Governance Commitment in Action
Our Corporate Governance Commitment
We are a caring, innovative growth company reimagining a healthier future for all people, their pets and our planet. The Board believes that good corporate governance accompanies and greatly aids our achievement of this purpose, as well as our long-term business success. Our key strategic business priorities are driving organic sales growth through innovation within our core businesses, leveraging faster growth in adjacent categories and expanding in high-growth channels and markets; delivering margin expansion through operating leverage and efficiency; and maximizing the impact of our environmental, social and governance programs and leading in the development of human capital, including our sustainability and social impact and diversity, equity and inclusion strategies. The Board has been at the center of these key priorities, helping to design and implement them across the organization, and seeing that they guide our operations.
The Board believes that we have 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 stakeholder value.
Board Independence, Expertise and Accountability
- Strict Director Independence Standards. With the exception of Noel R. Wallace, our Chairman of the Board, President and Chief Executive Officer (the “CEO”), the Board is comprised entirely of independent directors. All members of the Audit Committee, the Finance Committee, the Nominating, Governance and Corporate Responsibility 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 our 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 that outline the types of relationships, both personal and professional, between directors and the Company, our senior management, other directors and third parties that, if present, would preclude a finding of independence. These standards, which are stricter than those required by the listing standards of the New York Stock Exchange (the “NYSE”), guide the Board’s annual affirmative determinations of independence. Click here to view our Director Independence Standards.
- Executive Sessions/Lead Director. The independent directors of the Board meet in executive session, without any members of management 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 is currently serving as the Lead Director. Our Corporate Governance Guidelines include a description of the responsibilities of the Lead Director. Click here to view our Board Guidelines on Significant Corporate Governance Issues.
- All Directors Elected Annually by Majority Vote. The Board is accountable to stockholders through the annual election of all directors by majority vote. We have never had a staggered board. Under our 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.
- Director Attendance at Annual Meetings. It is our policy that all members of the Board should attend our Annual Meeting of Stockholders, whether held virtually or in person, unless extraordinary circumstances prevent a director’s attendance. All of the directors who were elected to the Board at the 2020 Annual Meeting were in attendance.
- Proxy Access. Our by-laws permit a group of up to 20 stockholders who have owned at least three percent of our outstanding common stock continuously for at least three years to submit director nominees (up to the greater of two individuals or 20% of the Board) for inclusion in our proxy statement if the stockholder(s) and the nominee(s) satisfy the requirements specified in our by-laws.
- 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 under 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 our present directors exemplify, we value enterprise leadership experience; relevant sector experience in our or a complementary industry, finance, regulatory and public service or digital, technology and innovation; international experience; corporate governance experience; educational achievement; and strong moral and ethical character. We are strongly focused on diversity, and 50% of director nominees are female and/or members of underrepresented communities. Our Independent Board Candidate Qualifications describe the criteria for Board membership. Click here to view our Independent Board Candidate Qualifications.
Board Focused on Key Business Priorities
- Strategic Role of Board. The Board plays a major role in overseeing our business strategy. It reviews our strategic plan and receives detailed briefings throughout the year on critical aspects of its implementation. These include reviews of the strategic choices we are making and the capabilities needed to deliver against our goals, as well as performance reviews of operating divisions, product categories and competitive and marketplace trends.
- Role of Board in Risk Management (including Cybersecurity). The Board oversees our risk management process to ensure it is properly designed, well-functioning and consistent with our overall corporate strategy. Annually, the Board or a relevant committee reviews each of the top risk areas identified by management and receives reports more regularly for certain risk areas to ensure risks are being adequately managed. Our Chief Information Security Officer provides a report to the Board on cybersecurity at each in-person Audit Committee meeting.
- Oversight of Company Culture. The Board believes that our culture and our core corporate values of caring, global teamwork and continuous improvement are critical to our business success. It monitors the ongoing impact of those values and our culture in various ways, including by visiting our operations around the world and reviewing the results of employee engagement surveys and related responsive actions.
- Succession Planning. The Board has extensive involvement in succession planning and people development, 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 our people development initiatives.
- Sustainability. We view sustainability as being critically important to our business. In November 2020, we announced our 2025 Sustainability & Social Impact Strategy, focusing on three ambitions—promoting well-being and inclusivity; helping people develop healthy habits; and preserving and improving the environment. These ambitions are supported by actionable targets consistent with our continued commitment to building environmental and social consciousness into our decision-making. Our sustainability efforts span all aspects of our business, including supply chain, marketing, innovation, customer development and people development. To provide incentives for Colgate people to integrate sustainability into business strategy and operations, our global sustainability initiatives are among the individual objectives used to determine the compensation for many of our senior managers. The Governance Committee oversees and receives regular updates on the implementation of our sustainability and social impact strategy, including our actions to preserve the environment, combat climate change and achieve our “net zero” sustainability targets. The Sustainability section of our website contains additional information about our sustainability and social impact ambitions and targets. Click here to view our Sustainability website.
- Diversity, Equity and Inclusion. We believe our people are crucial to our ongoing business success. We celebrate differences, promote an equitable and inclusive environment and value the contributions of all Colgate people. As a truly global company, we are working to ensure that our workforce reflects the diversity of the communities in which we live and work. We are committed to providing all of our employees with an equitable and inclusive work environment, learning opportunities and promotion and growth opportunities. A vital piece of our diversity, equity and inclusion strategy has been ensuring that our succession planning process incorporates the advancement of women and people of all cultures, including underrepresented communities. Our global diversity, equity and inclusion strategy aims to further advance our commitment to become an even more diverse, equitable and inclusive company through its four pillars of People, Community, Supplier Diversity and Communication. The Board receives regular updates on the implementation of our diversity, equity and inclusion strategy and initiatives. The Diversity, Equity and Inclusion section of our website contains additional information about our diversity, equity and inclusion commitment and initiatives. Click here to view our Diversity, Equity and Inclusion website.
Directors are Stockholders
- Director Compensation in Stock. On average, 79% of a non-employee director’s compensation was paid in Colgate equity in 2020.
- Significant Levels of Director Stock Ownership. Board members own significant amounts of Colgate stock. Under our stock ownership guidelines, independent directors are required to own stock equal in value to at least five times their annual share grant. For more information on director stock ownership, please see the table included in “Stock Ownership—Stock Ownership of Directors and Executive Officers” in our 2021 Proxy Statement.
Established Policies Guide Governance and Business Integrity
- Corporate Governance Guidelines. The corporate governance guidelines reflect the Board’s views and Company policy regarding significant corporate governance issues, which the Board believes are best practice. As part of its ongoing review of best practices in corporate governance, the Board periodically reviews and updates the guidelines. Click here to view our Board Guidelines on Significant Corporate Governance Issues.
- Code of Conduct. The Board sponsors our Code of Conduct, which promotes the highest ethical standards in all of our business dealings. The Global Ethics and Compliance function, headed by a corporate officer who provides reports directly to the Audit Committee, oversees compliance with these standards and periodically reviews and updates the Code of Conduct in conjunction with our Global Legal Organization. The Code of Conduct applies to our directors and employees, including the CEO, the Chief Financial Officer and the Controller (who is our chief accounting officer), and satisfies the SEC’s requirements for a code of ethics for senior financial officers. Click here to view our Code of Conduct.
- Business Integrity Initiatives. The Board supports our efforts to effectively communicate our commitment to ethical business practices, which are led by our Global Ethics and Compliance function. To further this goal, all of our employees worldwide are required to annually certify that they understand and comply with the Code of Conduct. In addition, our executives and key managers worldwide participate in training programs regarding the Code of Conduct, Colgate’s values, effective leadership and the applicable laws and regulations that govern our business practices around the world. Our directors also annually certify their compliance with the Code of Conduct.
- Political Expenditures. As set forth in our Code of Conduct, we have a longstanding policy against making contributions to any political party or candidate. In addition, each year, we advise our U.S. trade associations of this policy to prevent the use of Company dues or contributions for any such expenditures and request that such associations that receive at least $10,000 annually from us confirm their compliance with this policy.
- Restrictions on Hiring Audit Firm Employees. To bolster the independence of our independent registered public accounting firm and the integrity of our internal financial reporting and audit processes, we have a longstanding policy prohibiting us from hiring any partners or managers engaged in an audit of Colgate or any employees engaged in the corporate portion of an audit of Colgate from PricewaterhouseCoopers LLP, our independent registered public accounting firm, within five years of the end of their engagement without the approval of the Audit Committee.
- Hedging and Pledging Policies. To further ensure that the interests of our directors, officers and senior managers are aligned with those of our stockholders, our hedging policy prohibits our directors, officers and employees who receive stock-based compensation from engaging in transactions to hedge against declines in the value of our stock. The policy also strongly discourages all other employees from entering into such transactions. Further, to prevent forced sales of Colgate stock by our directors and officers, we prohibit our directors and officers from pledging Colgate stock.
- Clawback Policies. Our clawback policy permits us to recoup cash and equity-based incentive awards made to an officer subject to the policy if the financial results on which such awards were based are subsequently restated and such officer’s intentional misconduct contributed to the restatement. In addition, our equity award agreements include non-competition, non-solicitation and non-interference restrictions in the event of an employee’s departure from Colgate. Failure to comply with any of these requirements may result in forfeiture and/or cancellation of equity awards.
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 in discussions and working groups with corporate officers, division presidents and other employees, often without the CEO present. Directors are invited to contact senior managers directly with questions and suggestions.
Ensuring Management Accountability
- Performance-Based Compensation. We have linked the pay of our managers and employees at all levels to Colgate’s performance. As described in greater detail in the Compensation Discussion and Analysis in our 2021 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 by the Board against the goals set each year, including both objective measures (such as earnings per share and organic sales growth) and subjective criteria reflective of our 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
- Board Size. Designed to maximize board effectiveness, our by-laws fix the number of directors between seven and 15. The number of directors is currently fixed at eleven, to be decreased to ten upon the completion of Dr. Helene D. Gayle's current term, and ten directors have been nominated for election at the Annual Meeting.
- Board Retirement Age. Our by-laws require that no director may stand for re-election after his or her 72nd birthday, which provides a mechanism for regular Board refreshment.
- Directorship Limits. To ensure that directors are able to devote sufficient time to properly discharge their duties, our corporate governance guidelines provide that directors should not serve on more than three other public company boards. Directors are also required to seek the approval of the Governance Committee prior to joining any corporate board, providing a further mechanism for the Board to evaluate each director’s other commitments and ensure they have sufficient availability.
- Meeting Attendance. On average, the incumbent directors attended 99% of the meetings of the Board and the committees on which they served in 2020. No incumbent director attended less than 75% 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 its performance.
- Board Committee Evaluations. Self-evaluations of each of the Board’s committees are also conducted annually. The results of these evaluations are reviewed with each committee, 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 three 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 2020, enables directors to provide valuable feedback to one another and identifies areas of strength and areas of focus for enhanced effectiveness.
- Ongoing Director Education. Outside experts periodically present to the Board on various subjects. During 2020, such subjects included executive compensation trends and environmental, social and governance reporting. From time to time, our directors also visit Colgate operations around the world, deepening their understanding of our business.