Baker Hughes 2004 Annual Report Download - page 22

CORPORATE฀GOVERNANCE
The฀Company’s฀Board฀of฀Directors฀believes฀that฀the฀pur-
pose฀of฀corporate฀governance฀is฀to฀maximize฀stockholder฀value฀
in฀a฀manner฀consistent฀with฀legal฀requirements฀and฀the฀high-
est฀standards฀of฀integrity.฀The฀Board฀has฀adopted฀and฀adheres฀
to฀corporate฀governance฀practices,฀which฀practices฀the฀Board฀
and฀management฀believe฀promote฀this฀purpose,฀are฀sound฀
and฀represent฀best฀practices.฀The฀Board฀continually฀reviews฀
these฀governance฀practices,฀Delaware฀law฀(the฀state฀in฀which฀
the฀Company฀is฀incorporated),฀the฀rules฀and฀listings฀standards฀
of฀the฀NYSE฀and฀SEC฀regulations,฀as฀well฀as฀best฀practices฀sug-
gested฀by฀recognized฀governance฀authorities.฀The฀Board฀has฀
established฀the฀Company’s฀Corporate฀Governance฀Guidelines฀
(“Governance฀Guidelines”)฀as฀the฀principles฀of฀conduct฀of฀the฀
Company’s฀business฀affairs฀to฀benefit฀its฀stockholders,฀which฀
guidelines฀conform฀to฀the฀NYSE฀corporate฀governance฀listing฀
standards฀and฀the฀rules฀promulgated฀by฀the฀SEC.฀The฀Gover-
nance฀Guidelines฀are฀posted฀under฀the฀“About฀Baker฀Hughes”฀
section฀of฀the฀Company’s฀website฀at฀www.bakerhughes.com฀
and฀are฀also฀available฀upon฀request฀to฀the฀Company’s฀Corpo-
rate฀Secretary.
Board฀of฀Directors
During฀the฀fiscal฀year฀ended฀December฀31,฀2004,฀the฀
Board฀of฀Directors฀held฀nine฀meetings฀and฀each฀director฀
attended฀at฀least฀75%฀of฀the฀total฀number฀of฀meetings฀of฀the฀
Company’s฀Board฀of฀Directors฀and฀respective฀Committees฀on฀
which฀he฀or฀she฀served,฀except฀for฀Messrs.฀Clarence฀P.฀Cazalot,฀
Jr.,฀and฀J.฀Larry฀Nichols,฀each฀of฀whom฀attended฀at฀least฀70%฀
of฀the฀total฀number฀of฀meetings฀of฀the฀Company’s฀Board฀of฀
Directors฀and฀respective฀Committees฀on฀which฀they฀served.฀In฀
fiscal฀year฀2004,฀each฀non-employee฀director฀was฀paid฀an฀
annual฀retainer฀of฀$60,000,฀with฀each฀Committee฀Chairman฀
receiving฀an฀additional฀annual฀fee฀of฀$10,000.฀Each฀member฀
of฀the฀Audit/Ethics฀Committee,฀including฀the฀Chairman,฀
received฀an฀additional฀annual฀retainer฀fee฀of฀$5,000.฀฀
Mr.฀Anthony฀G.฀Fernandes,฀received฀a฀one-time฀special฀payment฀
of฀$10,000฀for฀his฀services฀as฀Chairman฀of฀the฀Special฀Commit-
tee฀of฀the฀Board฀of฀Directors,฀which฀was฀formed฀in฀connection฀
with฀the฀succession฀of฀Mr.฀Michael฀E.฀Wiley.฀Each฀non-employee฀
director฀received฀annual฀non-retainer฀equity฀in฀a฀total฀amount฀of฀
$50,000,฀with฀$30,000฀issued฀in฀the฀form฀of฀restricted฀shares฀of฀
the฀Company’s฀Common฀Stock฀and฀$20,000฀issued฀in฀the฀form฀
of฀stock฀options฀in฀the฀Company’s฀Common฀Stock.฀Restricted฀
stock฀grants฀in฀the฀amount฀of฀$15,000฀and฀stock฀option฀grants฀
in฀the฀amount฀of฀$10,000฀were฀made฀in฀January฀and฀July฀of฀
2004.฀The฀restricted฀stock฀will฀vest฀upon฀retirement฀from฀the฀
Company’s฀Board฀of฀Directors,฀and฀the฀stock฀options฀vest฀one-
year฀from฀the฀date฀of฀grant.฀The฀Company฀previously฀provided฀
benefits฀under฀a฀Directors฀Retirement฀Plan,฀which฀plan฀remains฀
in฀effect฀until฀all฀benefits฀accrued฀thereunder฀are฀paid฀in฀accor-
dance฀with฀the฀current฀terms฀and฀conditions฀of฀that฀Plan.฀No฀
additional฀benefits฀have฀been฀accrued฀under฀the฀Plan฀since฀
December฀31,฀2001.
Effective฀as฀of฀January฀1,฀2005,฀each฀non-employee฀direc-
tor฀is฀paid฀an฀annual฀retainer฀of฀$60,000.฀The฀Audit/Ethics฀
Committee฀Chairman฀receives฀an฀additional฀annual฀retainer฀
of฀$20,000.฀Each฀of฀the฀other฀non-employee฀Committee฀
Chairmen฀receives฀an฀additional฀annual฀retainer฀of฀$15,000.฀
Each฀of฀the฀members฀of฀the฀Audit/Ethics฀Committee,฀exclud-
ing฀the฀Chairman,฀receives฀an฀additional฀annual฀retainer฀of฀
$10,000.฀Each฀of฀the฀members,฀excluding฀the฀Chairmen,฀of฀
the฀Compensation,฀Finance฀and฀Governance฀Committees฀
receives฀an฀additional฀annual฀retainer฀of฀$5,000.฀Each฀non-
employee฀director฀also฀receives฀annual฀non-retainer฀equity฀in฀
a฀total฀amount฀of฀$70,000,฀in฀the฀form฀of฀restricted฀shares฀of฀
the฀Company’s฀Common฀Stock฀with฀$35,000฀issued฀in฀January฀
and฀July฀of฀each฀year฀starting฀in฀January฀2005.฀
Director฀Independence
All฀members฀of฀the฀Board฀of฀Directors,฀other฀than฀the฀
Chairman฀and฀Chief฀Executive฀Officer,฀Mr.฀Deaton,฀satisfy฀
the฀independence฀requirements฀of฀the฀NYSE.฀In฀addition,฀the฀
Board฀has฀adopted฀a฀“Policy฀for฀Director฀Independence,฀Audit/
Ethics฀Committee฀Members฀and฀Audit฀Committee฀Financial฀
Expert”฀included฀as฀Exhibit฀C฀to฀the฀Governance฀Guidelines฀
and฀attached฀as฀Annex฀A฀to฀this฀Proxy฀Statement.฀Such฀Policy฀
supplements฀the฀independence฀requirements฀promulgated฀by฀
the฀NYSE.฀Directors฀who฀meet฀these฀standards฀are฀considered฀
to฀be฀“independent.”฀The฀Board฀has฀determined฀that฀the฀
nominees฀for฀election฀at฀this฀Annual฀Meeting,฀Messrs.฀Brady,฀
Cazalot,฀Fernandes฀and฀Nichols,฀as฀well฀as฀all฀other฀directors,฀
Ms.฀Gargalli฀and฀Messrs.฀Djerejian,฀Lash,฀McCall,฀Riley฀and฀
Watson,฀other฀than฀Mr.฀Deaton,฀meet฀these฀standards.
Regularly฀Scheduled฀Executive฀
Sessions฀of฀Non-Management฀Directors
The฀Governance฀Guidelines฀provide฀for฀executive฀sessions฀
of฀independent฀non-management฀directors฀to฀be฀held฀at฀every฀
regularly฀scheduled฀meeting฀of฀the฀Board฀of฀Directors.฀The฀
Governance฀Committee฀reviews฀and฀recommends฀to฀the฀Board฀
a฀director฀to฀serve฀as฀Lead฀Director฀during฀executive฀sessions.฀
Currently,฀Mr.฀Riley฀serves฀as฀Lead฀Director฀during฀executive฀
sessions฀of฀independent฀non-management฀directors.฀
Stockholders฀wishing฀to฀communicate฀directly฀with฀any฀
director,฀including฀the฀Lead฀Director฀or฀non-management฀
directors฀as฀a฀group,฀may฀do฀so฀as฀prescribed฀in฀the฀“Stock-
holder฀Communications฀with฀the฀Board฀of฀Directors”฀proce-
dures฀included฀as฀Exhibit฀E฀to฀the฀Governance฀Guidelines,฀
which฀are฀posted฀under฀the฀“About฀Baker฀Hughes”฀section฀of฀
the฀Company’s฀website฀at฀www.bakerhughes.com฀and฀are฀also฀
available฀upon฀request฀to฀the฀Company’s฀Corporate฀Secretary.
6฀฀฀฀Baker฀Hughes฀Incorporated