Baker Hughes 2009 Annual Report Download - page 66

56 Baker Hughes Incorporated
EXHIBIT C
BAKER HUGHES INCORPORATED POLICY FOR DIRECTOR
INDEPENDENCE, AUDIT/ETHICS COMMITTEE MEMBERS
AND AUDIT COMMITTEE FINANCIAL EXPERT
(As Amended October 23, 2008)
INDEPENDENCE
I. Introduction
A member of the Board of Directors (“Board”) of Baker
Hughes Incorporated (“Company”) shall be deemed indepen-
dent pursuant to this Policy of the Board, only if the Board
affirmatively determines that (1) such director meets the stan-
dards set forth in Section II below, and (2) the director has 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). In making its determination,
the Board shall broadly consider all relevant facts and circum-
stances. Material relationships can include commercial, indus-
trial, banking, consulting, legal, accounting, charitable and
familial relationships, among others.
Each director of the Company’s Audit/Ethics Committee,
Governance Committee and Compensation Committee must
be independent. A director who is a member of the Company’s
Audit/Ethics Committee is also required to meet the criteria
set forth below in Section III. These standards shall be imple-
mented by the Governance Committee with such modifica-
tions as it deems appropriate.
II. Standards for Director Independence
1. A director who is an employee, or whose immediate family
member is an executive officer, of the Company is not inde-
pendent until three years after the end of such employment
relationship. Employment as an interim Chairman or CEO
shall not disqualify a director from being considered inde-
pendent following that employment.
2. A director who receives, or whose immediate family mem-
ber receives, more than $120,000 per year in direct com-
pensation from the Company, other than director and
committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation
is not contingent in any way on continued service), is not
independent until three years after he or she ceases to
receive more than $120,000 per year in such compensation.
Compensation received by a director for former service as
an interim Chairman or CEO need not be considered in
determining independence under this test. Compensation
received by an immediate family member for service as a
non-executive employee of the Company need not be con-
sidered in determining independence under this test.
3. A director who is affiliated with or employed by a present
or former internal or external auditor of the Company is not
“independent” until three years after the end of the affilia-
tion or the employment or auditing relationship. A director,
however, is still considered independent if the director’s
immediate family member currently works for the company’s
auditor, as long as the immediate family member is not a
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)
6. The three year period referred to in paragraphs II.1 through
II.5 above will be applied consistent with the New York
Stock Exchange’s (“NYSE”) transition rules, which permit a
one year look-back period until November 4, 2004. Accord-
ingly, until November 4, 2004, a one year period, rather
than a three-year period, shall apply to the determination
of independence and the application of paragraphs
II.1 through II.5 above.
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 finan-
cial advisory services 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 con-
tributions 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.