Corporate Governance
Baxter is operated under the direction of the company's board of directors. Twelve independent directors and Baxter's chief executive officer (CEO) comprise the company's 13-person board. Baxter's CEO serves as the chairman of the board, which the board believes provides for a unified vision for the company. The board also annually appoints an independent lead director, who presides at executive sessions of the board and serves as a liaison with the other independent directors and the chairman. The lead director also serves as the contact for direct communications from shareholders, supporting effective shareholder communications.
Baxter has long adhered to principles designed to ensure effective corporate governance. Since 1995, the board has had in place corporate governance guidelines that address the operation of the board and its committees, strategic and succession planning, and director qualifications, independence and compensation.
To further align the interests of directors and management with shareholders, Baxter requires directors and officers to own Baxter common stock. Baxter’s CEO is required to own common shares valued at six times his annual base salary and each of the other executive officers is required to achieve ownership of shares worth four times his or her annual base salary within five years of becoming an officer. Directors must hold Baxter common stock equal to five times their annual cash retainers within five years of commencing board service.
In selecting nominees for director, the board considers experience in business, government, education, healthcare, science, technology and other areas relevant to the company’s activities, as well as diversity of background, including gender, race, age and ethnicity or national origin. The board considers candidates recommended by shareholders, board members and management, and evaluates all candidates based on the same criteria.
Baxter’s board has six committees: Audit, Compensation, Corporate Governance, Finance, Public Policy and the newly formed Science and Technology Committee. Each committee is made up of independent directors and has the authority to obtain advice or assistance from outside experts, as the committee deems appropriate.
The Audit Committee is focused primarily on the integrity of Baxter’s financial statements, system of internal accounting controls, the internal and external audit process and the process for monitoring compliance with laws and regulations. Accordingly, the Audit Committee is directly responsible for the appointment, compensation and oversight of Baxter’s independent registered public accounting firm.
The Compensation Committee exercises the authority of the board relating to employee benefit plans, and is responsible for overseeing compensation generally and for the design of Baxter’s overall compensation program. The most significant element of this program is pay for performance. Demonstrating its commitment in this area, the Compensation Committee recommended to the board an executive recoupment policy, which the board adopted in February 2009. This policy allows the board to take any actions it deems appropriate regarding executive incentive compensation following any restatement of the company’s financial results that requires an amendment to any previously filed results, or if an officer violates a restrictive covenant in any agreement between Baxter and the officer.
The Corporate Governance Committee assists and advises the board on director nominations, corporate governance and general board organization and planning matters. Specifically, the Corporate Governance Committee takes the lead in the director nomination process, determination of the board and committee structure, annual review of corporate governance guidelines, executive officer succession planning, and the annual processes for evaluating the performance of the CEO, the board and each board committee.
The Finance Committee assists the board in fulfilling its responsibilities in connection with Baxter’s financial affairs. This includes overseeing significant financing proposals, capital expenditures, acquisitions, divestitures and similar matters.
The Public Policy Committee is concerned primarily with review of the company's policies and practices to ensure they are consistent with Baxter's responsibility to act with integrity. Among other activities, this committee conducts an annual sustainability review across the spectrum of topics discussed in this report, and reports on these activities to the full board. The Public Policy Committee also oversees Baxter’s government affairs program, including Baxter’s political contributions, positions on pending legislation and political advocacy activities.
The Science and Technology Committee, formed in May 2009, is responsible for advising the board on scientific matters relating to Baxter’s research and development and technology strategies and initiatives. The creation of this new Science and Technology Committee reflects the enhanced focus on research and development at Baxter over the last few years.
The board meets in executive session at each regularly scheduled meeting, and convened eight times in 2008. Board committees held a total of 28 meetings in 2008, with average attendance exceeding 97 percent. View more information on the board's activities and responsibilities.
Shareholders and interested parties may communicate directly with Baxter’s directors by emailing boardofdirectors@baxter.com or writing a letter to: Baxter Director c/o Corporate Secretary, Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015.
