Under the New York Stock Exchange rules and the Companys Corporate Governance Guidelines, at least a majority of
the Companys directors and each member of the Audit Committee, Compensation and Development Committee, Compliance Committee and Nominating and Corporate Governance Committee must meet the independence standards set forth above. The Board of
Directors has determined that each of Mr. Boyce, Ms. Burgess, Mr. Dearth, Dr. Delgado, Mr. Lawton, Ms. Reed and Mr. Wehmer is independent under the standards set forth above. In addition, the Board of Directors has
determined that each of the members of the standing committees satisfies the Companys independence standards, including the additional independence standards and financial literacy requirements required for audit committee members and
compensation committee members, as applicable, established by SEC and New York Stock Exchange rules.
In making independence determinations, the Nominating and
Corporate Governance Committee, with assistance from the Companys legal counsel, evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the
Company and management. In its review of director independence, the Nominating and Corporate Governance Committee considered the commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may
have with the Company or management. In addition, the Nominating and Corporate Governance Committee considered any relationships between the Company and entities for which any director serves as management or a member of the board of directors. The
Nominating and Corporate Governance Committee recommended, and the Board of Directors approved, that the seven directors named above be considered independent.
Mr. Stepan is not deemed independent under the rules of the New York Stock Exchange because he serves as the Chairman and Chief Executive Officer of the Company.
Board Leadership Structure
The Board of
Directors regularly reviews its leadership structure in light of the Companys then-current needs, trends, internal assessments of Board effectiveness, and other factors. The Board does not have a policy regarding the separation of the roles of
Chief Executive Officer and Chairman of the Board because the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board.
Currently, the Board believes the interests of the Company and its stockholders are best served through a leadership model with a combined Chairman and Chief Executive
Officer position and a Lead Independent Director. The current Chairman and Chief Executive Officer, Mr. Stepan, possesses extensive knowledge and understanding of the Company and its operations, strategic planning and industry, developed during
his over 30-year career with the Company. The Board believes that Mr. Stepans experience puts him in the best position to provide broad leadership for the Board as it works to deliver value to
stockholders.
To aid the Board of Directors independent oversight of the Company and management, the Board has elected Mr. Wehmer as Lead Independent
Director. The Board believes that the election of the Lead Independent Director enhances the Boards commitment to maintaining strong corporate governance and provides effective independent Board leadership. Among other responsibilities, the
Lead Independent Director presides at all Executive Sessions of the independent Directors, advises the Chairman and Chief Executive Officer on Board meeting schedules, agendas and materials, and serves as principal liaison between the independent
Directors and the Chairman and Chief Executive Officer. In addition, the Lead Independent Director, in consultation with the chairs of the Compensation and Development Committee and the Nominating and Corporate Governance Committee, leads the
process for the evaluation of the Chairman and Chief Executive Officer.
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