ETHICS, COMPLIANCE AND ACCOUNTABILITY INTEGRATED INTO ALL PRACTICES
Intercontinental Exchange’s Board of Directors sets high standards for the Company’s employees, officers and directors. The Board oversees, counsels and directs management in the long-term interests of the Company and our stockholders. The Board is regularly engaged in business strategy, risk oversight, financial reporting, succession planning and corporate responsibility and Board members are actively involved in various committees.
The Nominating and Corporate Governance Committee (NCGC) assists the Board in identifying and attracting highly qualified individuals to serve as directors and actively monitors the Board’s skill sets and diversity so it is in a position to address any needs that arise. This committee also develops and maintains corporate governance guidelines and oversees the annual evaluation of the Board and its committees.
We recognize the importance of Board independence and only our Chairman and CEO, who also is the Company’s founder, is not independent. The remaining directors are independent in accordance with the requirements of the New York Stock Exchange. Each person serving as a director must devote time and attention to meetings and committee responsibilities.
Each of the Board committees is governed by written charters that outline specific roles and responsibilities. Each committee consists of at least three independent directors.
Each committee meets at least four times a year in person with additional conference calls throughout the year. Our Board regularly reviews our corporate governance policies and practices and we believe that our overall governance structure is stockholder-friendly.
Intercontinental Exchange’s Board is committed to ongoing improvements and it continued to strengthen its governance structure in 2016 and 2017. Key among the enhancements was the adoption of proxy access on a 3-3-20-20 basis. While ICE’s stockholder rights provided opportunities for investors to nominate directors for consideration before proxy access, now, with the adoption of proxy access, any qualified stockholder can nominate a candidatefor election to the Board of Directors based on the following criteria:
Each year, our directors appoint an independent director to serve as Lead Independent Director for a one-year term. The Lead Independent Director has specific responsibilities, including helping set the agenda for meetings and chairing executive sessions with the independent directors.
BOARD REFRESHMENT AND TENURE
Given the complexity of our various businesses we believe that it is in the best interest of our stockholders to ensure that we have the right mix of directors. That includes those with strong institutional knowledge that can guide us based on experience as well as newer members that bring fresh perspectives to the boardroom. Our Board believes fixed limits on director tenure is not currently in the best interests of our company and its stockholders as it might deprive us of critical experience and institutional knowledge. However, our Board has demonstrated a commitment to refreshment and it uses a robust annual evaluation process to solicit feedback from directors to guide those decisions. In 2016, three of our long-serving Board members were not re-nominated for election, including the longest tenured Board member. We added three women to our Board in 2017 and added a cyber security expert in late 2016.
Today, five of our directors have been on our board for less than five years. Recent board additions include:
The Rt. Hon. the Lord Hague of Richmond
The Rt. Hon. the Lord Hague of Richmond joined our Board in September 2015. He also serves as Chairman of the Board of Directors of ICE Futures Europe, our London-based global futures and options exchange subsidiary. Lord Hague served as a Member of the UK Parliament from 1989 to 2015. He introduced the landmark Disability Discrimination Act in 1995 as the Minister of State responsible for Social Security and Disabled People and, in the same year, was appointed Secretary of State for Wales by Prime Minister John Major. He was leader of the Conservative Party from 1997 to 2001. He served as Foreign Secretary from 2010 to 2014, as well as First Secretary of State, a role he carried with him when he became Leader of the House of Commons from 2014 to 2015 before retiring from British politics at the General Election. Prior to his service in Parliament beginning in 1989, Lord Hague was a management consultant at McKinsey & Co Inc. from 1983 to 1988 and worked for Shell (UK) Limited from 1982 to 1983. Currently, Lord Hague frequently carries out speaking engagements on regulatory and political matters. Lord Hague earned a First-Class Honours in Philosophy, Politics, and Economics from Oxford University and an MBA with distinction from the Institut Europeen d’Administration des Affaires (INSEAD). Lord Hague was granted a life peerage in August 2015 and is a member of the House of Lords.
Tom Noonan joined our Board in September 2016. He is a founding partner of TechOperators LLC and Chairman of TEN Holdings, LLC. Most recently, he was the General Manager of the Energy Management business of Cisco, following the acquisition of JouleX in 2013, where he was co-founder and CEO. Noonan founded Actuation Electronics and Leapfrog Technologies as well as co-founded Endgame Security, a leading provider of software solutions to the U.S. Intelligence Community and Department of Defense. Noonan co-founded Internet Security Systems (ISS), where he served as Chairman, President and Chief Executive Officer prior to its acquisition by IBM in 2006. In 2002, President Bush appointed Noonan to serve on the National Infrastructure Advisory Council (NIAC), a White House homeland defense initiative that protects information systems critical to the nation’s infrastructure, where he continues to serve in that role. Noonan currently serves on the Board of Directors of Manhattan Associates since 1999. Noonan earned a Bachelor of Science degree in Mechanical Engineering from the Georgia Institute of Technology and a CSS in Business Administration and Management from Harvard University.
Ann Cairns joined our Board in March 2017. She also serves as Chair of the Board of Directors of ICE Clear Europe, the London-based clearing house and a subsidiary of ICE. Cairns brings more than 20 years’ experience across international business, risk management and financial sectors. Currently, she serves as president, International Markets for Mastercard, responsible for the management of all markets and customer-related activities outside North America; a role she has held since August 2011. From 2008 to 2011, Cairns was a Managing Director and Head of the Financial Industry Services group for Europe with Alvarez & Marsal in London where she oversaw the European liquidation of Lehman Brothers Holdings International. Cairns has held several global management positions where she led operations in Europe, U.S. and Japan, including Chief Executive Officer, Transaction Banking at ABN-AMRO in London. At the start of her career, she spent time as an award-winning research engineer, culminating as the head of Offshore Engineer-Planning for British Gas and was the first woman qualified to go offshore in Britain. Cairns served as a Director of AstraZeneca from 2014 to April 2017. Cairns received a Bachelor of Science in Pure Mathematics at Sheffield University and a Master of Science in Statistics from Newcastle University, UK.
Duriya Farooqui joined the Board in March 2017. Farooqui brings more than a decade’s experience in international policy, complex efficiency implementation, and economic development. She also serves on the boards of certain NYSE U.S. regulated exchanges and NGX. Farooqui is Executive Director of Atlanta Committee for Progress (ACP), a coalition of leading CEOs focused on critical issues for Atlanta. This unique public-private partnership focuses on priorities for the City in collaboration with the Mayor of Atlanta. Before joining ACP in May 2016, Farooqui was a principal at Bain & Company. Her executive consulting spanned across customer analytics, pricing, divestitures, transformations and strategy. Prior to 2014, Farooqui served as Chief Operating Officer for the City of Atlanta. She managed all operating departments, including public safety agencies and Hartsfield-Jackson Atlanta International airport, with a $2 billion budget and over 7,000 employees. She joined the City of Atlanta in 2007 and served as a Director, Deputy Chief Operating Officer and Chief Operating Officer across six years of public service. At the start of her career, she worked with the Center for International Development at Harvard University, The World Bank, and the Center for Global Development. Farooqui holds an M.P.A. in International Development from the Kennedy School of Government at Harvard University, and a B.A. in Economics and Mathematics from Hampshire College.
Sharon Bowen joined the Board in December 2017. She also serves on the boards of certain NYSE U.S. regulated exchanges. Bowen brings more than 35 years of regulatory, securities, and public policy expertise. Most recently, she served as a Commissioner of the U.S. Commodity Futures Trading Commission (CFTC) from 2014 - 2017. During that time, she was a sponsor of the CFTC Market Risk Advisory Committee. Bowen was previously confirmed by the U.S. Senate and appointed by President Obama on February 12, 2010 to serve as Vice Chair of the Securities Investor Protection Corporation (SIPC). She assumed the role of Acting Chair in March 2012. Prior to her appointment to the CFTC, she was a partner in the New York office of Latham & Watkins LLP. Bowen’s broad and diverse corporate and transactional practice of almost 32 years began in 1982 when she started her career as an associate at Davis Polk & Wardwell. She joined Latham as a senior corporate associate in the summer of 1988 and became a partner January 1991 and continued at Latham & Watkins LLP until 2014. Bowen earned a B.A. in Economics from the University of Virginia, MBA from the Kellogg School of Management and J.D. from Northwestern University School of Law.
Well-Rounded Skill Sets
We believe that each of our current Board members has unique experiences and skill sets that give Intercontinental Exchange stockholders a well-rounded leadership team. Taken together, the backgrounds and skill sets of our Board positions them for effective oversight and strategic counsel to management.
BOARD MEMBER BACKGROUNDS CROSS A WIDE RANGE OF PERSPECTIVES
We believe the diversity and strong mix of skill sets on our Board strengthens our company and adds to stockholder value.View Full List of Board Members and Biographies
Currently, our Board has 12 members, four of whom are female. In recent years, we have actively recruited additional candidates who are women, minorities or cyber security experts. Those efforts resulted in the additional Board members listed above.
Additionally, we have been aggressive in adding to the female representation on our 17 subsidiary boards, which now comprise 30 percent women.
Intercontinental Exchange focuses on ensuring strong relationships with all stakeholders — from customers and stockholders, to regulators and those in the communities where we live and work. We believe in open and transparent communication, and we value the feedback we get from these groups.
We regularly engage with both our stockholders and prospects about our business operations through quarterly earnings reports, investor meetings and conferences. In 2016, we expanded on our governance activities by conducting a governance road show. We were pleased to share the progress we made on board diversity and board member refreshment.
We received input on a range of topics, including executive compensation programs, board refreshment and evaluation, board diversity, cyber security and risk management, human capital management and sustainability. We appreciate all of the feedback and will continue to take it into account as we further develop our work in these areas. We will continue to provide updates on our progress through our quarterly reports, proxy, annual report and annual corporate responsibility reports. We look forward to continued dialogue and interactions with our investors and industry counterparts on ESG topics.
PERFORMANCE BASED COMPENSATION
Intercontinental Exchange provides a well-balanced andperformance-based executive compensation program.We believe that this philosophy aligns company, officer,employee and stockholder interests, and providesincentives to meet or exceed business objectives.
Our Named Executive Officer compensation program isweighted toward performance and is aligned with thecompany’s enterprise goals and strategy. We continue toemphasize variable incentive compensation, rather thanfixed, which is consistent with our philosophy.
Further, performance measures are company-wide, rather than business unit specific.
Our compensation program is designed to:
We have a rigorous goal-setting process that is directly tied to compensation plans and is overseen by our Board of Directors. Annual cash bonus and performance-based stock awards are based on ambitious financial targets set for the company. In addition to the performance-based compensation program, our Board is focused on compensation practices that are well recognized as part of strong governance standards. They include:
For more information on compensation changes for2017, please see the ICE Notice of 2017 Annual Meeting and Proxy Statement.
Risk Management & Business Continuity
Managing Risk and Ensuring Business Continuity
As a global company with locations spread around the world, we must be prepared to respond to a wide range of issues and maintain seamless, secure operations. Thousands of companies rely on us to help them raise capital, manage risk and access data. Our risk management programs are designed to provide for the security and safety of our operations, safeguard our people and our facilities and mitigate any business disruption. We take seriously the trust our customers have in our technology and the responsibility to protect their data.
Our Board of Directors is responsible for overseeing ICE’s risk management process, which includes management of general risks, as well as particular risks facing our various businesses. With the assistance of our Audit and Risk Committees and our Subsidiary Boards, the Board oversees that our assets are properly safeguarded, that appropriate financial and other controls are maintained, and that our business is conducted prudently and in compliance with applicable laws, regulations and our corporate governance guidelines.
Enhanced Global Risk Management Team
Management is responsible for identifying risk and risk controls related to significant business activities, mapping the risks to the Company’s enterprise strategy and developing programs to identify risks and control them appropriately. Intercontinental Exchange has a detailed Enterprise Risk Management team, led by the Chief Corporate Risk Officer, a position that the Board put in place in 2014. In 2016, we expanded the team to include regional Chief Risk Officers (CROs) that oversee each business unit: clearing houses, exchanges, trade repositories and the data and benchmark services. The business unit CROs report to the ICE Corporate Risk Officer.
We have adopted a three-line defense model to enterprise risk management, a concept endorsed by the Institute of Internal Auditors and published in January 2013. This framework helps ensure strong redundancies and preparation.
The first priority for the regional CROs was to facilitate and accelerate the establishment of the components of a robust “second line” enterprise risk management program at the business units they oversee. The CROs work together to ensure that our program is implemented consistently across the company. Consistency of process and terminology is extremely important and supports efficient risk communications to oversight committees and boards, between the subsidiaries, and to Intercontinental Exchange, the parent company.
The basic components of our enterprise risk management program include a Board-level Risk Appetite Framework and a management-level Operational Risk Framework. The Risk Appetite Framework serves to engage a subsidiary’s board in the risk oversight of the company. It establishes risk appetite statements, metrics and thresholds that allow monitoring and remediation of risk at a level appropriate to board oversight responsibilities. The Operational Risk Framework establishes a formal process for management to identify risk, assess risk, monitor risk and report risk on an ongoing basis. It establishes appropriate risk limits and, as a result, provides a process for the second line to monitor risk. The operational framework also provides the process that allows the second line to challenge management’s controls.
Our customers rely on us for the delivery of time-sensitive, up-to-date and high-quality financial market data, analytics and trading solutions. We rely on redundant systems and detailed disaster recovery plans to deliver timely, reliable products and services to our customers. We operate an Information Security program that is designed to prevent, detect, track and mitigate cyber incidents.
The Intercontinental Exchange Crisis Management team handles our end-to-end response to any potential issues and regularly conducts full-scale global drills to ensure our processes are ready to be implemented. All mission-critical functions are tested for responsiveness and business continuity. Following each acquisition of a new company, this process is reviewed, enhanced and practiced to ensure crisis management procedures are in place across our entire organization.
A Culture of Compliance
Our values define our culture and how we operate. They drive how we live and work each day. Our success rests on the fact that we operate as one company — one culture and one team. Operating a global business is complex and regulatory and policy environments continue to change. This requires strong standards and procedures.
We believe that strong leadership and governance continue to enhance and deliver stockholder value.
Our Board and management team sets the “tone from the top” for our ethical culture and holds all employees and consultants accountable for operating ethically and in compliance with labor laws, financial regulations and other standards that apply to our businesses. We provide the relevant tools, resources and training to help employees succeed and to recognize ethical decision-making.
We rely on a combination of online and instructor-led training sessions to ensure that all employees are well informed. We use regular communications throughout the year and intranet resources to help drive an ethical and legal-compliant culture.
The U.S. and U.K. are two of our key markets. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits bribery of government officials, and the U.K. Bribery Act prohibits all bribery of both government officials and private individuals, and includes facilitation payments in its prohibitions. We train and monitor our employees to ensure compliance with regulations across all markets where we operate.
In 2016, all six of our corporate compliance policies became available in 10 languages: Arabic, Dutch, English, French, German, Hebrew, Italian, Japanese, Spanish Castilian and Spanish Latin American. These policies apply to all employees, consultants and contractors. Additionally, certain employees are also subject to compliance policies that are business unit specific.
Transparency and Accountability
Our principles are built around:
Global Corporate Compliance Policies
We dedicate significant resources to provide training on these policies. New employees go through a detailed orientation program and all employees are required to take web-based training periodically throughout employment. These self-timed sessions provide specific feedback to employees and the global compliance team on areas that may require additional training.
Employment laws differ around the world and our ethics and compliance teams work together with our human resource professionals to promote a work environment that encourages transparency and accountability throughout our offices. We maintain a robust system for reporting misconduct and our employees are encouraged to raise any questions concerning ethics and report all concerns. We have various channels for our employees to voice concerns — via the web or a toll-free hotline — that can be accessed anonymously or with full disclosure. Our non-retaliation policy protects those who report an issue and all concerns are investigated. The Intercontinental Exchange Audit Committee Chair receives a report of the complaints and concerns related to corporate misconduct and internal controls or auditing matters, and may designate a person within the company to assist with an investigation or review.
Complaints or concerns related to Intercontinental Exchange accounting, auditing, internal controls or financial reporting can be submitted anonymously and confidentially, or with full disclosure. Our employees around the world have access to the Whistleblower Hotline which can be easily found on the company’s internal website. For external parties wishing to access the Whistleblower Hotline, they can refer to the Global Code of Business Conduct policy.
We also have separate policies on the following business procedures which are available here.
We work with regulators and policy makers around the world on the supervision, compliance and reliable operation of our exchanges and clearing houses. As a leader in the development of transparent, global markets, we work with market participants to maintain confidence and integrity in the markets we operate.
Our exchanges are responsible for enforcing rules and listed company compliance with applicable listing standards, overseeing regulatory policy determinations, rule interpretation and regulation-related rule development and conducting trade reviews.
Globally Regulated Markets
Our markets are overseen by a number of global regulators including:
Advocacy & Collaboration
We contribute to discussions on policy issues that impact our businesses, industries, employees and the communities in which we operate. We share our knowledge and expertise with legislators, regulators, industry organizations and others to contribute to the development of policy initiatives.
We collaborate with and belong to various industry organizations around the world to help further engage and understand different perspectives from a variety of customers and stakeholders, including:
Our policies prohibit the use of corporate funds to make contributions to any candidates, political committees or other entities organized primarily for political activities under section 527 of the Internal Revenue Code or under 501(c)(4) of the Internal Revenue Code, or to any political party that would use the money to support any candidates. Intercontinental Exchange has a PAC in the U.S., which is supported entirely by voluntary employee and director contributions. A statement of organization for ICE PAC was filed with the Federal Election Commission in January 2008 and all expenditures of the PAC are publicly available at www.FEC.gov.
*Per the ICE-PAC Operating & Political Contribution Guidelines, the above list includes all U.S. trade organizations to which we paid membership dues, special assessments or other payments in excess of $50,000, and to the extent available, the portion of such payments in excess of $50,000 reported by the Company as being used by the association for political purposes.
COLLABORATING ON ESG
As the owner of several global exchanges, we support and promote the principles of strong governance. We are a member of the World Federation of Exchanges (WFE) and the United Nations Sustainable Stock Exchange Initiative (SSE). Since 2014, we have been a participating member of the WFE’s Sustainability Working Group and we are committed to continue our participation in 2017. Creation of this group in 2014 signaled the industry’s commitment to explore and integrate environmental, social and governance topics. By participating in industry initiatives and forums such as the WFE and the SSE, we continue to be at the table for discussions on these issues and guidelines for issuers across exchanges around the world.
STATEMENT IN SUPPORT OF THE SSE
Intercontinental Exchange (NYSE: ICE) and its subsidiary, the New York Stock Exchange, support the efforts of publicly traded companies to be long-term responsible corporate citizens and stewards of stockholder resources. It may be beneficial to share with stockholders and other stakeholders information on a company’s corporate responsibility efforts by disclosing relevant environmental, social and governance (ESG) indicators tied to a company’s business strategy.
Companies earn the trust of stockholders by delivering financial returns, coupled with responsible stewardship of resources. As a member of the Sustainable Stock Exchange (SSE) Initiative, ICE supports the efforts of the SSE and of NYSE-listed companies to provide ongoing communications and information regarding the quality and quantity of disclosures relating to relevant ESG matters. These efforts may contribute to transparency for all stakeholders.
We are dedicated to serving as a resource for ESG matters to our customers and we launched a dedicated section on our website in March 2017 to support enhanced ESG disclosure. We recognize the importance of ESG considerations in conducting our business, in listing new derivative products for trading, and in acting as a platform for companies listed on the NYSE to share insights, highlight achievements and gain information.
We are taking meaningful steps to encourage ESG disclosure and are doing so in a fashion consistent with the desires and feedback from our stockholders, customers and the NYSE listed companies. The ESG information on our website provides an easily accessible central repository for issuers (and the public) to locate information on third-party resources regarding ESG disclosure. We plan to continue to update these resources as best practices evolve so that our listed companies can stay abreast of market expectations.
2016 Governance, Risk & Compliance Leadership Award Winners
Award winners and finalists were honored at the Governance, Risk & Compliance Leadership Awards on Wednesday, June 8, 2016. The awards were sponsored by Computershare | Georgeson, Diligent Corporation, FTI Consulting, Inc., JamesDruryPartners and Semler Brossy.