LeapFrog 2012 Annual Report Download - page 109

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identified by these parties in their capacities as advisors to or leaders of LeapFrog, and how we plan
to address them. In addition, such reviews include evaluating the effectiveness of our risk
management processes and how to improve them if necessary.
• The full board of directors engages in extensive discussions with our executive team on a regular
basis concerning the risks facing the Company and how best to manage them. Board of directors
meetings generally include detailed discussion among board members, management and professional
advisors regarding material risks we face as an enterprise, including operational and financial risks.
Our management provides information to the board of directors regarding our approach to material
risks, both at meetings and in regular informal discussions, and takes extensive guidance from the
board of directors in decision-making with respect to such matters.
• The board of directors and audit committee generally review the disclosures in our Annual Report
on Form 10-K, including the risk factors. The audit committee reviews the Annual Report on Form
10-K in detail and also reviews and discusses with management the disclosures in our Quarterly
Reports on Form 10-Q and holds extensive discussions with management concerning whether all
material risks have been identified. The discussion also provides a mechanism by which board
members can ask questions of our executive team concerning material risks we face and how we
plan to manage them, and guide management’s actions with respect to such risk management.
• Our internal audit department and any internal audit consulting firm reports directly to the audit
committee of the board of directors on the adequacy and effectiveness of our system of internal
control and risk management systems. The audit committee guides management and board of
directors decisions concerning financial and operational matters based on the reports regarding risk
management priorities. This information is delivered to the audit committee during the regular
portion of the meeting and in a separate discussion among our audit committee members, internal
audit representatives and external auditors during executive sessions of the audit committee.
• Our compensation committee reviews our compensation philosophy and programs with our
management and external compensation consultants, and, in approving such programs, considers
whether and to what extent they have a potential to encourage excessive risk-taking by our
employees, including our executives. In addition, the committee monitors these programs to evaluate
on a regular basis whether the philosophy and programs provide an appropriate balance of incentives
and do not encourage employees to take unreasonable risks.
• Our nominating and corporate governance committee monitors the effectiveness of our corporate
governance guidelines. The committee also helps ensure that we are prepared to deal with risks and
crises by evaluating the individual capabilities of the directors, nominating directors with risk
management experience, recommending appropriate committee structure and composition and
considering the time each director and nominee has to devote to the Company. The committee also
works with our management to establish orientation programs for new directors and evaluates the
effectiveness of our board of directors and its committees.
17