KNIGHT TRANSPORTATION, INC.
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors has adopted these Corporate Governance Guidelines (the "Guidelines") to further its goal of providing effective governance of the Company’s business and affairs for the long-term benefit of the Company’s shareholders. These Guidelines are reviewed periodically by the Nominating and Corporate Governance Committee and revised as appropriate to ensure the effective functioning of the Board of Directors and high quality corporate governance.
1. Director Responsibilities and Functions of the Board. The fundamental responsibility of the Board of Directors is to promote the best interests of the Company and its shareholders by overseeing the management of the Company’s business and affairs. In doing so, Board members have two basic legal obligations to the Company and its shareholders: (a) a duty of care, which generally requires that Board members exercise appropriate diligence in making decisions and in overseeing management of the Company, and (b) a duty of loyalty, which generally requires that Board members make decisions based on the best interests of the Company and its shareholders.
2. Other Board Functions. The Board also performs a number of specific functions, including:
a. Selecting, evaluating and, through the Compensation Committee of the Board, compensating the Company’s Chief Executive Officer ("CEO") and overseeing CEO succession planning;
b. Providing counsel on and oversight of the selection, evaluation, retention and compensation of qualified senior executives;
c. Reviewing, approving and monitoring important financial and business decisions and corporate actions;
d. Advising management on significant issues facing the Company;
e. Nominating qualified directors for service on the Board;
f. Ensuring processes are in place for maintaining effective corporate governance practices;
g. Planning for management succession; and
h. Review and establish long term corporate goals and strategy.
3. Board Meetings. It is expected that each director will make every effort to attend each Board meeting, and each meeting of any committee on which he or she sits, as well as each annual meeting of the Company’s shareholders. An agenda for each Board meeting and briefing materials will, to the extent practicable in light of the timing of the matters that require Board attention, be distributed to each director prior to the meeting.
4. Director Qualification Standards. The following standards have been adopted by the Board of Directors:
a. Independent Directors. The Board shall have a majority of independent directors, as that term is defined in Section 303A Corporate Governance Standards of the NYSE listing standards and applicable law. No director will be considered independent if he or she has a material relationship with the Company, as determined by the Board. The Board affirmatively determines annually, based on the recommendations and findings of the Nominating and Corporate Governance Committee, the independence of each director.
b. Limitation on Number of Other Directorships. Service as a member of the Company’s Board of Directors is significant in terms of both time and responsibility. Accordingly, each Board member is encouraged to limit the number of other boards on which he or she serves and be mindful of his or her other existing and planned future commitments, so that such other directorships and commitments do not materially interfere with his or her service as an effective and active member of the Company’s Board. Specifically, a member of the Board of Directors may serve on no more than five (5) other corporate boards, including the Company’s Board of Directors. The Chief Executive Officer may serve on no more than two (2) other corporate boards, excluding the Company’s Board.
c. Size of Board. The Company’s Bylaws provide that the Board shall consist of not fewer than seven or more than eleven members (with the exact number to be determined by the Board), divided into three classes if there are more than nine members (as nearly equal in number as possible) having staggered terms of three years each.
d. Director Tenure. The Board believes it should not expressly limit a director’s tenure on the Board, or discourage experience. The Company values the contribution of directors who over time have developed increasing insight into the Company and its operations and therefore provide an increasing contribution to the Board as a whole. The Board’s Nominating and Corporate Governance Committee reviews each director’s continuation on the Board every three years, at the time when each director is up for reelection by the Company’s shareholders.
e. Director Retirement. There is no mandatory retirement age for directors. The Board, or the Nominating and Governance Committee, will periodically review the ability of a director to continue to contribute to the Board and to carry out his or her responsibilities.
f. Director Succession. The Board of Directors has a duty to the Company’s shareholders to identify the most qualified candidates to serve as Board members. The Board is responsible for recommending director candidates for election by the shareholders and for electing directors to fill vacancies or newly created directorships. The Board has delegated the screening and evaluation process for director candidates to the Nominating and Corporate Governance Committee, which will identify, evaluate and recruit highly qualified director candidates and recommend them to the Board.
5. Selection of Director Candidates. The Board’s Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on a periodic basis, the requisite skills and characteristics of potential new Board members in the context of the current make-up of the Board. This assessment will include members’ qualification as independent, as well as consideration of the candidate’s broad-based business skills and experiences, prominence and reputation in their profession, concern for the interests of the shareholders, other commitments and responsibilities, personal integrity and judgment and such other matters as the Nominating and Corporate Governance Committee deems appropriate. The following sets forth the Knight Transportation, Inc. Committee’s selection criteria for director candidates. The following are used as guidelines and are not absolute prerequisites for selecting director candidates.
a. All director candidates should be committed to the Company’s basic beliefs as set forth in the Company’s Code of Ethical Conduct and shall be individuals of integrity, intelligence and strength of character and should support and enhance the Company’s core values, culture, and operating model;
b. Non-employee director candidates should be "independent," as defined under the applicable rules and regulations of the stock market or exchange on which the Company’s shares are listed, and any other applicable laws, rules, and regulations governing independence (including the Sarbanes- Oxley Act of 2002), and the Company’s corporate governance guidelines;
c. Director candidates should also maintain the independence necessary for an unbiased evaluation of management performance;
d. Director candidates should be able to effectively carry out responsibilities of oversight of the Company’s strategy;
e. Directors should have a working knowledge of corporate governance issues and the changing role of boards, together with a firm commitment to attend and participate in Board meetings and related Board activities;
f. Directors should have demonstrated management and/or business skills or experience that will contribute substantially to the management of the Company; and
g. Directors should ideally have either public company experience, a financial background, or experience in the transportation industry or a related industry.
6. Director Orientation and Continuing Education. The Nominating and Corporate Governance Committee will develop and oversee an orientation program for new Board members. New non-employee directors will be provided with a variety of materials to familiarize themselves with the Company, its management structure and operations and any key legal, financial, risk management and operational issues, as well as the policies, procedures and responsibilities of the Board and its committees. New non-employee directors also meet with members of the Company’s senior management and other non-employee directors as part of their orientation. In addition, the Company periodically provides materials to the directors on subjects that would assist them in discharging their duties.
7. Executive Sessions of the Board. The non-management directors of the Company will meet in executive session without management at least once each year and may meet without management at any regularly scheduled meeting of the Board of Directors or at any other time a non-management director requests. The Chairman of the Nominating and Corporate Governance Committee will preside at the executive sessions. Any third party desiring to contact the non- management directors of the Company may do so by contacting the Chairman of the Nominating and Corporate Governance Committee.
8. Director Access to Management and Independent Advisors. The Board has full access to any officer of the Company, any representative of the Company’s advisors, and to any of the Company’s outside legal counsel and other advisors.
9. Director Compensation. The Board of Directors, upon the recommendation of the Compensation Committee, will establish the form and amount of compensation paid to non-management Board members. Board members who are also employees of the Company receive no additional compensation for serving on the Board of Directors. The Compensation Committee reviews director compensation annually, including information obtained from one or more third- party reports or surveys in order to compare the Company’s Board compensation practices with those of other public companies of comparable size. In making its recommendation to the Board, the Compensation Committee will consider that Board members’ independence may be jeopardized if Board compensation exceeds appropriate levels, if the Company makes substantial charitable contributions to organizations with which a Board member is affiliated, or if the Company enters into material consulting arrangements to a Board member or organization with which a Board member is affiliated.
10. Management Succession. The Compensation Committee, in consultation with the Chairman of the Board and Chief Executive Officer, will make an annual report to the Board of Directors on succession planning. The Board will work with the Compensation Committee and the Chairman of the Board and Chief Executive Officer to evaluate potential successors to the Chairman of the Board and Chief Executive Officer, President, Chief Financial Officer, and other key members of executive management. The Chairman of the Board and Chief Executive Officer will at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
11. Annual Performance Evaluation of the Board. The Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board an annual self-evaluation process of the Board designed to assure that Board members contribute to the Company’s corporate governance and to its performance. The Committee will develop, approve and implement a director evaluation program to measure the individual and collective performance of the Board and the fulfillment of their responsibilities to the Company’s shareholders, including an assessment of the Board’s compliance with general corporate governance guidelines and identification of areas in which the Board could improve its performance.
Amended January 24, 2013.