or from outside counsel designated by the General Counsel.
Directors are also expected to act in compliance with the Company's Board of Directors Code of Ethics and its Securities Law Compliance Policy.
- Share Ownership.
The Board has approved the following stock ownership guidelines for members of the Board of Directors as follows:
- Executive Chairman: ownership of stock equal to four (4) times base pay to be achieved within five (5) years
- Non-executive Directors: ownership of stock equal to $100,000 to be achieved within three (3) years
Only shares of stock owned (excluding stock options and unvested restricted stock) will be applied towards satisfaction of the guidelines. The Compensation Committee will oversee compliance with the foregoing guidelines on an annual basis and provide a report to the Board of Directors.
- Board Compensation.
An Employee Director shall not receive additional compensation for service as a Director.
The Company believes that compensation for non-employee Directors should be competitive. The Compensation Committee will periodically review the level and form of the Company's director compensation, including how such compensation relates to director compensation of companies of comparable size and complexity. The Governance Committee shall periodically consider the impact of compensation on Director independence. Changes to director compensation will be proposed to the full Board for consideration.
Director's fees (including stipends and committee fees in the form of cash or equity) are the only compensation a member of the Audit Committee may receive from the Company.
- Executive Sessions and Meetings of Independent Directors.
The Independent Directors shall meet in Executive Session (without management and non-independent Directors) on a quarterly basis. These Executive Sessions shall be chaired by the Chairman of the Governance Committee who is an Independent Director or if he or she is not present, another Independent Director chosen by the Board. The Chairman of the Governance Committee or the Independent Director chairing the Executive Session may, at his or her discretion, invite the Executive Chairman, other non-independent Directors, including the Chief Executive Officer, or other members of management to participate in a portion of such Executive Sessions, as appropriate.
Shareholders who wish to communicate directly with the non-employee Directors may do so via directors@cme.com or by writing to the non-employee Directors in care of the Corporate Secretary at Chicago Mercantile Exchange Holdings Inc., 20 South Wacker Drive, Chicago, Illinois 60606.
- Board Access to Senior Management and Independent Advisors.
Directors should have complete and open access to members of management and, as appropriate, to the Company's outside advisors. Directors shall coordinate such access through the Executive Chairman, the Chief Executive Officer or the President. Directors will use their judgment to assure that this access is not distracting to the business operation of the Company. In addition, the Chief Executive Officer or the President shall invite key employees to attend Board sessions at which such persons can meaningfully contribute to Board discussion.
The Board shall have the right at any time to retain independent outside financial, legal or other advisors. Subject to Board approval, the Board Committees may retain independent outside financial, legal or other advisors. Notwithstanding the foregoing, (i) the Audit Committee may in its sole discretion retain such advisors as it determines is necessary to carry out its duties (ii) the Compensation Committee may in its sole discretion retain any compensation consulting firm as it determines is necessary to fulfill its duties and (iii) the Nominating Committee may in its sole discretion retain any search firm used to identify Director candidates.
- Board Interaction with Institutional Investors, Media, Peers, Customers, etc.
The Executive Chairman, the Vice Chairman, the Chief Executive Officer, the President and the Chief Financial Officer, and such other persons as they may designate from time to time, are authorized to speak on behalf of the Company. Individual Directors may, from time to time, meet with or communicate with various constituencies that are involved with the Company. It is expected that Directors would do this with the knowledge of management and, in most instances, at the request of management. Directors are encouraged to refer all inquiries from institutional investors, analysts or the press to the Chief Executive Officer, the President or their designee(s).
Directors are expected to comply with the Company's External Communications and Disclosure Policy.
- Confidentiality of Information.
In order to facilitate open discussion, confidentiality of information and deliberations is an imperative. Each Director has an affirmative duty to safeguard the confidentiality of information provided to the Board.
- Board Orientation and Continuing Education.
The Company shall provide new Directors with a director orientation program to familiarize such Directors with, among other things, the Company's business, strategic plans, significant financial, accounting and risk management issues, compliance programs, conflicts policies, code of business conduct and ethics, corporate governance principles, principal officers, internal auditors and independent auditors. Each Director is encouraged to participate in continuing education programs as necessary or appropriate to assist him or her in performing his or her responsibilities as a director. The Corporate Secretary will periodically advise Directors of available educational opportunities.
- Board Evaluations.
The Governance Committee will administer an annual self-evaluation of the Board. The Committee shall be responsible for establishing the evaluation criteria, implementing the process for such evaluation, as well as making appropriate recommendations for improving performance. This self-evaluation will focus on the performance of the Board and its Committees as a whole, concentrating on areas where performance might be improved. The purpose of the review is to improve the performance of the Board as a unit, and not to target the performance of any individual Board member.
- Board Meetings.
- Board Committees.
The Board currently has the following Board-level Committees: Audit; Board Steering; Compensation; Executive; Governance; Marketing and Public Relations Advisory; Nominating; and Market Regulation Oversight. The Board may want, from time to time, to form a new committee or disband a current committee depending on circumstances. In addition, the Board may determine to form ad hoc committees from time to time, and determine the composition and areas of competence of such committees.
The Audit, Compensation, Governance, Nominating and Market Regulation Oversight Committees shall consist solely of Independent Directors. In addition, the Market Regulation Oversight Committee shall consist solely of Directors who do not have any relationship with the Company by way of being a member of the Exchange or an employee of a futures commission merchant or clearing firm.
- Committee Assignments and Chairs.
The Executive Chairman shall be responsible for making recommendations to the Board with respect to the assignment of Directors to various committees, including the designation of Chair. After reviewing the Executive Chairman's recommendations, the Board shall be responsible for appointing the members to the committees.
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 and that Directors and Chairs should be rotated only if a change is likely to increase Committee performance or facilitate Committee work.
- Frequency and Length of Board Committee Meetings.
Committee chairs should regularly consult with the Executive Chairman, the Chief Executive Officer or the President to obtain their insights and to optimize Committee performance. The Committee Chairs, in consultation with the Executive Chairman, the Chief Executive Officer or the President, should establish the frequency and length of Committee meetings.
- Development of Committee Agenda.
The Committee Chairs, working with the Executive Chairman, the Chief Executive Officer and/or the President, should establish Committee agendas for the year. All standing Committees should meet regularly during the year and receive reports from Company personnel on Company developments affecting the Committee's work.
IV. CHAIRMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT
- Separate Positions of Chairman and Chief Executive Officer.
The Company's By-Laws permit the Chairman and the Chief Executive Officer to be the same person; however, the Board believes that these roles and their attendant responsibilities should be separate and fulfilled by separate individuals. Additionally, the Board believes that under its current circumstances the Board's Chairman serves in an executive role and should hold the title of Executive Chairman.
- Selection of the Chief Executive Officer and the President.
The Board shall be responsible for identifying potential candidates for, and selecting, the Chief Executive Officer and the President. In identifying potential candidates for, and selecting, the Chief Executive Officer and the President, the Board shall consider, among other things, a candidate's experience, understanding of the Company's business, leadership qualities, knowledge, skills, expertise, integrity, and reputation in the business community. When it is appropriate or necessary, it is the Board's responsibility to remove the Chief Executive Officer or the President and select a successor.
- Formal Evaluations of the Office of the CEO.
The Board in an Executive Session shall, on an annual basis, assess the performance of the Chief Executive Officer and the President in relation to their established goals. The Board shall also review the qualitative performance of the Chief Executive Officer in an Executive Session in accordance with procedures recommended by the Governance Committee.
- Succession Planning.
Senior management should compile and evaluate a succession plan for their areas of responsibility which should be reviewed with the Chief Executive Officer and the President.
The Board reviews and monitors plans for the succession of the Chief Executive Officer and other executive officers. To assist the Board, the Chief Executive Officer and the President shall provide a report to the Board in an Executive Session on an annual basis on succession planning for all senior officers with an assessment of senior managers and their potential to succeed the Chief Executive Officer and other senior management positions. There should also be available, on a continuing basis, the Executive Chairman's and the Chief Executive Officer's recommendation as a successor should the Chief Executive Officer unexpectedly become unable to serve
- Management Development.
There should be an annual report to the Board by the Chief Executive Officer and the President on the Company's program for management development. This report should be given to the Board at the same time as the succession planning report noted previously.
- Attendance at Annual Meeting of Shareholders.
Directors are also strongly encouraged to attend the Annual Meeting of Shareholders.
- Confidential Voting.
It is the policy of the Company that individual shareholder voting be confidential.
- Cumulative Voting.
The Board strongly supports the "one share/one vote" concept and opposes cumulative voting. It opposes the ability of a single investor or group of investors to band together to achieve a goal, such as the election of a Director, which is not supported by a majority of the Company's shareholders.
- Representation of Shareholder Interests.
The Board of Directors believes that all directors represent the balanced interests of the Company's shareholders as a whole.
Adopted November 2002; Last revised September 11, 2007
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| Trade Date | 05/09/08 | 05/08/08 |
| Est. Electronic | 6,524,256 | 8,968,777 |
| Est. Open Outcry | 1,506,206 | 2,054,304 |
| Est. Totals | 8,030,462 | 11,023,081 |
| NYMEX on Globex | 1,088,929 | 1,217,235 |
Delayed at least 30-35 minutes