Baker Hughes 2010 Annual Report Download - page 61

2 0 11 P r o x y S t a t e m e n t 49
partner of the company’s auditor or is not personally involved
(and has not been personally involved for the past three
years) in the company’s audit.
4. A director who is employed, or whose immediate family
member is employed, as an executive officer of another
company where any of the Company’s present executives
serve on that company’s compensation committee is not
“independent” until three years after the end of such
service or the employment relationship.
5. A director who is an executive officer or an employee, or
whose immediate family member is an executive officer, of
a company that makes payments to, or receives payments
from, the Company for property or services in an amount
which, in any single fiscal year, exceeds the greater of
$1 million, or 2% of the consolidated gross revenues of
such other company employing such executive officer or
employee, is not “independent” until three years after
falling below such threshold.(1)
III. Standards for Audit/Ethics Committee Members
1. A director who is a member of the Audit/Ethics Committee
other than in his or her capacity as a member of the Audit/
Ethics Committee, the Board, or any other Board committee,
may not accept directly or indirectly any consulting, advisory,
or other compensatory fee from the Company or any sub-
sidiary thereof, provided that, unless the rules of the NYSE
provide otherwise, compensatory fees do not include 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 con-
tingent in any way on continued service).
Indirect acceptance of compensatory payments includes:
(1) payments to spouses, minor children or stepchildren, or
children or stepchildren sharing a household with the mem-
ber; or (2) payments accepted by an entity in which such
member is a partner, member, officer such as a managing
director occupying a comparable position or executive officer,
or occupies a similar position and which provides accounting,
consulting, legal, investment banking or financial advisory
services to the Company.
2. A director, who is a member of the Audit/Ethics Committee
may not, other than in his or her capacity as a member of
the Audit/Ethics Committee, the Board, or any other Board
committee, be an affiliated person of the Company or any
subsidiary thereof.
3. A member of the Audit/Ethics Committee may not simul-
taneously serve on the audit committees of more than
two other public companies in addition to the Company.
(1) In applying this test, both the payments and the consolidated gross revenues
to be measured shall be those reported in the last completed fiscal year. The
look-back provision for this test applies solely to the financial relationship
between the Company and the director or immediate family member’s cur-
rent employer; the Company need not consider former employment of the
director or immediate family member. Charitable organizations shall not be
considered “companies” for purposes of this test, provided however that
the Company shall disclose in its annual proxy statement any charitable
contributions made by the Company to any charitable organization in which
a director serves as an executive officer if, within the preceding three years,
contributions in any single fiscal year exceeded the greater of $1 million, or
2% of such charitable organization’s consolidated gross revenues.
IV. Definitions
An “immediate family member” includes a person’s spouse,
parents, children, siblings, mothers and fathers-in-law, sons
and daughters-in-law, brothers and sisters-in-law, and anyone
(other than domestic employees) who shares such person’s
household. When considering the application of the three year
period referred to in each of paragraphs II.1 through II.5 above,
the Company need not consider individuals who are no longer
immediate family members as a result of legal separation or
divorce, or those who have died or become incapacitated.
The “Company” includes any subsidiary in a consolidated
group with the Company.
AUDIT/ETHICS COMMITTEE
FINANCIAL EXPERT QUALIFICATIONS
The Company believes that it is desirable that one or more
members of the Audit/Ethics Committee possess such qualities
and skills such that they qualify as an Audit Committee Finan-
cial Expert as defined by the Securities and Exchange Commis-
sion (“SEC”).
1. The SEC rules define an Audit Committee Financial Expert
as a director who has the following attributes:
(a) An understanding of generally accepted accounting
principles and financial statements;
(b) The ability to assess the general application of such
principles in connection with the accounting for
estimates, accruals and reserves;
(c) Experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally com-
parable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant’s
financial statements, or experience actively supervising
one or more persons engaged in such activities;
(d) An understanding of internal controls and procedures
for financial reporting; and
(e) An understanding of audit committee functions.
2. Under SEC rules, a director must have acquired such
attributes through any one or more of the following:
(a) Education and experience as a principal financial officer,
principal accounting officer, controller, public accountant
or auditor or experience in one or more positions that
involve the performance of similar functions;
(b) Experience actively supervising a principal financial officer,
principal accounting officer, controller, public accountant,
auditor or person performing similar functions;
(c) Experience overseeing or assessing the performance of
companies or public accountants with respect to the prep-
aration, auditing or evaluation of financial statements; or
(d) Other relevant experience.