DIODES INCORPORATED
CORPORATE GOVERNANCE GUIDELINES
Adopted: April 13, 2004
Updated: May 25, 2022
The Board of Directors (the “Board”) of Diodes Incorporated (the “Company”) has adopted the following principles to further its continuing efforts to enhance corporate governance. The Board will review and amend these guidelines from time to time as it deems necessary and appropriate.
- Role and Composition of the Board of Directors
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- The stockholders elect the Board to oversee their interest in the long-term health of the business and its financial strength. The Board is the ultimate decision-making body of the Company, except with respect to those matters reserved for the stockholders by statute or by our charter. The Board selects the senior management team, which is charged with the conduct of the Company’s business. Having selected the senior management team, the Board acts as an advisor and counselor to senior management and ultimately monitors its performance.
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- The core responsibility of the Board is to exercise their business judgment to act in what they reasonably believe is the best interests of the Company and the stockholders. Directors must fulfill their responsibilities consistent with their fiduciary duty to the stockholders, in compliance with all applicable laws and regulations.
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- The Company’s By-laws state that each stockholder entitled to vote at any election for directors shall have the right to cumulate its votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which its shares are entitled, or to distribute its votes on the same principle among as many candidates and in such manner as it shall desire. The candidates receiving the highest number of votes up to the number of directors to be elected shall be declared elected.
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- It is the policy of the Company that the number of directors does not exceed a number that can function efficiently as a body. Our Bylaws provide for a Board size ranging between 5 and 17, with the number of directors currently set by the Board at 7. The Governance and Stockholder Relations Committee considers candidates to fill new positions created by expansion and vacancies that occur by resignation, by retirement, or for any other reason.
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- The Board from time to time will determine the leadership structure that serves it best. The Board has no policy requiring the separation of the offices of Chairman of the Board and Chief Executive Officer. The Board may, but is not required to, appoint an independent director as Lead Director. The Board believes that it is in the best interests of the Company for the Board to make determinations on these issues depending on current and anticipated circumstances.
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- Directors are nominated by the Board or by stockholders in accordance with the By-laws. The Governance and Stockholder Relations Committee will review all nominees for the Board in accordance with its charter. The assessment will include a review of the nominee's judgment, experience, independence, understanding of the Company's or other related industries, and the specific criteria developed by the Governance and Stockholder Relations Committee. Final approval of a candidate is determined by the full Board.
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- A non-employee Board member will not be eligible to stand for re-election to the Board after attaining the age of 75 (“Board Member Age Requirement”). The Board has considered implementing term limits for service on the Board but believes that such limits can result in the loss of directors who have developed, over a period of time, an in-depth understanding of the Company, its objectives and operations. The Board may review and waive the Board Member Age Requirement for a maximum of five times per Board member, and each waiver shall be valid and effective until the next election of directors.
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- The Chairman of the Board sets the agenda for Board meetings, with the understanding that certain items pertinent to the advisory and monitoring functions of the Board will be brought to it periodically by senior management for review or decision. For example, the annual corporate budget is reviewed by the Board. Agenda items that fall within the scope of responsibilities of a Committee of the Board are reviewed with the chair of that Committee. Any member of the Board may request that an item be included on the agenda.
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- The Lead Director of the Board, if any, shall have the following duties: to preside at executive sessions of the independent directors; serve as principal liaison between the independent directors and the Chairman; work with the Chairman to set and approve the schedule and agenda for meetings of the Company’s Board and its committees; direct the retention of advisors and consultants who report directly to the Board; serve as liaison for consultation and communication with stockholders; oversee the annual evaluation of our Board and its committees; and evaluate, in cooperation with the Compensation Committee and all members of the Board, the Chief Executive Officer's performance.
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- At the invitation of the Board, members of senior management recommended by the Chairman and Chief Executive Officer may attend all or part of a Board meeting for the purpose of participating in discussions. Generally, presentations of matters to be considered by the Board are made by the manager responsible for that area of the Company's operations. In addition, Board members have free access to all other members of management and employees of the Company.
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- Executive sessions 2 or meetings of independent directors without management present are held regularly.
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- Any director (including management directors) whose principal occupation or business association changes substantially during his or her tenure as a director will be expected to promptly submit a resignation as a director for consideration by the Board. The Governance and Stockholder Relations Committee will recommend to the Board the action, if any, to be taken with respect to the resignation. The Board would not necessarily be expected to accept the resignation of a director who experiences such a change.
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- It is the general policy of the Company that the Board as a whole makes all major decisions. As a consequence, the standing committees of the Board are limited to those committees essential to, or mandated for, the operation of a publicly owned company of our size. Currently these standing committees of the Board are the Audit Committee, the Compensation Committee, the Governance and Stockholder Relations Committee and the Risk Oversight Committee. Only independent directors serve on the Audit Committee, Compensation Committee, and the Governance and Stockholder Relations Committee. Each Committee of the Board has, and will continue to have, at least three members.
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- The Compensation Committee3 determines the compensation of the Chairman and Chief Executive Officer and his or her annual and long-term performance goals and evaluates his or her performance in light of those goals. The Compensation Committee has full authority in these matters, but in developing the compensation and performance goals the Compensation Committee consults with the Chairman and Chief Executive Officer and the full Board. The Compensation Committee also recommends and approves annual and long-term performance goals and compensation for senior management of the Company.
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- The Governance and Stockholder Relations Committee will prepare annually a formal evaluation of the Chief Executive Officer by all non-employee directors. The evaluation should have the purpose of reinforcing the Board’s confidence in the Chief Executive Officer and should be based on several criteria including the performance of the business, accomplishment of long-term strategic objectives, and development of management. This evaluation shall be communicated to the Chief Executive Officer and the Board.
- Functioning of Committees
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- The chair of each Committee of the Board determines the frequency, length, and agenda of meetings of each of the Committees. The agenda provides sufficient time to consider each item of business. Committee members receive materials related to agenda items sufficiently in advance of a meeting when necessary to allow the members to prepare for discussion.
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- The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Company and each such registered public accounting firm reports directly to the Audit Committee.
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- The Audit Committee establishes procedures for receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting and auditing matters.
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- The Audit Committee, as necessary and appropriately, may consult with independent legal, financial, and accounting advisors to assist in their duties to the Company and its stockholders.4
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- The Compensation Committee makes recommendations to the Board regarding compensation, benefits, and incentive arrangements for officers and other key employees of the Company.5
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- The Governance and Stockholder Relations Committee identifies individuals qualified to be Board members, consistent with criteria approved by the Board and recommends the director nominees to be selected by the Board.6
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- The Risk Oversight Committee oversees the Company’s risk management process and provides reasonable assurance that processes are in place to identify, assess, monitor, manage, and disclose risks that may have a material adverse effect on the achievement of the Company’s strategic objectives.7
- Independent Directors
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- In keeping with the rules of Nasdaq, a majority of the Board is composed of independent directors. From time to time, the independent directors meet separately or hold executive sessions to discuss and make decisions regarding matters including the supervision of management and those matters reserved for determination by independent directors under the rules of Nasdaq and the Securities and Exchange Commission (“SEC”). .
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- In the absence of a Lead Director, a meeting or executive session of the independent directors is presided over by the chair of the Committee having principal authority over the subject matter of the meeting or session. The Board believes that this practice provides for leadership at all of the meetings or executive sessions of independent directors.
- Stock Ownership Policy and Stock Holding Policy
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- Within five years of the later of (1) the adoption of this stock ownership policy (July 19, 2007) or (2) appointment or initial election, each non-employee director shall acquire (and thereafter through the term of appointment maintain ownership of) a minimum number of shares of Common Stock with a value equal to three times the annual retainer.
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- Within five years of the later of (1) the adoption of this stock ownership policy (February 22, 2013) or (2) appointment (other than a newly-appointed Chief Executive Officer, who has seven years to comply), each executive officer shall acquire (and thereafter through the term of appointment maintain ownership of) shares of Common Stock with a value equal to (1) six times his or her annual base salary (excluding bonus) in the case of the Chief Executive Officer and (2) two times his or her annual base salary (excluding bonus) for any Senior Vice President or Vice President.
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- The value of shares held is calculated once per year, on the last business day of the fiscal year. For purposes of determining compliance with this stock ownership policy, “value” means an assumed per share value based on the closing price of Common Stock on the last business day of the fiscal year.
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- If any executive officer or director was determined to own less than the minimum number of shares of Common Stock, such executive officer or director shall have the two open periods after the two subsequent “Blackout Periods” (as defined in the Company’s Insider Trading Policy) to obtain the minimum number of shares of Common Stock.
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- An executive officer or director subject to this stock ownership policy is not required to acquire shares of Common Stock in accordance with this policy if acquisition at such time would result in a violation of the Company’s insider trading policy, in which event the executive officer or director is required to comply with this stock ownership policy as soon as reasonably feasible thereafter.
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- Each executive officer or director who acquires shares of Common Stock through the exercise of a stock option shall retain 33% of the “net” shares acquired (i.e., net of the tax impact of the stock option exercise) until the earlier to occur of the first anniversary of the date of exercise or the date the individual ceases to be an executive officer or director. This stock retention policy applies to all stock option grants awarded to executive officers or directors.
- Conflicts of Interest
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- The Audit Committee conducts an appropriate review of all related party transactions for potential conflict of interest situations on an ongoing basis, all in accordance with such procedures as the Audit Committee may adopt from time to time.8
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- To help maintain the independence of the Board, all directors are required to deal at arm's length with the Company and its subsidiaries and to disclose any transaction or circumstance affecting the director that might be perceived as creating an interest that conflicts with, or is different from, the interest of the Company and its stockholders.
- Policies on Business Ethics and Conduct
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- The Board has adopted a Code of Conduct applicable to all directors, officers, and employees and makes it available to the public. The Code of Conduct also complies with the provision of Item 406 of Regulation S-K that requires a code of ethics applicable to the principal executive, financial, and accounting officers which includes such standards as are reasonably necessary to promote the ethical handling of conflicts of interest, full and fair disclosure, and compliance with laws, rules, and regulations.9
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- Employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of our Code of Conduct. The Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. We currently have these procedures in place, and we will monitor any rules adopted by the SEC to determine whether we need to modify our process. The Company also encourages customers, vendors, and interested parties to report any conduct that they believe in good faith to be an actual or apparent violation of our Code of Conduct.
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- At any time, for any reason, employees who wish to maintain anonymity and report any actual or potential violation of this Policy or other ethics issues (including any concerns about accounting, internal accounting controls or auditing matters), may call NAVEX Global at the phone number(s) below or submit an online report via https://reportlineweb.com/diodes. NAVEX Global is not staffed by personnel affiliated with the Company and is the independent hotline service retained by the Company to handle any anonymous calls regarding compliance issues.
Location |
First Stage Phone Number10 |
Second Stage Phone Number |
United States |
855-316-2192 |
Applicable |
China (North, Beijing) |
10-811 |
855-316-2192 |
China (North, Beijing) |
108-888 |
855-316-2192 |
Germany |
0-800-225-5288 |
855-316-2192 |
Japan (NTT) |
0034-811-001 |
855-316-2192 |
Japan (KDDI) |
00-539-111 |
855-316-2192 |
Japan (Softbank Telecom) |
00-663-5111 |
855-316-2192 |
Korea |
00-309-11 |
855-316-2192 |
Korea |
00-729-11 |
855-316-2192 |
Korea |
00-369-11 |
855-316-2192 |
Taiwan |
00-801-102-880 |
855-316-2192 |
United Kingdom |
0-800-89-0011 |
855-316-2192 |
United Kingdom |
0-500-89-0011 |
855-316-2192 |
United Kingdom |
0-800-013-0011 |
855-316-2192 |
- Communication with Stockholders and External Entities
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- The Chairman and Chief Executive Officer are responsible for establishing effective communications with the Company’s stakeholders, i.e., stockholders, customers, company associates, communities, suppliers, creditors, governments, and corporate partners. It is the policy of the Company that only management speaks for the Company.
Chairman of the Board
c/o Richard Dallas White, Company Secretary
Diodes Incorporated
4949 Hedgcoxe Road, Suite 200
Plano, Texas 75024
United States of America
The Chairman of the Board will review all relevant communications with the Board.
- Director Resignation Policy
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- Promptly following the receipt of the final report from the inspector of election relating to an election of directors (other than elections in which the number of nominees exceeds the number of directors to be elected), any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election, will tender his or her resignation for consideration by the Board. Subject to paragraphs 3 and 4 below, the Governance and Stockholder Relations Committee (the “Governance Committee”) will meet to consider the tendered resignation and make a recommendation to the Board concerning the action, if any, to be taken with respect to the resignation.
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- The Board will consider and act upon the Governance Committee’s recommendation within 90 days of certification of the vote at the annual meeting. In considering the resignation, the Governance Committee and the Board will consider all factors they deem relevant, including, without limitation, the underlying reason for the vote result, if known, the director’s contributions to the Company during his or her tenure, and the director’s qualifications. The Board may accept the resignation, refuse the resignation, or refuse the resignation subject to such conditions designed to cure the underlying cause as the Board may impose.
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- Subject to paragraph 4 of this Director Resignation Policy, any director nominee who tenders a resignation pursuant to the foregoing policy will not participate, as a member of either the Governance Committee or of the Board, in any deliberations concerning his or her resignation or the resignation of any other director nominee who similarly tendered his or her resignation by virtue of the vote at the same annual meeting of stockholders. If with respect to the same annual meeting of stockholders a majority of the members of the Governance Committee are required to tender their resignation pursuant to this policy, then, provided that there are at least two directors on the Board whom the Board has determined to be “independent” pursuant to this policy and who are not required to tender their resignations in connection with the same annual meeting of stockholders (the “Non-Tendering Directors”), the Board will establish an ad hoc committee comprised of Non-Tendering Directors, and such committee will assume the role of the Governance Committee with respect to the tendered resignations. Notwithstanding the foregoing, if there are not at least two Non-Tendering Directors on the Board in connection with an annual meeting of stockholders, then the Board will consider the tendered resignations without the prior recommendation of a Board committee.
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- Notwithstanding anything to the contrary in this Director Resignation Policy, if the only directors who are not required to tender their resignations pursuant to these guidelines in connection with the same annual meeting of stockholders constitute three or fewer directors, then all the independent directors on the Board will participate in the Board's consideration of whether to accept or reject the tendered resignations (whether the Board's consideration follows a prior recommendation of the Governance Committee or a committee of Non-Tendering Directors or whether there is no Board committee involvement pursuant to paragraph 3 above), provided that a director will not participate in deliberations concerning his or her own resignation.
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- Within four business days of the decision regarding the tendered resignation, the Company will file with the SEC a report on Form 8-K disclosing the decision with respect to the resignation, describing the deliberative process and, if applicable, the specific reasons for rejecting the tendered resignation.
4 Nasdaq Rule 5605(c)(3); Sarbanes-Oxley Act of 2002, Section 301; SEC Rule 10A-3.