Governance Commitment in Action
Colgate's Corporate Governance Commitment
Colgate's Board of Directors believes that good corporate governance accompanies and greatly aids our long-term business success. This success has been the
direct result of Colgate's key business strategies, including its focus on core product categories and global brands, people development programs
emphasizing "pay for performance" and the highest business standards. Colgate's Board has been at the center of these key strategies, helping to design and
implement them, and seeing that they guide the Company's operations.
The Board believes that the Company has consistently been at the forefront of good corporate governance. Reflecting its commitment to continuous
improvement, the Board reviews its governance practices on an ongoing basis to ensure that they promote shareholder value.
Board Independence, Expertise and Accountability
Strict Director Independence Standards.
With the exception of Ian Cook, Colgate's President and Chief Executive Officer (the "CEO"), Colgate's Board is composed entirely of independent
directors. All members of the Audit Committee, the Finance Committee, the Nominating and Corporate Governance Committee (the "Governance Committee")
and the Board's compensation committee, known as the Personnel and Organization Committee (the "P&O Committee"), are independent directors. The
Board believes that an independent director should be free of any relationship with Colgate or its senior management that may in fact or in appearance
impair the director's ability to make independent judgments or compromise the director's objectivity and loyalty to stockholders. Based on this
principle, the Board adopted director independence standards which outline the types of relationships, both personal and professional, between
directors and the Company, its senior management and other directors that, if present, would preclude a finding of independence. These standards, which
are stricter than those required by the listing standards of the NYSE, guide the Board's annual affirmative determinations of independence.
Click here to view Colgate's Director Independence Standards
Executive Sessions/Lead Director.
The independent directors of the Board are scheduled to meet in executive session, without the CEO present, at every regularly scheduled Board meeting.
The Lead Director chairs these sessions. The lead director serves a three-year term and is selected by the independent directors following nomination
by the Governance Committee. Stephen I. Sadove currently is serving as Lead Director. Colgate's Corporate Governance Guidelines include a description
of the responsibilities of the Lead Director.
Click here to view Colgate's Corporate Governance Guidelines.
All Directors Elected Annually by Majority Vote.
Colgate's Board is accountable to stockholders through the annual election of all directors by majority vote. Colgate has never had a staggered board.
Under Colgate's by-laws, in uncontested elections for directors, if a nominee for director who is an incumbent director is not re-elected by a majority
of the votes cast, the by-laws require the director to promptly tender his or her resignation to the Board. The Governance Committee will then consider
the resignation and make a recommendation to the Board.
Audit Committee Independence and Financial Literacy.
All members of the Audit Committee are independent directors. The Board has also determined that all members of the Audit Committee are "audit
committee financial experts," as that term is defined in the rules of the Securities and Exchange Commission (the "SEC"), and that they meet the
independence and financial literacy requirements of the NYSE.
Board Experience and Diversity.
As its present directors exemplify, Colgate values experience in the fields of business, education and public service, international experience, strong
moral and ethical character and diversity. Colgate's Independent Board Candidate Qualifications describe the criteria for Board membership.
Click here to view Colgate's Independent Board Candidate Qualifications.
Directors are Stockholders
Director Compensation in Stock.
On average, 76 percent of a director's compensation is paid in Colgate stock. Board members also receive stock options each year.
Significant Levels of Director Stock Ownership.
Board members own significant amounts of Colgate stock. Under the Company's stock ownership guidelines, independent directors are required to own stock
equal in value to at least five times their annual stock fee. For more information on director stock ownership, please see the table included in "Stock
Ownership of Directors and Executive Officers" in Colgate's 2015 Proxy Statement.
Established Policies Guide Governance and Business Integrity
Corporate Governance Guidelines.
First formalized in 1996, the corporate governance guidelines reflect the Board's views and Company policy regarding significant corporate governance
issues. As part of its ongoing review of best practices in corporate governance, the Board periodically updates the guidelines. The Board believes the
guidelines reflect best practices in corporate governance.
Click here to view Colgate's Corporate Governance Guidelines
Code of Conduct.
The Board sponsors the Company's Code of Conduct and Business Practices Guidelines, both of which promote the highest ethical standards in all of the
Company's business dealings. The Global Ethics and Compliance function, headed by a corporate officer who reports to the Audit Committee, oversees
compliance with these standards and periodically reviews and updates the Code of Conduct and Business Practices Guidelines. The Code of Conduct applies
to the Company's directors and employees, including the CEO, the Chief Financial Officer and the chief accounting officer (Corporate Controller), and
satisfies the SEC's requirements for a code of ethics for senior financial officers.
Click here to view Colgate's Code of Conduct
Business Integrity Initiatives.
The Board supports the Company's efforts to communicate effectively its commitment to ethical business practices, which are led by the Company's Global
Ethics and Compliance function. To further this goal, all of the Company's approximately 37,700 employees worldwide are required to certify annually
that they and any people they supervise understand and comply with the Code of Conduct. In addition, the Company's executives and key managers
worldwide participate in management training programs regarding the Code of Conduct, Colgate's values, effective leadership and the applicable laws and
regulations that govern Colgate's business practices around the world. Colgate directors also annually certify their compliance with the Code of
As set forth in the Company's Code of Conduct and Business Practices Guidelines, the Company has a longstanding policy against making contributions to
any political party or candidate. In addition, each year, the Company advises its U.S. trade associations of this policy to prevent the use of Company
dues or contributions for any such expenditures and requests that such associations which receive at least $10,000 annually from the Company confirm
their compliance with this policy.
Colgate places a high priority on operating in a responsible and respectful manner, with a focus on three key areas—People, Performance and Planet. To
provide incentives for Colgate people to integrate sustainability into business strategy and operations, Colgate's global sustainability initiatives
have been added to the individual objectives used to determine the compensation for many of Colgate's senior managers.
Click here to view Colgate's Sustainability Report
Restrictions on Hiring Audit Firm Employees.
To bolster the independence of Colgate's independent registered public accounting firm and the integrity of Colgate's internal financial reporting and
audit processes, Colgate has a longstanding policy prohibiting the Company from hiring any partners or managers engaged in an audit of the Company or
any employees engaged in the corporate portion of an audit of the Company from PricewaterhouseCoopers LLP, Colgate's independent registered public
accounting firm, within five years of the end of their engagement without the approval of the Audit Committee.
To further ensure that the interests of Colgate's directors, officers and senior managers are aligned with those of Colgate's stockholders, in 2011,
the Board adopted a hedging policy that prohibits Colgate's directors, officers and employees who receive stock-based compensation from engaging in
transactions to hedge against declines in the value of Colgate's stock. The policy also discourages all other employees from entering into such
In 2012, the Board adopted a clawback policy that permits Colgate to recoup incentive awards made to Colgate's executive officers if the financial
results on which such awards were based are subsequently restated and the executive officer's intentional misconduct contributed to the restatement.
To prevent forced sales of Colgate stock by Colgate's directors and officers, in 2013, the Board adopted a policy that prohibits Colgate's directors
and officers from pledging Colgate stock.
Board Focused on Key Business Priorities
Strategic Role of Board.
The Board plays a major role in overseeing Colgate's business strategy. It reviews the Company's strategic plan and receives detailed briefings
throughout the year on critical aspects of its implementation. These include performance reviews of operating divisions and major subsidiaries, product
category reviews, presentations regarding research and development initiatives and reports from specific disciplines such as customer development,
supply chain and information technology.
Succession Planning and People Development.
The Board has extensive involvement in this area with special focus on CEO succession. It discusses potential successors to key executives and examines
backgrounds, capabilities and appropriate developmental assignments. Regular reviews of professional training programs, benefit programs and career
development processes assist the Board in guiding the Company's people development initiatives and efforts to gain a competitive recruitment and
Direct Access to Management
Management Participation at Board Meetings.
Key senior managers regularly attend Board meetings. Topics are presented to the Board by the members of management who are most knowledgeable about
the issue at hand irrespective of seniority. An open and informal environment allows dialogue to develop between directors and management, which often
produces new ideas and areas of focus.
Direct Access to Management.
The Board's direct access to management continues outside the boardroom during discussions with corporate officers, division presidents and other
employees, often without the CEO present. Directors are invited to, and often do, contact senior managers directly with questions and suggestions.
Ensuring Management Accountability
Colgate has linked the pay of its managers and employees at all levels to the Company's performance. As described in greater detail in the Compensation
Discussion and Analysis in Colgate's 2015 Proxy Statement, the P&O Committee adheres to this pay-for-performance philosophy, and stock-based
incentive awards are a significant component of senior management's overall compensation.
CEO Evaluation Process.
The Board's evaluation of the CEO is a formal annual process. The CEO is evaluated against the goals set each year, including both objective measures
(such as earnings per share) and subjective criteria reflective of the Company's strategy and core values. As part of the overall evaluation process,
the Board meets informally with the CEO to give feedback on a regular basis.
Board Practices Promote Effective Oversight
Designed to maximize board effectiveness, Colgate's by-laws fix the number of directors between seven and 12. Ten directors currently serve on the
To ensure that directors are able to devote sufficient time to properly discharge their duties, Colgate's corporate governance guidelines provide that
directors should not serve on more than three other corporate boards.
On average, the directors attended 98% of the meetings of the Board and the committees on which they served in 2014. No director attended less than 95%
of these meetings.
Continuous Improvement through Evaluation and Education
Board Self-Evaluation Process.
Each year, the Board evaluates its performance against criteria that it has determined are important to its success. One or more of the following
topics may be considered during such evaluations: financial oversight, succession planning, executive compensation, strategic planning, corporate
governance, ethics and compliance and Board structure and role. The Board then considers the results of the evaluation and identifies steps to enhance
Board Committee Evaluations.
Self-evaluations of the Board's committees are also conducted annually. The results of these evaluations are reviewed with the Board, and further
enhancements are agreed for each committee.
Individual Director Evaluations.
Complementing the Board and committee self-evaluations, the Board has also developed an individual director evaluation process to be used every few
years. Using director effectiveness criteria selected by the Board following a review of external best practices, directors evaluate their peers and
the resulting feedback is shared with individual directors by an external facilitator. This process, which the Board most recently conducted in 2013,
enables the directors to provide valuable feedback to one another and identifies areas of strength and areas of focus for enhanced effectiveness.
Ongoing Director Education.
Periodically, Colgate's directors participate in Colgate-specific director education programs. These sessions are led by expert external faculty with
relevant governance, legal and business experience. In addition, outside experts periodically present to the Board on various subjects. During 2014,
such subjects included recent corporate governance developments, macroeconomic trends and cybersecurity. From time to time, Colgate's directors also
visit Colgate operations around the world, deepening their understanding of Colgate's business. In 2014, they visited commercial and manufacturing
operations in Mexico.