Corporate Governance Framework
Our governance framework focuses on the interests of stockholders. It is designed to promote governance transparency and ensure our Board has the necessary authority to review and evaluate our business operations and make decisions that are independent of management and in the best interests of stockholders. Our goal is to align the interests of directors, management and stockholders and comply with or exceed the requirements of The Nasdaq Stock Market and applicable law.
This governance framework establishes the practices our Board follows with respect to:
- rigorous engagement in the corporate strategic framework for long-term value creation;
- overseeing capital allocation;
- identifying risks and overseeing risk management, including information security and cybersecurity;
- fostering a culture of integrity;
- establishing corporate governance structures, principles and practices that contribute to effective oversight of Nasdaq and its subsidiaries;
- succession planning and evaluating performance and approving compensation of senior management; and
- ensuring corporate awareness and contribution to the global communities in which we serve and work.
Our goal is to align the interests of directors, management and stockholders and comply with or exceed the requirements of The Nasdaq Stock Market and applicable law.
BOARD’S ROLE IN LONG-TERM STRATEGIC PLANNING
The Board takes an active role with management to formulate and review Nasdaq’s long-term corporate strategy. In 2017, with the full participation and support of the Board, Nasdaq undertook a comprehensive review of its existing strategic framework. As a result of the review, we have reoriented our vision, mission and strategy to embrace our strengths to focus more effectively on our clients and their evolving needs. For further discussion of our 2017 strategic review, see “Item 1. Business—2017 Strategic Review” in our annual report on Form 10-K for the fiscal year ended December 31, 2017.
The Board and management routinely confer on our company’s execution of its long-term strategic plans, the status of key strategic initiatives and the principal strategic opportunities and risks facing Nasdaq. In addition, the Board periodically devotes meetings to conduct an in-depth long-term strategic review with our company’s senior management team. During these reviews, the Board and management discuss the emerging technological and macroeconomic trends and short and long-term plans and priorities for each of our business units.
Additionally, the Board annually discusses and approves the company’s budget and capital requests, which are linked to Nasdaq’s long-term strategic plans and priorities. Through these processes, the Board brings its collective, independent judgment to bear on the most critical long-term strategic issues facing Nasdaq.
The Nominating & Governance Committee regularly oversees and plans for director succession and refreshment of the Board to ensure a mix of skills, experience, tenure and diversity that promotes and supports the company’s long-term strategy. In doing so, the Nominating & Governance Committee takes into consideration the corporate strategy and the overall needs, composition and size of the Board, as well as the criteria adopted by the Board regarding director qualifications.
Since January 2017, three new directors have joined the Board: Melissa M. Arnoldi, Adena T. Friedman and John D. Rainey. The average age of these new directors is 47 years old, and all three are senior executives at public companies. All three also are first-time directors of a public company.
In addition, the Board has nominated Jacob Wallenberg, who is the Chairman of the Board of Investor AB and who has significant experience as a director of publicly traded companies, for election to the Board at the 2018 Annual Meeting.
|SUCCESSION PLANNING FOR NASDAQ LEADERSHIP
The Board is committed to positioning Nasdaq for further growth through ongoing talent management, succession planning and the deepening of our leadership bench. In this regard, formally on an annual basis and informally throughout the year in Executive Session, the Nominating & Governance Committee, the Management Compensation Committee, the Board and the President and CEO review the succession planning and leadership development program, including a short-term and long-term succession plan for development, retention and replacement of senior officers. The Board has a formal process for reviewing internal succession candidates through regular interaction during Board meetings and strategy presentations, individual meetings between directors and potential internal candidates and internal and external feedback from a variety of sources, including meeting with stockholders. In addition, the President and CEO prepares, and the Board reviews, a short-term succession plan that delineates a temporary delegation of authority to certain officers of the company, if all or a portion of the senior officers should unexpectedly become unable to perform their duties. In conjunction with the annual report of the succession plan, the President and CEO also reports on Nasdaq’s program for senior management leadership development.
The Nominating & Governance Committee regularly oversees and plans for director succession and refreshment of the Board to ensure a mix of skills, experience, tenure and diversity that promotes and supports the company’s longterm strategy.
The Board’s role in risk oversight is consistent with the company’s leadership structure, with management having day-to-day responsibility for assessing and managing the company’s risk exposure and the Board having ultimate responsibility for overseeing risk management with a focus on the most significant risks facing the company. The Board is assisted in meeting this responsibility by several Board Committees as described below under “Board Committees.” Furthermore, directors meet on a regular basis, both in Chairman’s Session with the CEO present and in Executive Session without the presence of management, to discuss matters, including matters pertaining to risk.
The Board sets the company’s risk appetite (i.e., the boundaries within which Nasdaq’s management operates while achieving corporate objectives). In addition, Nasdaq’s Board reviews and approves the company’s ERM Policy, which mandates ERM requirements and defines employees’ risk management roles and responsibilities.
Per the ERM Policy, Nasdaq employs an ERM approach that manages risk within the approved risk appetite through objective and consistent identification, assessment, monitoring and measurement of significant risks across the company.
Nasdaq classifies risks into the following four broad categories.
- Strategic and Business Risk. Risk to earnings and capital arising from changes in the business environment and from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment.
- Financial Risk. Risk to the company’s financial position or ability to operate due to investment decisions and financial risk management practices in particular as it relates to market, credit, capital and liquidity risks.
- Operational Risk. Risks arising from the company’s people, processes and systems and external causes, including, among other things, risks related to transaction errors, financial misstatements, technology, information security (including cyber security), engagement of third parties and maintaining business continuity.
- Legal and Regulatory Risk. Exposure to civil and criminal consequences — including regulatory penalties, fines, forfeiture and litigation — while conducting business operations.
Nasdaq’s management has day-to-day responsibility for: (i) identifying risks and assessing them in relation to Nasdaq’s strategies and objectives, (ii) implementing suitable risk mitigation plans, processes and controls and (iii) appropriately managing risks in a manner that serves the best interests of Nasdaq, its stockholders and other stakeholders. Nasdaq’s Global Risk Management Committee, which is composed of senior executives, assists the Board of Directors in its risk oversight role, ensuring that the ERM framework is appropriate and functioning as intended and the level of risk assumed by the Company is consistent with Nasdaq’s strategy and risk appetite. Nasdaq also has other limited-scope management risk committees that address specific risks, geographic areas and/or subsidiaries. These management risk committees, which include representatives from business units and support functions, monitor current and emerging risks within their purview to ensure an appropriate level of risk. Together, the various management risk committees facilitate timely escalation of issues to the Global Risk Management Committee, which escalates critical issues to the Board.
Nasdaq’s Group Risk Management Department oversees the ERM framework, supports its implementation and aggregates and reports risk information.
The Board’s role in risk oversight is consistent with the company’s leadership structure, with management having day-to-day responsibility for assessing and managing the company’s risk exposure and the Board having ultimate responsibility for overseeing risk management with a focus on the most significant risks facing the company.
BOARD LEADERSHIP STRUCTURE
In accordance with our Corporate Governance Guidelines, Nasdaq separates the roles of Chairman of the Board and President and CEO. We believe that this separation of roles and allocation of distinct responsibilities to each role facilitates communication between senior management and the full Board about issues such as corporate governance, management development, succession planning, executive compensation and company performance.
Nasdaq’s President and CEO, Adena T. Friedman, who has over 20 years’ experience in the securities industry, is responsible for the strategic direction, day-to-day leadership and performance of Nasdaq. The Chairman of Nasdaq’s Board, Michael R. Splinter, an independent director who brings to the Board the perspective of a technology CEO, provides guidance to the President and CEO, presides over meetings and Executive Sessions of the Board and serves as a primary liaison between the President and CEO and other directors.
Throughout 2017, Mr. Splinter, who is an independent director of the company, served as either Lead Independent Director or Chairman. Mr. Splinter became Lead Independent Director on January 1, 2017 at the same time that Ms. Friedman succeeded Robert Greifeld as CEO of the company and Mr. Greifeld became Chairman. Mr. Greifeld did not stand for re-election at the 2017 Annual Meeting; immediately following the Meeting, the Board elected Mr. Splinter to serve as Chairman through the 2018 Annual Meeting.
We believe that the separation of the roles of Chairman of the Board and President and CEO and allocation of distinct responsibilities to each role facilitates communication between senior management and the full Board about issues such as corporate governance, management development, succession planning, executive compensation and company performance.
- Substantial majority of independent directors. Nine of our ten director nominees are independent of the company and management.
- Executive Sessions of independent directors. At each Board meeting, independent directors have the opportunity to meet in Executive Session without company management present. In 2017, the Board met 9 times in Executive Session.
- Independent advisors. Each Committee has the authority and budget to retain independent advisors. In 2017, the Nominating & Governance Committee retained such independent advisors to assist with the annual Board assessment and director recruitment.
BOARD COMMITTEE INDEPENDENCE AND EXPERTISE
- Committee independence. All Board Committees, with the exception of the Finance Committee, are composed exclusively of independent directors, as required by the Listing Rules of The Nasdaq Stock Market.
- Executive Sessions of independent directors. At each Committee meeting, members of the Audit Committee, Finance Committee, Management Compensation Committee
and Nominating & Governance Committee have the opportunity to meet in Executive Session.
- Financial sophistication and expertise. Each member of the Audit Committee is independent as defined in Rule 10A-3 adopted pursuant to the Sarbanes-Oxley Act of 2002 and in the Listing Rules of The Nasdaq Stock Market. Four members of the Audit Committee are “audit committee financial experts” within the meaning of SEC regulations and meet the “financial sophistication” standard of The Nasdaq Stock Market.
PROGRESSIVE STOCKHOLDER RIGHTS
- Annual elections. All directors are elected annually. Nasdaq does not have a classified Board.
- Proxy access. We implemented proxy access at 3%/3 years by amending our By-Laws to allow a stockholder (or group of stockholders) that complies with certain customary requirements to nominate candidates for service on the Board and have those candidates included in Nasdaq’s proxy materials.
- Special meetings. Stockholders representing 15% or more of outstanding shares can convene a special meeting.
- Majority voting. We have a majority vote standard for uncontested director elections.
Nasdaq’s Board: By the Numbers in 2017
MEETINGS AND MEETING ATTENDANCE
The Board held 11 meetings during the year ended December 31, 2017, and the Board met in Executive Session without management present during 9 of those meetings. None of the current directors attended fewer than 91% of the meetings of the Board and those Committees on which the director served during the 2017 fiscal year. Nasdaq’s policy is to encourage all directors to attend annual and special meetings of our stockholders. All of the current members of the Board who were directors at the time of the Annual Meeting held on May 10, 2017, attended the Annual Meeting.
DIRECTOR ORIENTATION AND CONTINUING EDUCATION
Our comprehensive and robust orientation programs familiarize new directors with Nasdaq’s businesses, strategies and policies. We also provide in-person or telephonic tutorials to educate Board members on emerging and evolving initiatives and strategies. Our directors receive frequent updates on recent developments, press coverage and current events that relate to our strategy and business.
Directors regularly attend continuing education programs at external organizations and universities to enhance the skills and knowledge used to perform their duties on the Board and relevant Committees.
Attendance at these programs provides our directors with additional insight into our business and industry and gives them valuable perspective on the performance of our company, the Board, our President and CEO and members of senior management.
BOARD AND COMMITTEE EVALUATIONS / INDIVIDUAL DIRECTOR ASSESSMENT
The Board Assessment Process
We embrace good governance by holding ourselves to the highest ethical standards in all of our interactions.
CODE OF ETHICS: BOARD AND EMPLOYEES
We embrace good governance by holding ourselves to the highest ethical standards in all of our interactions. As such, we have adopted the Nasdaq Code of Ethics, which is applicable to the Board, all of our employees, including the principal executive officer, the principal financial officer and the controller and principal accounting officer, and contractors. We also have a separate Nasdaq Code of Conduct for the Board, which contains supplemental provisions specifically applicable to directors. These codes embody the company’s fundamental ethics and compliance principles and expectations of business conduct.
The Nasdaq Code of Ethics is subject to annual review by our Board. As part of the 2017 updates to the Code of Ethics, we enhanced coverage of our commitment to diversity and inclusion in our workforce, managing compliance in our supply chain, and our commitment to protecting personal data and privacy. We also added content to the Code of Ethics to help employees with ethical decision making and identification of conflicts of interest. Other revisions reflected updates to company policies, regulatory developments and other improvements identified as part of the annual review process.
Our Global Ethics and Corporate Compliance Program is based on industry-leading practices and is designed to meet or exceed available standards, including those promulgated by U.S. and European regulators in the jurisdictions in which we operate. Pillars of the program include structural elements, such as policies, risk assessment, monitoring, training and communications, and key risk areas, including anti-bribery and corruption, data privacy and antitrust and competition. The Global Ethics and Corporate Compliance Program is reinforced by executive leadership including coverage of ethics during employee town halls and participation in our ongoing Ethics in Action webinar series.
Nasdaq is committed to providing employees the ability to report concerns or seek guidance on ethics and compliance matters without fear of retaliation. In 2016 we launched our SpeakUp! Program which enhanced existing policies and procedures to ensure that Nasdaq employees and other stakeholders have channels to raise issues, seek guidance and report potential violations of our Code of Ethics or other company policies. The program is administered within the Legal and Regulatory Group and implemented by cross-functional teams representing all areas of the company. Oversight is provided by the Global Compliance Council.
We post amendments to and intend to post waivers from the Nasdaq Code of Ethics (to the extent applicable to the principal executive officer, the principal financial officer or the controller and principal accounting officer) or to the Nasdaq Code of Conduct for the Board on our Investor Relations website. We also will disclose amendments or waivers to the codes in any manner otherwise required by the standards applicable to companies listed on The Nasdaq Stock Market.
|Amended and Restated|
Certificate of Incorporation
|Audit Committee Charter||Board of Directors Duties
|By-Laws||Code of Conduct for the |
Board of Directors
|Code of Ethics|
|Corporate Governance Guidelines||Environmental Practices Statement||Finance Committee Charter|
|Information Protection and |
|Management Compensation |
|Nasdaq Human Rights
|Nominating & Governance |
|Procedures for Communicating |
with the Board of Directors
|Supplier Code of Ethics|
These documents are available on our Investor Relations webpage at: http://ir.nasdaq.com/.
Corporate Responsibility, Corporate Culture and Focus on Entrepreneurship
Nasdaq is committed to integrating sustainability into our everyday actions to help create long-term value for our stockholders and the communities in which we operate. We aim to operate the company responsibly while managing risks and using our resources wisely.
We exemplify this commitment by practicing sustainability, advocating volunteerism, empowering philanthropy and actively partnering with our employees, customers, clients and partners on ESG initiatives.
Integrating Sustainability Into Our Everyday Actions
We understand the importance of environmental sustainability and have undertaken meaningful efforts to responsibly manage our environmental footprint over the past several years. Our recent efforts include:
- serving as a board member for the United Nations Global Compact Network USA and the Global Sustainability Standards Board and chairing the World Federation of Exchanges Sustainability Working Group;
- selecting office locations near public transportation, when possible; in addition, electric car charging stations are available near many of the office buildings where we are tenants;
- offering employees pre-tax public transportation passes, allowances or subsidies in many locations;
- selecting, designing and building office space that aligns with LEED Green Building Standards, or local country standards, when possible; in 2017, we were awarded the LEED Green Building Standards Platinum Award for our Philadelphia office space;
- deploying energy efficient equipment and fixtures to reduce energy consumption;
- working with landlords to ensure effective recycling and waste reduction programs;
- reviewing our business continuity policies to ensure the safety of our employees, facilities and critical business functions in the case of natural disasters;
- increasing employee awareness worldwide on our environmental sustainability commitment and programs;
- releasing our Environmental Practices Statement in early 2018; and
- strengthening our commitment to supply chain sustainability through our Supplier Code of Ethics.
Advocating Volunteerism and Empowering Philanthropy
Through the employee giving and volunteering program, “Nasdaq GoodWorks,” Nasdaq provides full and part-time employees with 16 hours of paid time off to volunteer in their local communities. For any Nasdaq employee or Nasdaq contractor, Nasdaq also matches up to $1,000 of voluntary employee donations to eligible non-profits of their choice. In 2017, 40% of the Nasdaq workforce participated in the GoodWorks program, generating more than $600,000 in charitable impact.
Internally, diversity and inclusion are furthered by strong participation in our Women’s Initiative at Nasdaq, which promotes professional growth for women, and Out Proud Employees of Nasdaq, which represents LGBT employees, families and allies.
Actively Partnering with Our Employees, Customers, Clients and Partners on ESG Initiatives
As an integral part of our business, we strive to assist issuers and the public to increase their awareness on sustainability and ESG topics through webinars, MarketSite events and broadcasts and our ESG Reporting Guide for European Issuers. Our achievements in this area include the following:
- through our Information Services segment, we combine data, expertise and technology to create index products for sustainable investing;
- we actively support the United Nations Sustainable Development Goals via our membership in the U.N. Global Compact; and
- Nasdaq was again selected for inclusion in the Dow Jones Sustainability Index for North America, and we actively support listed companies in their pursuit of similar distinctions.
We support diversity and inclusion throughout our company. Our commitment to diversity and inclusion is further demonstrated by:
- formal anti-discrimination and anti-harassment policies;
- public commitments on gender equality through the Parity Pledge, the United Nations Woman’s Empowerment Principles and membership in the 30% Club;
- early adoption of the United Nations’ Standards of Conduct for Business designed to help businesses promote equality for lesbian, gay, bisexual, transgender and intersex people in the workplace and beyond;
- a Code of Ethics that sets forth the corporate values and ethical principles to guide employee conduct;
- privacy policies designed to protect privacy and personal data, including an Information Protection and Privacy Practices Statement adopted in early 2018;
- a SpeakUp! Program that enables all employees to voice concerns and seek guidance on any matter in a non-retaliatory manner; and
- a Human Right Practices Statement adopted in early 2018.
Internally, diversity and inclusion are furthered by strong participation in our Women’s Initiative at Nasdaq, which promotes professional growth for women, and Out Proud Employees of Nasdaq, which represents LGBT employees, families and allies.
FOCUS ON ENTREPRENEURSHIP
The Nasdaq Entrepreneurial Center is a separate, non-profit organization established with the support of the Nasdaq Educational Foundation. The Center’s mission is to deliver resources and mentoring to enable entrepreneurs across the globe to realize their potential. Since launching in September 2015, the Center has developed 477 original programs that have benefitted 10,871 entrepreneurs across the globe. In keeping with a commitment to advancing inclusivity, the Center is proud that 49% of its entrepreneurs are women. To achieve these milestones, the Center has partnered with universities and thought leaders around the world, including Wilson Sonsini Goodrich & Rosati, KPMG, Lehigh University and The University of Melbourne. In addition to its own entrepreneurial education and original research, the Center supports a wide variety of like-minded organizations, including non-profits, accelerators, investors, universities and government agencies, with curriculum and joint programming to serve local and international audiences.
The Nasdaq Educational Foundation is also a separate, non-profit organization. The Foundation’s mission is to connect the business, capital and innovative ideas that advance global economies. In 2017, the Foundation also supported academic programs on entrepreneurship at the Massachusetts Institute of Technology, Fordham University and Columbia University.
Stockholder Communication with Directors
Stockholders and other interested parties are invited to contact the Board by writing us at: AskBoard@nasdaq.com or Nasdaq Board of Directors, c/o Joan C. Conley, SVP and Corporate Secretary, 805 King Farm Boulevard, Rockville, Maryland 20850.
“We are a business based on integrity – nothing else matters if we don’t have integrity.”
Adena T. Friedman