Magna International Inc 6-K, filed Mar 28, 2022
Magna International Inc (MGA)
About this 6-K
Magna International Inc filed this 6-K on March 28, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of March 2022
Commission File Number 001-11444
MAGNA INTERNATIONAL INC.
(Exact Name of Registrant as specified in its Charter)
337 Magna Drive, Aurora, Ontario, Canada L4G 7K1
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F o Form 40-F x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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MAGNA INTERNATIONAL INC. | |||
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(Registrant) | |||
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Date: |
March 25, 2022 |
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By: |
/s/ “Bassem Shakeel” | ||
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Bassem A. Shakeel, | ||
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Vice-President and Corporate Secretary | ||
EXHIBITS
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Exhibit 99.1 |
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Exhibit 99.2 |
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Exhibit 99.3 |
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Corporate Governance, Compensation and Nominating Committee Charter approved March 25, 2021. |
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Exhibit 99.4 |
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Exhibit 99.5 |
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MAGNA INTERNATIONAL INC.
BOARD CHARTER
Purpose
This Charter has been adopted by the Board of Directors to assist the Board in the exercise of its responsibilities. This Charter, together with the Corporate Constitution, the charters of the Board’s committees and the various policies, principles, procedures, codes and guidelines adopted by the Board and/or any Board committees from time to time, collectively comprise the Corporation’s overall corporate governance framework.
Where used in this Board Charter, the following terms have the following meanings:
“Act” means the Business Corporations Act (Ontario).
“Board Interlock” means a circumstance in which two directors of the Corporation serve together on the board of directors of another public company.
“Executive Management” means all appointed officers of the Corporation above the level of Vice-President.
“Independent Auditor” means the independent auditor nominated for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Corporation.
“Independent Director” means an individual who meets the independence standards specified under applicable law, currently being Section 1.4 of National Instrument 52-110 of the Canadian Securities Administrators.
Role and Responsibilities of the Board
1. Stewardship Role: The Board is responsible for the overall stewardship of the Corporation. To this end, the Board:
· supervises the management of the business and affairs of the Corporation pursuant to the Act and other applicable law; and
· jointly with Executive Management, seeks to create long-term shareholder value.
2. Specific Responsibilities: In addition to the Board’s legal obligations under the Act and any requirements specified in the Corporation’s articles of incorporation and by-laws, the Board bears responsibility for the following:
Corporate Culture and Governance
a. Oversight and Reinforcement of the Corporate Culture: The Corporation maintains a unique entrepreneurial corporate culture which seeks to encourage productivity, ingenuity and innovation and align the interests of employees, management and shareholders. This corporate culture includes a number of operating principles, including:
· functional and operational decentralization;
· fiscal discipline;
· employee equity participation and profit sharing;
· shareholder profit participation through dividends;
· incentive-based management compensation;
· a commitment to innovation through research and development; and
· support for charitable, cultural, educational, political and other social causes.
The Board shall be responsible for overseeing and reinforcing the Corporation’s entrepreneurial corporate culture which has been essential to the Corporation’s long-term financial success, the creation of long-term shareholder value and its ability to attract, retain and motivate skilled, entrepreneurial employees at all levels.
b. Approach to Corporate Governance and Governance Guidelines: The Board shall oversee the development of the Corporation’s system of, and overall approach to, corporate governance. The Board has delegated to the Corporate Governance, Compensation and Nominating Committee responsibility to review and make recommendations to the Board regarding corporate governance matters.
Management Oversight
c. Selecting the Chief Executive Officer and Overseeing the Hiring of Other Members of Executive Management: The Board is responsible for selecting the Corporation’s Chief Executive Officer. In doing so, the Board shall consider a number of factors, including a candidate’s personal and professional integrity, reputation, achievements, experience, acumen/judgment, leadership qualities, knowledge and understanding of the Corporation’s business environment. Additionally, the Board shall provide oversight and advice with respect to the selection of other members of Executive Management.
d. Satisfying itself as to the Integrity of Executive Management: The Board shall take such actions as it deems necessary to satisfy itself as to the:
· integrity of the Corporation’s Chief Executive Officer and other members of Executive Management; and
· creation and fostering by the Chief Executive Officer and other members of Executive Management of a culture of integrity and ethical business conduct throughout the Corporation.
e. Overseeing Executive Compensation: The Board shall be responsible for ensuring that the Corporation’s system of executive compensation:
· is consistent with the Corporation’s entrepreneurial culture; and
· continues to meet the objectives of attracting, retaining and motivating skilled executives.
The Board has delegated to the Corporate Governance, Compensation and Nominating Committee responsibility for making recommendations to the Board with respect to the:
· Corporation’s overall system of executive compensation; and
· application of such system to members of Executive Management, including with respect to the assessment of the performance of Executive Management and the determination of all direct, indirect and incentive compensation, benefits and perquisites (cash and non-cash) for members of Executive Management.
In addition, the Board shall provide shareholders with an annual advisory vote on the Corporation’s approach to executive compensation, substantially in the form of the following resolution:
“Resolved, on an advisory basis and not to diminish the role and responsibilities of the board of directors, that the shareholders accept the approach to executive compensation disclosed in the Corporation’s information circular delivered in advance of the [insert year] annual meeting of shareholders.”
In the event the annual advisory vote indicates significant opposition to the Corporation’s approach to executive compensation, the Board shall engage with shareholders to better understand the issues of concern and shall take such issues under advisement in determining the changes, if any, to be made to the Corporation’s system of executive compensation.
f. Leadership Development & Succession Planning: The Board shall be responsible for satisfying itself that the Corporation has developed and implemented effective succession plans identifying potential candidates for all positions within Executive Management, management of the Corporation’s Operating Groups and other key positions in the company. In fulfilling its responsibilities, the Board must satisfy itself that the Corporation’s leadership development and succession planning processes:
· have been structured to enable the Board to promptly address an unplanned succession event involving the Corporation’s Chief Executive Officer or other key members of Executive Management; and
· include robust and effective talent management practices to identify, reward, retain and promote high-performing employees.
The Board has delegated to the Corporate Governance, Compensation and Nominating Committee responsibility for reviewing such succession plans and making its recommendations to the Board.
The Board is also involved in management succession and planning through its review of executive officer appointments. In reviewing and appointing the Corporation’s executive officers, the Board shall satisfy itself as to each candidate’s personal and professional integrity, as well as skill and experience for the proposed office.
Corporate Strategy
g. Adoption of a Strategic Planning Process: In respect of each fiscal year, the Board shall:
· meet with applicable members of Executive Management and Operating Group management regarding strategic planning for the Corporation, including identification of future trends, opportunities and risks over a three to seven-year horizon; and
· consider and approve a business plan which addresses such trends, opportunities and risks.
Specific business plans and strategies at both the corporate and Operating Group levels shall be presented by Executive Management and Operating Group management for discussion with the Board. Capital expenditure projections for each fiscal year shall be reviewed and a budget presented for Board approval. Updates on industry trends, product strategies, new product developments, major new business, capital expenditures and specific problem areas/action plans shall be presented by management and discussed as required at regular quarterly Board meetings. The Board has delegated to the Technology Committee responsibility for reviewing and making its recommendations to the Board regarding the impact of technology trends on the Corporation’s business, operations and strategy.
Risk Oversight
h. Identification and Mitigation of Principal Risks: The Board shall satisfy itself that Executive Management maintains effective processes to identify and mitigate the principal business risks faced by the Corporation. The Board has delegated specific risk oversight responsibilities to each of the standing Committees, which shall periodically report to the Board in respect of such activities.
i. Integrity of Internal Controls and Management Information Systems: The Board shall satisfy itself that effective systems are in place to monitor the integrity of the Corporation’s system of internal controls and its critical management information systems. The Board has delegated to the Audit Committee responsibility to review and monitor the effectiveness of such systems and to make its recommendations to the Board.
Communication with Shareholders and Other Stakeholders
j. Shareholder Engagement: The Board recognizes the importance and value of regular, constructive engagement with the Corporation’s shareholders. The Board Chair shall act as the Board’s contact and Board spokesperson in connection with all meetings with shareholders and may be accompanied in such meetings by the Corporation’s most senior investor relations or financial officer or such other officer as may be appropriate to assist in ensuring that discussions do not extend to undisclosed material facts or changes.
k. Communications Policy: The Board shall oversee the Corporation’s programs to effectively communicate with all of its stakeholders, including employees, as well as the general public. Such programs include without limitation: open quarterly webcast conference calls; the Corporation’s website; MagNet (intranet); and the Hotline. The Board shall also satisfy itself that the Corporation maintains appropriate policies regarding corporate disclosure.
Fundamental Corporate Actions
l. Reviewing, Approving and Monitoring Fundamental Corporate Actions: In addition to those specific matters requiring prior Board approval under applicable laws, rules and regulations, or elsewhere in this Charter, the Board shall be responsible for:
· approving the following:
· the Corporation’s interim and annual financial statements, related Management’s Discussion and Analysis of Results of Operations and Financial Position, earnings press releases and other public disclosure documents of the Corporation containing financial information of the Corporation;
· material public disclosures of the Corporation, including all management information circulars/proxy statements, annual information forms/40-Fs and material press releases;
· business plans and capital expenditure budgets;
· material financing activities, whether by way of debt or equity;
· major organizational restructurings (excluding internal reorganizations);
· material acquisitions and divestitures; and
· major corporate policies; and
· recommending the Independent Auditor to shareholders, based on the recommendation of the Audit Committee.
Board Leadership and Structure
3. Board Chair: The Independent Directors shall select from among themselves an Independent Director to act as Chair of the Board. The Board Chair shall preside as chair at all Board and shareholder meetings and carry out such specific duties as set forth in this Board Charter, the Corporation’s general by-law and as otherwise required by the Board from time to time.
4. Separation of Board Chair and Chief Executive Officer Roles: The positions of Board Chair and Chief Executive Officer of the Corporation shall not be occupied by the same person, except on an interim basis following the resignation or termination of a Chief Executive Officer.
5. Board Chair’s Duties: The duties of the Board Chair include:
· presiding as Chair of all Board and shareholder meetings;
· agenda setting for Board meetings;
· representing the Board in discussions with third parties, including shareholder engagement meetings and similar activities with other stakeholders;
· representing the Independent Directors in discussions with Executive Management;
· ensuring that the Board functions independently of management;
· together with the Chief Executive Officer, assisting in recruiting to the Board potential director candidates who have been identified and recommended by the Corporate Governance, Compensation and Nominating Committee;
· overseeing the annual assessment of the effectiveness of the Board and each of its standing committees; and
· performing such other duties and responsibilities as are delegated by the Board from time to time.
6. Effect of Resignation by Chief Executive Officer: A person serving as both a director and Chief Executive Officer of the Corporation shall submit to the Board his or her resignation as a director upon his or her resignation or termination as the Chief Executive Officer. The Corporate Governance, Compensation and Nominating Committee shall consider and make recommendations to the remaining members of the Board as to whether to accept such resignation and, if so, the appropriate effective date thereof to help achieve an orderly transition.
7. Standing Committees: The Board shall have three standing committees:
· Audit Committee;
· Corporate Governance, Compensation and Nominating Committee; and
· Technology Committee.
The purpose, duties, responsibilities and composition of, and other matters relating to, each such committee shall be set forth in a committee charter approved by the Board and each standing committee shall act within and under the mandate set forth in its charter.
8. Special Committees: From time to time, the Board may establish special committees to review and make recommendations on specific matters. Where appropriate, such special committees shall be composed entirely of Independent Directors of the Corporation.
Board Independence and Effectiveness
9. Size: The Board shall consist of such number of directors between five and fifteen as the Board deems appropriate in order to facilitate effective and efficient decision-making. The Board has delegated to the Corporate Governance, Compensation and Nominating Committee the responsibility for considering and making recommendations to the Board with respect to Board size. Given the Corporation’s size, scope and complexity, as well as the need for a diversity of director views, it is expected that the Board will typically include at least nine directors.
10. Independence: At least two-thirds of the Corporation’s directors shall be Independent Directors. The Board shall annually determine the independence of each director, based on the recommendations of the Corporate Governance, Compensation and Nominating Committee.
If less than two-thirds of the Corporation’s directors are Independent Directors, including as a result of an Independent Director ceasing to be a director for any reason, the Board shall act promptly and in any event within 120 days use all reasonable efforts to restore the two-thirds independence ratio.
11. Board Diversity Policy: The Board shall consist of directors who represent a diversity of knowledge, skills, experience, perspectives and backgrounds which will assist the Board in fulfilling its duties. In addition, the Board aspires to achieve gender parity by [December 31, 2023], subject to a minimum of not less than 30% female directors prior to that time. For purposes of this target, gender parity will be achieved if the balance between male and female directors ranges between 40% and 60%, assessed over a three-year timeframe. Beyond gender, diversity, the Board’s composition will generally be reflective of the Corporation’s customers, shareholders and employees, as well as the geographic markets in which it operates.
12. Individual Attributes: At a minimum, each director should possess the following attributes:
· personal and professional integrity;
· significant achievement in his or her field;
· experience and expertise relevant to the Corporation’s business;
· a reputation for sound and mature business judgment;
· the commitment and ability to devote the necessary time and effort in order to conduct his or her duties effectively; and
· general ability to read and understand financial statements.
13. Director Recruitment, Tenure and Succession: The Corporate Governance, Compensation and Nominating Committee shall oversee the Board’s succession practices and make recommendations to the Board regarding director recruitment, tenure and Board refreshment.
In order to promote a diverse Board consistent with the policy in Section 11 of this Charter, the Corporate Governance, Compensation and Nominating Committee shall establish recruitment procedures intended to elicit a diverse range of candidates, without discrimination on the basis of any diversity attributes, including age, gender, cultural background, national origin, religion, physical ability and sexual or gender orientation.
Decisions regarding continued service on the Board by an Independent Director shall be based primarily on the Board’s skills needs, the Independent Director’s performance, as determined through the Board’s annual effectiveness evaluation, as well as his or her continued independence. As a general rule, an Independent Director shall serve for a term of up to 12 years.
14. Interlocks: In selecting candidates for nomination as directors of the Corporation, the Board has charged the Corporate Governance, Compensation and Nominating Committee with the responsibility of managing Board Interlocks. The Corporate Governance, Compensation and Nominating Committee shall not propose a slate of directors for election by shareholders if the election of those directors would result in more than two concurrent Board Interlocks. During the period between annual shareholder meetings, directors are required to advise the Chair of the Corporate Governance, Compensation and Nominating Committee of their intention to join or be nominated for election to the Board of another public company in order to help ensure that the Board does not exceed two Board Interlocks.
15. Overboarding: In order to be able to devote the necessary time and effort to the activities of the Board and its committees, a director should not sit on a total of more than four public company boards without the prior approval of the Corporate Governance, Compensation and Nominating Committee. A director who serves as a chief executive officer (or equivalent position) of a public company or similar commercial enterprise should not sit on more than one public company board in addition to the company of which he or she is a chief executive officer without the prior approval of the Corporate Governance, Compensation and Nominating Committee.
16. Material Change in Director’s Status: Each director shall be required to notify the Chair of the Corporate Governance, Compensation and Nominating Committee of any material change in his or her circumstances which could adversely impact the director’s ability to carry out his or her duties on the Board and any Committees. Such circumstances could include material changes to the director’s:
· health;
· qualification as an Independent Director;
· primary occupation;
· country of primary residence; and/or
· inability to meet the attendance requirement contained in this Charter.
17. Access to Outside Advisors: The Board and its Committees may retain and compensate outside legal and other advisors at the expense of the Corporation where reasonably required to assist and advise the Board and Committees in carrying out their duties and responsibilities.
18. Prohibition on Loans to Directors and members of Executive Management: The Corporation shall not make personal loans or extensions of credit to directors of the Corporation or members of Executive Management.
19. Board and Chair Evaluation: The Board Chair, in conjunction with the Corporate Governance, Compensation and Nominating Committee, is responsible for assisting in the annual evaluation of the effectiveness of the Board as a whole, the committees of the Board and individual directors. The Board Chair may determine the most effective way to complete the evaluation in any particular year, including by: written questionnaire; interviews of Independent Directors by the Board Chair; and/or interviews of Independent Directors by a third party. Feedback from the annual evaluation shall be considered by the Corporate Governance, Compensation and Nominating Committee and the Board in connection with the nomination of directors for election by shareholders.
Majority Voting Policy
20. Majority Voting: Any director nominee who is elected to the Board in an uncontested director election in circumstances where the number of votes withheld against such director exceeds the number of votes cast in his or her favour (“an Affected Director”) shall immediately tender his or her written resignation to the Chair of the Corporate Governance, Compensation and Nominating Committee (with a copy to the Secretary of the Corporation) after the shareholder meeting at which the election occurred. Such resignation shall take effect upon acceptance in accordance with this Section 20.
The Corporate Governance, Compensation and Nominating Committee of the Board shall consider the Affected Director’s resignation. Absent exceptional circumstances, the Corporate Governance, Compensation and Nominating Committee shall recommend and the Board shall accept the Affected Director’s resignation, effective no more than 90 days following the shareholder meeting at which the election occurred. The Corporation shall promptly disclose in a press release, a copy of which is provided to the Toronto Stock Exchange, the determination made by the Board, including, if applicable, the nature of the exceptional circumstances underlying a refusal to accept an Affected Director’s resignation.
An Affected Director will not participate in the recommendation of the Corporate Governance, Compensation and Nominating Committee or the determination made by the Board. If a quorum of the Corporate Governance, Compensation and Nominating Committee cannot be obtained due to the service on the Corporate Governance, Compensation and Nominating Committee of one or more Affected Directors, the Board shall consider the resignation and make the determination.
Upon acceptance of an Affected Director’s resignation, the Board may (subject to applicable law):
· leave the vacancy unfilled until the next annual meeting of the Corporation;
· fill the vacancy through the appointment of a new director (other than the Affected Director); or
· call a special meeting of shareholders at which a director nominee (other than the Affected Director) will be proposed for election by shareholders.
For greater certainty, this majority voting policy does not apply in any case where the number of individuals nominated for election exceeds the number of directors to be elected, including as a result of a proxy contest.
21. Disclosure of Detailed Voting Results: Promptly after a shareholders’ meeting, the Corporation shall disclose in a press release the number and percentage of votes cast For and Withheld against any director, as well as those cast For and Against each other matter voted upon by shareholders.
Director Orientation, Education and Access to Senior Employees
22. Director Orientation: New Independent Directors shall be provided with a detailed overview of the Corporation’s business in order to assist them in contributing effectively to the Board. Management shall provide new Independent Directors with an orientation manual, the opportunity to meet with Executive Management and operational personnel and the opportunity to visit the Corporation’s manufacturing and other facilities.
Additionally, the Board may undertake or arrange for continuing director education activities and programs on subjects that would assist directors in carrying out their duties. Individual directors are encouraged to participate in external director education activities at the Corporation’s expense and shall be reimbursed for their costs in doing so.
23. Director Education: The Corporation shall offer directors a continuing director education program to assist them in furthering their understanding of the Corporation’s business and the automotive industry, directors’ duties and responsibilities and topical issues and emerging trends, including in such areas as corporate governance, risk management, development of human capital, executive compensation, ethics and compliance, mergers and acquisitions, as well as legal and regulatory matters. The educational priorities identified by the Board from time to time shall be addressed in the development of the director education program for any year. The Corporation’s director education program may include different elements, including: site visits to the Corporation’s facilities or those of its customers or suppliers; in-boardroom presentations by members of management or external advisors; attendance at third-party led training programs; membership in applicable organizations; and subscriptions to relevant periodicals or other educational resources. Additionally, Independent Directors are encouraged to participate in additional director education activities and the Corporation shall make available a reasonable budget from which directors’ expenses in connection with such activities can be funded.
24. Access to Senior Employees: Independent Directors are invited to contact senior employees of the Corporation, including the Corporation’s treasurer, senior accounting officer, controller, head of internal audit, senior tax officer, corporate secretary and others, without Executive Management present.
Board Compensation and Director Equity Ownership
25. Board Compensation: The Board shall approve appropriate compensation, benefits and perquisites for Independent Directors following a review by, and recommendations of, the Corporate Governance, Compensation and Nominating Committee. In establishing such compensation, the Corporate Governance, Compensation and Nominating Committee shall seek to achieve the following objectives:
· Independent Directors should be competitively compensated in relation to peer group companies of similar size, complexity, geographic scope and other relevant measures;
· the compensation system should align the interests of Independent Directors with those of the Corporation’s shareholders through one or more equity-based components; however, Independent Directors’ compensation shall not include stock options;
· the compensation system should appropriately recognize and compensate Independent Directors who serve as committee members and committee chairs;
· appropriate recognition should be given to the significant contribution in time and effort required from the Board Chair; and
· generally, non-Independent Directors should not receive additional compensation for serving on the Board.
The current schedule of retainers and fees payable to Independent Directors is attached as Schedule A to this Board Charter.
26. Independent Director Share Maintenance Requirement: Independent Directors are required to own common shares and/or deferred share units (“DSUs”) of the Corporation representing five times the annual retainer payable to Independent Directors. Compliance with such share maintenance requirement shall be determined by dividing:
· five times the annual retainer; by
· the average of daily closing prices on The New York Stock Exchange of the Corporation’s common shares for the prior five calendar years,
with the result obtained being the number of shares and/or DSUs required to be held.
New directors are entitled to a period of five years from the date first elected or appointed to the Board to accumulate the required number of shares or DSUs.
Board Meeting Administration
27. Meetings: The Board shall hold at least five scheduled meetings each year, consisting of four quarterly meetings and one strategic planning and business plan review meeting. Other meetings shall be scheduled as required. The Independent Directors shall hold sessions without non-Independent Directors and other members of management present at each scheduled meeting.
28. Minimum Attendance: Each director of the Corporation is expected to use all reasonable efforts to attend a minimum of 75% of all regularly scheduled Board and applicable Committee meetings, except to the extent that any absence is due to medical or other valid reasons.
29. Meeting Agendas: The Board Chair and the Chief Executive Officer, shall establish a preliminary agenda for each Board meeting with the assistance of the Secretary of the Corporation. Any director may request items to be included on the agenda for any meeting.
30. Meeting Materials: To the extent reasonably practicable, meeting materials shall be distributed sufficiently in advance of Board meetings to permit directors to properly review and consider such materials.
Review and Revision of Charter
31. Annual review: The Board shall annually review this Charter and revise it from time to time in such manner as the Board sees fit. The Board has delegated to the Corporate Governance, Compensation and Nominating Committee the responsibility for recommending changes to this Board Charter.
Board Approval Date: March 25, 2021
SCHEDULE A
SCHEDULE OF RETAINERS AND FEES PAYABLE TO INDEPENDENT DIRECTORS
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Annual retainer(1) |
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150,000 |
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Comprehensive (flat fee) Board Chair annual retainer(2) |
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500,000 |
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Committee members annual retainer |
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25,000 |
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Additional Committee Chair annual retainer |
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Audit |
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25,000 |
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CGCNC |
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25,000 |
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Technology Committee |
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25,000 |
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Special Committees |
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25,000 |
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Per meeting fee |
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2,000 |
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Written resolutions |
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400 |
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Additional services (per day) |
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4,000 |
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Travel days (per day) |
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4,000 |
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Notes:
1. Minimum 60% DSUs until minimum equity maintenance requirement met; thereafter, minimum 40% DSUs.
2. Includes all retainers and fees, other than Special Committee retainers and fees.
MAGNA INTERNATIONAL INC.
AUDIT COMMITTEE CHARTER
Purpose
This Charter has been adopted by the Board of Directors of the Corporation (the “Board”) to assist the Audit Committee (the “Committee”) and the Board in the exercise of their responsibilities, particularly by defining the scope of the Committee’s authority in respect of financial and audit-related matters delegated to it by the Board.
Where used in this Charter, the term “Executive Management” has the meaning ascribed to it in the Corporation’s Board Charter.
Role and Responsibilities of the Committee
1. The Board has delegated to the Committee the responsibility for the following matters:
Independent Auditor
(a) Selection and Compensation of Independent Auditor: recommending to the Board:
· the independent auditor to be nominated for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attest services for the Corporation (“Independent Auditor”); and
· the compensation of the Independent Auditor.
(b) Oversight of Independent Auditor: overseeing the work of the Independent Auditor, which shall report directly to the Committee, including with respect to the resolution of disagreements between Executive Management and the Independent Auditor regarding financial reporting.
(c) Pre-Approval of Audit Fees: pre-approving, or establishing procedures and policies for the pre-approval of, the engagement and compensation of the Independent Auditor in respect of the provision of all audit, audit-related, review or attest engagements required by applicable law.
(d) Pre-Approval of Non-Audit Services: pre-approving all non-audit services permitted to be provided by the Independent Auditor in accordance with applicable law and rules governing the Independent Auditor, provided that the Committee may pre-approve certain fixed fee or time and materials services within designated thresholds on an annual basis and further provided that the Committee may delegate to the Committee Chair, or such other member or members of the Committee that it deems appropriate, certain pre-approval authority provided that any such approval granted by such persons shall be reported at the next regularly scheduled meeting of the Committee.
(e) Audit Scope: reviewing and approving the objectives and general scope of the external audit (including the overall audit plan, the proposed timing and completion dates) and discussing the external audit with the Independent Auditor.
(f) Independent Auditor’s Quality Control Procedures, Performance and Independence: evaluating the quality control procedures, performance and independence of the Independent Auditor in carrying out its responsibilities, including by obtaining and reviewing at least annually a report by the Independent Auditor describing:
· the firm’s internal quality-control procedures;
· any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and
· all relationships between the independent auditor and the Corporation.
(g) Staffing of Audit Team: reviewing the experience and qualifications of the Independent Auditor’s audit team assigned to the audit of the Corporation and making annual recommendations to the Board as to the need (if any) for rotation of the Independent Auditor or the members of the Independent Auditor’s audit team assigned to the audit of the Corporation.
(h) Required Disclosures: reviewing and discussing with the Independent Auditor all disclosures required by applicable accounting or other regulators to be reviewed with respect to the conduct of the audit and quarterly review of the interim financial results.
(i) Relationship between Independent Auditor and Management: satisfying itself generally that there is a good working relationship between Executive Management and the Independent Auditor, and reviewing
· any management representation letters;
· the Independent Auditor’s management letters and management’s responses thereto;
· the Independent Auditor’s schedule of unadjusted differences; and
· any other reports of the Independent Auditor,
as well as discussing any material differences of opinion between management and the Independent Auditor.
(j) Hiring from Independent Auditor: reviewing and approving the hiring of partners, employees and former partners and employees of the present and any former Independent Auditor who were engaged on the Corporation’s account within the last three years prior to such hiring.
Internal Controls
(k) System of Internal Controls: satisfying itself that Executive Management has:
· established and is maintaining an adequate and effective system of internal control over financial reporting and information technology general controls (“ITGCs”), and
· is responding on a timely basis to any material weaknesses or significant deficiencies which have been identified,
including by meeting with and reviewing reports of the Corporation’s Internal Audit Department (“IAD”) and the Independent Auditor relating to the Corporation’s internal controls and ITGCs.
(l) Reports on Internal Controls: annually reviewing:
· Executive Management’s report relating to the effectiveness of the Corporation’s disclosure controls and procedures, internal control over financial reporting, changes in internal controls over financial reporting and ITGCs; and
· the Independent Auditor’s report on internal controls under standards of the United States Public Company Accounting Oversight Board.
Internal Audit
(m) Internal Audit Department: overseeing the appointment, termination and replacement of the senior management of IAD, the scope of the IAD’s work plan and budget, as well as the overall performance, staffing and resources of the IAD.
Accounting Matters
(n) Critical Accounting Policies: reviewing and discussing with the Independent Auditor:
· the selection, use and application of, as well as proposed material changes to, critical accounting policies, principles, practices and related judgments; and
· alternative GAAP treatments for policies and practices relating to material items, including the ramifications of such alternative disclosures or treatments and any recommended treatment,
to satisfy itself that the critical accounting policies and practices and GAAP treatments adopted are appropriate and consistent with the Corporation’s needs and applicable requirements.
(o) Disagreements: satisfying itself that there is an agreed course of action leading to the resolution of significant unsettled issues between Executive Management and either the Independent Auditor or IAD that do not affect the audited financial statements (e.g. disagreements regarding correction of internal control weaknesses or the application of accounting principles to proposed transactions), if any.
(p) Off-Balance Sheet Transactions: reviewing all material off-balance sheet transactions and the related accounting presentation and disclosure.
Risk Oversight
(q) Financial Risk Oversight: assessing with Executive Management the Corporation’s material risk exposures relating to financial and financial reporting matters and the Corporation’s actions to identify, monitor and mitigate such exposures.
(r) Litigation/Regulatory Actions Oversight: monitoring the status and potential impact of material litigation and regulatory proceedings.
Financial Disclosures
(s) Disclosure Controls: satisfying itself that procedures are in place for the review of the Corporation’s public disclosure of financial information extracted or derived from the Corporation’s financial statements and assessing the adequacy of those procedures annually.
(t) Approval of Disclosures: meeting to review and discuss the Corporation’s financial statements with Executive Management and the Independent Auditor and recommending to the Board prior to release, all such financial statements of the Corporation, together with related Management’s Discussion & Analysis of Results of Operations and Financial Position (“MD&A”), earnings press releases and all other public disclosure documents of the Corporation containing financial information of the Corporation.
Financial Integrity and Whistle-Blowing
(u) Financial Integrity: reviewing on behalf of the Board:
· any actual or alleged illegal, improper or fraudulent behaviour related to the Corporation’s financial statements, or its accounting or auditing practices; and
· the findings of any regulatory authorities in relation to the financial affairs of the Corporation;
(v) Whistle-Blowing Procedures: overseeing the implementation, operation and effectiveness of the Corporation’s mechanisms for:
· the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal controls, and auditing matters; and
· the confidential, anonymous submission of complaints by employees of the Corporation of concerns regarding questionable accounting or auditing matters.
Ethics and Legal Compliance
(w) Compliance Culture and Training: reviewing Executive Management’s implementation of systems and controls designed to promote compliance with applicable legal and regulatory requirements. In performing its oversight responsibilities, the Committee shall:
· satisfy itself that Executive Management has established an appropriate tone and culture with respect to:
· ethical business conduct by the Corporation’s employees, agents, representatives, contractors and suppliers; as well as
· legal and regulatory compliance;
· review with Executive Management the design, implementation and effectiveness of policies or programs that promote compliance with, legal and regulatory requirements; and
· periodically meet with representatives of the Corporation’s applicable functional departments and/or external advisors to discuss the Corporation’s compliance with applicable legal and regulatory requirements, the results of internal compliance reviews and material non-compliance with legal and/or regulatory requirements or internal policies, procedures and programs of the Corporation.
(x) Code of Conduct: monitoring the implementation, operation and effectiveness of the Corporation’s Code of Conduct, periodically reviewing and recommending to the Board changes to such Code, authorizing any waiver of compliance of such Code and overseeing the investigation of any material alleged breach thereof.
Reporting and Disclosure
(y) Reporting to Board: quarterly reporting to the Board with respect to the Committee’s review of the Corporation’s financial statements, MD&A, financial disclosures, earnings press releases and related matters, and at least annually in respect of the Committee’s other activities.
(z) Audit Committee Report: overseeing the preparation of the Audit Committee report for inclusion in the Corporation’s management information circular/proxy statement, in the form and at the time required by the laws, rules and regulations of applicable regulatory authorities.
Size, Composition and Independence
2. Size: The Committee shall be composed of not less than three (3) nor more than five (5) members. The Board shall annually appoint the members of the Committee and a Chair from amongst those appointed, to hold office until the next annual meeting of shareholders of the Corporation. The members of the Committee shall serve at the pleasure of the Board and vacancies occurring from time to time shall be filled by the Corporate Governance, Compensation and Nominating Committee. Any member of the Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director of the Corporation.
3. Independence: All of the members of the Committee shall meet the independence standards specified under applicable law, currently being Sections 1.4 and 1.5 of National Instrument 52-110 of the Canadian Securities Administrators.
4. Financial Literacy and Expertise: All of the members of the Committee shall be “financially literate” as such term is defined in National Instrument 52-110 of the Canadian Securities Administrators and at least one member of the Committee shall have such accounting or financial expertise as is required to comply with applicable rules and regulations of the Ontario Securities Commission (“OSC”), the United States Securities and Exchange Commission (the “SEC”), The New York Stock Exchange (“NYSE”) and any other regulatory authority having jurisdiction.
5. Limit on Outside Audit Committees: No director shall serve as a member of the Committee if that director is a member of the audit committees of more than two other boards of directors of other public companies.
6. Independent Advisors: The Committee may retain and compensate such outside financial, legal and other advisors at the expense of the Corporation as it deems reasonably necessary to assist and advise the Committee in carrying out the Committee’s duties and responsibilities.
7. Role of Committee Chair: The Committee Chair shall generally provide leadership to enhance the effectiveness of the Committee and act as the liaison between the Committee and the Board as well as between the Committee and Executive Management. The Committee Chair shall also manage the Committee’s activities and meetings, manage any outside legal or other advisors retained by the Committee and manage the process of reporting to the Board on the Committee’s activities and related recommendations.
8. Secretary of the Committee: Unless otherwise determined or approved by the Committee, the Secretary or an Assistant Secretary of the Corporation shall act as the Secretary of the Committee. In the absence of the Secretary or an Assistant Secretary, the Committee shall select an individual to act as the Secretary of the Committee. The Secretary of the Committee shall keep minutes of the Committee and such minutes shall be retained in the corporate records of the Corporation.
Committee Meeting Administration
9. Meetings: The Committee shall hold at least four scheduled meetings each year, consisting of quarterly meetings held within the timeframes set forth in Section 10 of this Charter. Other meetings shall be scheduled as required. Regular meetings of the Committee shall be called by the Committee Chair, and additional meetings may be called by any member of the Committee, the Board Chair, Chief Executive Officer, Chief Financial Officer, Chief Legal Officer or the Secretary of the Corporation. At each quarterly meeting, the Committee shall meet separately with: the Independent Auditor and the head of IAD, in the absence of management; and management, in the absence of the Independent Auditor. At least annually, the Committee shall meet separately with the Corporation’s Vice President, Ethics and Legal Compliance without members of Management being present.
10. Quarterly Meetings: the Committee shall meet with Executive Management and the Independent Auditor of the Corporation within:
(a) forty-five (45) days, or such lesser period as may be prescribed by applicable law, following the end of each of the first three financial quarters of the Corporation, but in any event prior to the release of the financial results for each such quarter and their filing with the applicable regulatory authorities, to review and discuss the financial results of the Corporation for the preceding fiscal quarter and the related MD&A as well as the results of the Independent Auditor’s review of the financial results for such quarter and, if satisfied, report thereon to, and recommend their approval by, the Board and their inclusion in the Corporation’s required regulatory filings for such quarter; and
(b) sixty (60) days, or such lesser period as may be prescribed by applicable law, following the financial year-end of the Corporation, but in any event prior to the release of the financial results for the financial year and their filing with the applicable regulatory authorities, to review and discuss the audited financial statements of the Corporation for the preceding fiscal year and the related MD&A and, if satisfied, report thereon to, and recommend their approval by, the Board and the Corporation’s shareholders as required by applicable law and their inclusion in the Corporation’s Annual Report and other required regulatory filings.
In reviewing the quarterly and annual financial results the Committee shall ensure that there are adequate procedures for review of such financial results, including timely review by the Independent Auditor.
11. Minimum Attendance: Each member of the Committee is expected to use all reasonable efforts to attend a minimum of 75% of all regularly scheduled Committee meetings, except to the extent that any absence is due to medical or other valid reasons.
12. Notice of Meeting: Unless otherwise determined or approved by the Committee, the Secretary of the Committee shall provide notice of each meeting of the Committee to the following persons, all of whom shall be entitled to attend each Committee meeting:
· the Committee Chair and each member of the Committee;
· the Chief Executive Officer, the Chief Financial Officer, Chief Legal Officer of the Corporation, Senior Vice-President, Finance and the Controller;
· the Independent Auditor;
· the head of the IAD;
· the Chief Compliance Officer; and
· any other person whose attendance is deemed necessary or advisable by the Committee Chair.
13. Committee Access to Employees and Others: For the purpose of performing their duties and responsibilities, the members of the Committee shall have full access to and the right to discuss any matters relating to such duties with any or all of:
· any employee of the Corporation;
· the Independent Auditor; and/or
· any advisors to the Corporation (including advisors retained by the Committee),
as well as the right to inspect all applicable books, records and facilities of the Corporation and its subsidiaries and shall be permitted to discuss such books, records and facilities and any other matters within the Committee’s mandate with any of the foregoing.
14. Meeting Agendas: The Committee Chair shall establish a preliminary agenda for each Committee meeting with the assistance of the Secretary of the Corporation. Any director or other person entitled to call a meeting may request items to be included on the agenda for any meeting.
15. Meeting Materials: To the extent reasonably practicable, meeting materials shall be distributed sufficiently in advance of Committee meetings to permit members to properly review and consider such materials.
16. Quorum: A majority of the members of the Committee shall constitute a quorum and all actions of the Committee shall be taken by a majority of the members present at the meeting. If the Committee only has two members as a result of a vacancy on the Committee, both members shall constitute a quorum.
Delegation of Responsibility
17. Right of Delegation: Subject to applicable law, the Committee may from time to time delegate one or more of its duties and responsibilities under this Charter to the Committee Chair, any other member of the Committee or any sub-committee of the Committee.
MAGNA INTERNATIONAL INC.
CORPORATE GOVERNANCE, COMPENSATION AND NOMINATING COMMITTEE CHARTER
Purpose
This Charter has been adopted by the Board of Directors of the Corporation (the “Board”) to assist the Corporate Governance, Compensation and Nominating Committee (the “Committee”) and the Board in the exercise of their responsibilities, particularly by defining the scope of the Committee’s authority in respect of corporate governance, compensation and nomination matters delegated to it by the Board.
Where used in this Charter, the term “Executive Management” has the meaning ascribed to it in the Corporation’s Board Charter.
Role and Responsibilities of the Committee
1. The Board has delegated to the Committee the responsibility for the following matters:
Corporate Governance
(a) General: making recommendations to the Board with respect to corporate governance of the Corporation as a whole, including without limitation:
· the stewardship role of the Board in respect of management of the Corporation;
· the corporate governance guidelines applicable to the Corporation;
· related party transactions, unless otherwise delegated by the Board to a special committee of the Board; and
· such processes and procedures as may be reasonably necessary to allow the Board to function independently of Executive Management.
(b) Changes in Governance-Related Laws: monitoring proposed changes in laws, rules, instruments and regulations, as well as in policies of applicable regulators, relating to corporate governance matters and making recommendations to the Board to address any such regulatory changes.
(c) Board/Executive Management Relationship: monitoring, assessing and making recommendations to the Board with respect to the relationship between the Board and Executive Management, including the limits to Executive Management’s authority.
(d) Board Effectiveness: annually overseeing the evaluation of the effectiveness of the Board and its Committees and making recommendations to the Board with respect to any changes which may be advisable to improve the functioning of the Board and/or any of its Committees.
(e) Board/Committee Charters: periodically reviewing the Board Charter, this Committee Charter and the charters of the Board’s other standing Committees and making recommendations to the Board with respect to such amendments to any such charter which may be necessary or advisable.
(f) Material Corporate Policies: reviewing and making recommendations to the Board with respect to material corporate policies affecting such matters as corporate disclosure and insider trading.
(g) Annual Proxy Circular: annually overseeing the development of, and reviewing and making recommendations to the Board with respect to, its approval of the Corporation’s annual management information circular/proxy statement, including the Report of the Committee, compensation discussion and analysis and statement of corporate governance practices contained therein.
(h) Voting of Shares Held by Deferred Profit Sharing Plans: directing the manner in which Common Shares of the Corporation held by the Corporation’s deferred profit sharing plans shall be voted on any matter to be voted on by shareholders; provided however that such shares shall be voted on the basis of the management, Board or Board Committee (as applicable) recommendations set forth in any applicable proxy circular in the absence of any direction to the contrary by the Committee.
Executive and Incentive Compensation
(i) Executive Compensation: making recommendations to the Board with respect to the Corporation’s overall system of executive compensation and assessing the performance of Executive Management and the determination of all direct, indirect and incentive compensation, benefits and perquisites (cash and non-cash) for members of Executive Management.
(j) Incentive Compensation: reviewing and making recommendations to the Board regarding incentive compensation and equity based plans generally.
(k) Stock Options: administering those functions delegated to the Committee pursuant to the Corporation’s 2009 Stock Option Plan, or any successor or replacement plan.
(l) Compensation Advisor: retaining and overseeing the work of an independent compensation consultant or advisor in connection with the compensation of Executive Management or the Corporation’s directors, including the sole authority for approving any such consultant or advisor’s fees and terms of engagement.
Independent Director Compensation
(m) Independent Director Compensation: generally reviewing and making recommendations to the Board with respect to the compensation of the Corporation’s Independent Directors.
Sustainability
(n) Sustainability: assessing the Corporation’s approach to sustainability, including at a minimum environmental compliance, as well as occupational health and safety.
Nomination and Board Composition
(o) Board Size and Composition: regularly reviewing the diversity of skills, experience, tenure and other relevant characteristics represented by current Board members and making recommendations to the Board regarding the size and composition of the Board.
(p) Director Qualifications: developing and recommending to the Board criteria for Board membership. At a minimum, each director should possess the attributes set forth in the Board Charter.
(q) Director Recruitment: establishing procedures for the identification of potential Board members and assisting in identifying and interviewing potential Board members.
(r) Director Nominees: annually recommending to the Board the proposed nominees for election at each of the Corporation’s annual shareholders’ meetings.
(s) Determination of Independence: annually determining the independence of each director and nominee for the purpose of their membership on the Board and each Committee, in accordance with applicable law, rules, regulations, instruments and policies of applicable regulators and, if advisable, developing and recommending to the Board categorical independence guidelines for the Corporation’s directors.
(t) Director Resignation under Majority Voting Policy: upon receipt of the resignation of a director under the Majority Voting Policy set forth in the Board Charter, promptly considering and making recommendations to the remaining members of the Board as to whether to accept such director’s resignation.
(u) Interlocks: establishing procedures to manage Board Interlocks in accordance with the guidelines set forth in the Board Charter.
(v) Material Changes in Directors’ Status: reviewing any material changes in a director’s circumstances which could adversely impact the director’s ability to carry out his or her duties on the Board and any Committees. Such circumstances could include the types of material changes set forth in the Board Charter.
(w) Board Vacancies: recommending to the Board whether to fill vacancies arising on the Board between shareholder meetings and, if so, recommending suitable candidates to fill such vacancies.
(x) Committee Composition: annually recommending to the Board the allocation of Board members to each of the Board Committees.
(y) Committee Vacancies: appointing directors to fill vacancies arising from time to time in respect of any of the Board’s Committees.
(z) Resignation of CEO from Board: upon receipt of a person’s resignation as both the Chief Executive Officer and a director of the Corporation, recommending to the Board whether to accept such person’s resignation as a director and, if so, the appropriate effective date thereof to achieve an orderly transition.
Pension Plans
(aa) Administrator: acting as the administrator of the Corporation’s pension plan for purposes of applicable Canadian legislation.
(bb) Amendment and Termination: exercising the same powers as the Board with respect to the amendment and termination of any pension plan of the Corporation or any subsidiary.
(cc) Pension Plans: overseeing the management of the Corporation’s pension obligations.
Talent Management and Succession Planning
(dd) Succession Planning: annually reviewing the Corporation’s approach to talent management, as well as its leadership development and succession plans and processes, and making any recommendations thereon to the Board as the Committee deems advisable.
Risk Oversight
(ee) Risk Oversight: assessing the Corporation’s material risk exposures relating to the responsibilities above, including corporate governance, Board succession, executive compensation, talent management and leadership development, as well as, sustainability, together with the Corporation’s actions to identify, monitor and mitigate such exposures.
Reporting to Board
(ff) Reporting: reporting to the Board at least annually with respect to the Committee’s activities in respect of each fiscal year.
Size, Composition and Independence
2. Size: The Committee shall be composed of not less than three (3) nor more than five (5) members. The Board shall annually appoint the members of the Committee and a Chair from amongst those appointed, to hold office until the next annual meeting of shareholders of the Corporation. The members of the Committee shall serve at the pleasure of the Board and vacancies occurring from time to time shall be filled by the Board. Any member of the Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director of the Corporation.
3. Independence: All of the members of the Committee shall meet the independence standards specified under applicable law, currently being Section 1.4 of National Instrument 52-110 of the Canadian Securities Administrators.
4. Independent Advisors: The Committee may retain and compensate such outside compensation, legal and other advisors at the expense of the Corporation as it deems reasonably necessary to assist and advise the Committee in carrying out the Committee’s duties and responsibilities.
5. Role of Committee Chair: The Committee Chair shall generally provide leadership to enhance the effectiveness of the Committee and act as the liaison between the Committee and the Board as well as between the Committee and Executive Management. The Committee Chair shall also manage the Committee’s activities and meetings, manage any outside legal or other advisors retained by the Committee and manage the process of reporting to the Board on the Committee’s activities and related recommendations.
6. Secretary of the Committee: Unless otherwise determined or approved by the Committee, the Secretary or an Assistant Secretary of the Corporation shall act as the Secretary of the Committee. In the absence of the Secretary or an Assistant Secretary, the Committee shall select an individual to act as the Secretary of the Committee. The Secretary of the Committee shall keep minutes of Committee meetings and such minutes shall be retained in the corporate records of the Corporation.
Committee Meeting Administration
7. Meetings: The Committee shall meet periodically as required in order to carry out its duties and responsibilities, but shall meet at least annually to address the matters specified in the following Sections of this Charter: 1(d) - Board Effectiveness; 1(g) – Annual Proxy Circular; 1(n) Sustainability; 1(r) – Director Nominees; 1(s) – Determination of Independence; 1(x) – Committee Composition; 1(dd) – Succession Planning; 1(ee) – Risk Oversight; 1(ff) – Reporting; and 15 – Annual Review. Meetings of the Committee may be called by the Committee Chair, any member of the Committee, Board Chair, Chief Executive Officer, Chief Financial Officer, Chief Legal Officer or the Secretary of the Corporation. The Committee shall generally hold sessions without members of management present at each scheduled meeting.
8. Minimum Attendance: Each member of the Committee is expected to use all reasonable efforts to attend a minimum of 75% of all regularly scheduled Committee meetings, except to the extent that any absence is due to medical or other valid reasons.
9. Notice of Meeting: Unless otherwise determined or approved by the Committee, the Secretary of the Committee shall provide notice of each meeting of the Committee to the following persons, all of whom shall be permitted to attend each Committee meeting:
· the Committee Chair and each member of the Committee;
· the Chief Executive Officer, the Chief Financial Officer and Chief Legal Officer of the Corporation; and,
· any other person whose attendance is deemed necessary or advisable by the Committee Chair.
10. Committee Access to Employees and Others: For the purpose of performing their duties and responsibilities, the members of the Committee shall have full access to and the right to discuss any matters relating to such duties with any or all of:
· any employee of the Corporation; and/or
· any advisors to the Corporation (including advisors retained by the Committee),
as well as the right to inspect all applicable books and records of the Corporation and its subsidiaries and shall be permitted to discuss such books and records and any other matters within the Committee’s mandate with any of the foregoing.
11. Meeting Agendas: The Committee Chair shall establish a preliminary agenda for each Committee meeting with the assistance of the Secretary of the Corporation. Any director or other person entitled to call a meeting may request items to be included on the agenda for any meeting.
12. Meeting Materials: To the extent reasonably practicable, meeting materials shall be distributed sufficiently in advance of Committee meetings to permit members to properly review and consider such materials.
13. Quorum: A majority of the members of the Committee shall constitute a quorum and all actions of the Committee shall be taken by a majority of the members present at the meeting. If the Committee only has two members as a result of a vacancy on the Committee, both members shall constitute a quorum.
Delegation of Responsibility
14. Right of Delegation: Subject to applicable law, the Committee may from time to time delegate one or more of its duties and responsibilities under this Charter to the Committee Chair, any other member of the Committee or any sub-committee of the Committee.
Review and Revision of Charter
15. Annual Review: The Committee shall annually review this Charter and recommend to the Board such changes as it deems advisable.
Board Approved: March 25, 2021
MAGNA INTERNATIONAL INC.
TECHNOLOGY COMMITTEE CHARTER
Purpose
This Charter has been adopted by the Board of Directors of the Corporation (the “Board”) to assist the Technology Committee (the “Committee”) and the Board in the exercise of their responsibilities, particularly by defining the scope of the Committee’s authority in respect of matters delegated to it by the Board relating to technology and innovation.
Where used in this Charter, the term “Executive Management” has the meaning ascribed to it in the Corporation’s Board Charter.
Role and Responsibilities of the Committee
1. The Board has delegated to the Committee the responsibility for the following matters:
Technology Trends, Opportunities and Risks
(a) Technology Trends: reviewing, monitoring, evaluating and making recommendations to the Board regarding general technological trends which may impact the automotive industry and/or the Corporation’s: product, service and solution software offerings; advanced manufacturing strategy; and/or overall strategic plan.
(b) Opportunities and Risks: assessing the impact of technological trends and disruptive technological changes on the Corporation’s business or strategy, and making recommendations to the Board with respect to the Corporation’s approach to addressing the opportunities and risks arising from such trends and changes.
Research & Development (“R&D”)
(c) R&D/Innovation: reviewing the Corporation’s R&D/innovation initiatives, assessing the effectiveness of such initiatives in relation to the Corporation’s strategy, and making recommendations to the Board with respect to same.
Technology Partnerships, Investments and Acquisitions
(d) Partnerships and Investments: advising Executive Management on, monitoring, assessing the effectiveness of and making recommendations to the Board regarding, the Corporation’s overall approach to:
· technology partnerships, joint projects and other collaborative activities with universities, colleges, technical institutes, advanced research organizations or other similar bodies;
· initiatives involving technology incubators; and
· joint ventures with, or investments in, software and technology companies.
(e) Technology M&A: advising Executive Management and making recommendations to the Board as needed with respect to material M&A transactions aimed at addressing a technological trend, opportunity or gap in the Corporation’s product or service portfolio.
Embedded Cybersecurity Risks
(f) Product-Embedded and Solution Software Cybersecurity: assessing with Executive Management the Corporation’s product-embedded and solution software cybersecurity risk exposures, together with the Corporation’s actions to identify, monitor and mitigate such exposures.
Technology & Corporate Strategy
(g) Alignment Between Technology & Strategy: satisfying itself that the Corporation’s overall approach to technology and intellectual property development, management and acquisition are aligned with the Board’s strategic priorities.
Reporting and Disclosure
(h) Annual Reporting to Board: reporting to the Board at least annually with respect to the Committee’s activities in respect of each fiscal year.
(i) Technology Committee Report: overseeing the preparation of the Technology Committee report for inclusion in the Corporation’s management information circular/proxy statement.
Size, Composition and Independence
2. Size: The Committee shall be composed of not less than three (3) nor more than five (5) members. The Board shall annually appoint the members of the Committee and a Chair from amongst those appointed, to hold office until the next annual meeting of shareholders of the Corporation. The members of the Committee shall serve at the pleasure of the Board and vacancies occurring from time to time shall be filled by the Corporate Governance, Compensation and Nominating Committee. Any member of the Committee may be removed or replaced at any time by the Board and shall automatically cease to be a member of the Committee upon ceasing to be a director of the Corporation.
3. Independence: A majority of the members of the Committee, including the Committee Chair, shall meet the independence standards specified under applicable law, currently being Section 1.4 of Multilateral Instrument 52-110 of the Canadian Securities Administrators.
4. Independent Advisors: The Committee may retain and compensate such outside advisors at the expense of the Corporation as it deems reasonably necessary to assist and advise the Committee in carrying out the Committee’s duties and responsibilities.
5. Role of Committee Chair: The Committee Chair shall generally provide leadership to enhance the effectiveness of the Committee and act as the liaison between the Committee and the Board as well as between the Committee and Executive Management. The Committee Chair shall also manage the Committee’s activities and meetings, manage any outside legal or other advisors retained by the Committee and manage the process of reporting to the Board on the Committee’s activities and related recommendations.
6. Secretary of the Committee: Unless otherwise determined or approved by the Committee, the Secretary or an Assistant Secretary of the Corporation shall act as the Secretary of the Committee. In the absence of the Secretary or an Assistant Secretary, the Committee shall select an individual to act as the Secretary of the Committee. The Secretary of the Committee shall keep minutes of the Committee and such minutes shall be retained in the corporate records of the Corporation.
Committee Meeting Administration
7. Meetings: The Committee shall meet periodically as required to carry out its duties and responsibilities, but shall meet at least annually to address the matters specified in Section 1 of this Charter. Meetings of the Committee may be called by the Committee Chair, any member of the Committee, Board Chair, Chief Executive Officer, Chief Financial Officer, Chief Legal Officer or the Secretary of the Corporation. The Committee shall generally hold sessions without members of management present at each scheduled meeting.
8. Minimum Attendance: Each member of the Committee is expected to use all reasonable efforts to attend a minimum of 75% of all regularly scheduled Committee meetings, except to the extent that any absence is due to medical or other valid reasons.
9. Notice of Meeting: Unless otherwise determined or approved by the Committee, the Secretary of the Committee shall provide notice of each meeting of the Committee to the following persons, all of whom shall be permitted to attend each Committee meeting:
· the Committee Chair and each member of the Committee;
· the Chief Executive Officer, the Chief Financial Officer and Chief Legal Officer of the Corporation;
· the Chief Technology Officer;
· any other person whose attendance is deemed necessary or advisable by the Committee Chair.
10. Committee Access to Employees and Others: For the purpose of performing their duties and responsibilities, the members of the Committee shall have full access to and the right to discuss matters relating to such duties with any:
· employee of the Corporation; and/or
· advisor to the Corporation (including any advisors retained by the Committee).
The Committee shall also have the right to inspect all applicable books, records and facilities of the Corporation and its subsidiaries and shall be permitted to discuss such books, records and facilities and any other matters within the Committee’s mandate with any of the foregoing.
11. Meeting Agendas: The Committee Chair shall establish a preliminary agenda for each Committee meeting with the assistance of the Secretary of the Corporation. Any director or other person entitled to call a meeting may request items to be included on the agenda for any meeting.
12. Meeting Materials: To the extent reasonably practicable, meeting materials shall be distributed sufficiently in advance of Committee meetings to permit members to properly review and consider such materials.
13. Quorum: A majority of the members of the Committee shall constitute a quorum and all actions of the Committee shall be taken by a majority of the members present at the meeting. If the Committee only has two members as a result of a vacancy on the Committee, both members shall constitute a quorum.
Delegation of Responsibility
14. Right of Delegation: Subject to applicable law, the Committee may from time to time delegate one or more of its duties and responsibilities under this Charter to the Committee Chair, any other member of the Committee or any sub-committee of the Committee.
Review and Revision of Charter
15. Annual review: The Committee shall annually review this Charter and recommend to the Corporate Governance, Compensation and Nominating Committee of the Board such changes as it deems advisable.
Board Approved: March 25, 2021
Code of Conduct and Ethics Driving Integrity Know it. Speak it. Live it. Magna International
Message from the CCO Magna’s Code of Conduct and Ethics is our guidepost to ensure that all of us act with honesty and integrity in all of our business dealings. I received an email from a long-time Magna employee recently. He told me that he has always been a proud Magna employee, but it made him even prouder to know that the company he worked for was making ethics and integrity a key priority. I am also very proud of the great work our employees have done to ensure that they are following our Code of Conduct and Ethics and getting the answers they need. Sometimes those answers aren’t obvious or are in a “grey” zone. We’ve seen an increase in questions to our Regional Compliance Officers and more usage of our internally available compliance resources. We also see more employees using our Disclose It! system for disclosing conflicts of interest and gifts to government officials and Integrity Check, which enables you to confirm that third parties who represent Magna have reputations for ethical business practices. Employees have committed to be “Magna Upstanders” during our annual Compliance Awareness Week campaign that asks each of us not to be bystanders by speaking up when we witness inappropriate behavior. We are in an extremely complicated business, which comes with challenging and nuanced ethics and compliance issues. Thank you for doing your part every day by acting with integrity and by speaking up. Your commitment drives our ongoing success. Joanne Horibe Vice President, Ethics and Chief Compliance Officer
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MAGNA INTERNATIONAL | CODE OF CONDUCT & ETHICS
Table of Contents Message from the CCO Introduction to the Code of Conduct and Ethics Why it’s Important to Employees 2 5 Driving Integrity In Business Dealings Conducting Business with Integrity, Fairness and Respect Compliance with Antitrust and Competition Laws Compliance with Anti-Bribery Laws Lobbying / Political Participation 7 7 8 9 Driving Integrity Financial Reporting Improper Securities Trading Public Disclosures Through Transparent Reporting 12 13 13 Driving Integrity Within Our Workplace The Environment and Occupational Health and Safety Protection of Personal Information Respect for Human Rights Diversity and Inclusion 15 15 16 16 Driving Integrity Use of Confidential Information Through Our Actions 19 19 20 21 21 Investments and Corporate Opportunities Self-Dealing and Interacting with Relatives or Friends Outside Positions Gifts, Meals, and Entertainment Driving Integrity Careful Communication The Magna Hotline With Good Communication 23 24 Support from Legal Compliance Experts Glossary Terms appearing in colour and italics have been defined in the Glossary. 25 26 1
Introduction It is important that we all understand our obligation to conduct business in a way that is both ethical and consistent with our corporate policies. Today, as the automotive industry continues to become more complex and challenging, it is important that we all understand our obligation to conduct business in a way that is both ethical and consistent with our corporate policies. The core values and business principles of Magna’s Fair Enterprise culture are contained in our Employee’s Charter and Operational Principles, and are reinforced by our Code of Conduct and Ethics. This Code acts as a guide to help us maintain our ethical standards. Magna expects and requires every Magna employee to act in accordance with applicable law and consistent with our core values and business principles. We also expect our suppliers, consultants, independent contractors, agents and other representatives to meet these standards. Violations of this Code will lead to disciplinary action for employees, up to and including dismissal, and may result in termination of our relationship with third parties. This standard applies to how we: • • • • • treat one another in the workplace; manage our environmental responsibilities; engage with competitors; interact with government officials; and protect Magna’s confidential information as well as that of our customers. Each of us is responsible for acting with honesty and integrity, and making the ethical choice all of the time. It is a key part of our job. Magna’s compliance team is committed to providing the necessary training and ongoing support to enable us to succeed in this area. This document is provided as a resource to help guide us through our duties as Magna employees, and it offers topics for ensuring compliance with local and international laws. 2 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Does the Code of Conduct and Ethics apply to me? Yes. The Code of Conduct and Ethics applies to all employees of Magna International Inc. and all of its operating groups, divisions, joint ventures and other operations globally. It also applies to all of our directors, officers and anyone who acts on Magna’s behalf, such as consultants, independent contractors, agents, and other representatives. What are the consequences if I violate the Code? We are deeply committed to the values of the Code of Conduct and Ethics and will take seriously any failure to uphold these commitments. Violations of the Code will lead to disciplinary action. The type of discipline will depend on the severity of the breach and may include dismissal for cause or good reason in serious cases. The consequences are the same for our suppliers, consultants, independent contractors, agents or other representatives who fail to meet the ethical standards expected of our employees. If the breach is very serious, we may terminate our relationship with the third party. You should also keep in mind that some sections of the Code simply reflect applicable legal requirements. This means that, in some cases, an action that breaches the Code may also violate the law. In these instances, the punishment can include fines or imprisonment. how we treat our employees how we operate in the workplace underlying principles and values Code of Conduct & Ethics Driving Integrity Know It. Speak It. Live It. Please note that the questions and examples provided throughout this document are solely illustrative, do not describe actual events, and are not intended to capture all, or even the most serious, cases which may arise under the Code of Conduct and Ethics. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 3
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Why it’s Important to Employees Our Choices Drive Integrity Life is full of choices, and we make many of them in the blink of an eye, every day. But some choices are much more important than others. And the choices we make as we represent Magna reflect on the company as a whole as well as ourselves. In short, our choices drive integrity. Magna has a Code of Conduct and Ethics to help guide us in making the best choices in the workplace. This Code applies to ALL Magna employees globally, including corporate/group offices, manufacturing divisions and joint ventures. Magna expects all employees to read and understand the Code of Conduct and Ethics and to always act in an ethical and honest way. Making the right choices and following the laws and regulations that govern our business are critically important to our success, now and in the future. What You Can Do Magna is relying on you to help us drive integrity throughout the organization. We are asking you • • To know the Code of Conduct and Ethics and related policies To speak up if you believe a possible violation of the Code of Conduct and Ethics has occured, or have a question about the Code To live the basic principles that make up the Code of Conduct and Ethics, every day • This is what we mean when we say: Know it. Speak it. Live it. Magna’s success depends on our people taking an active role and making sure all of us conduct business in an ethical way. Expectations of Executives / Senior Officers / Managers As leaders of the company, Magna executives, senior officers and managers are expected to set the highest ethical standard for themselves, in turn setting an example for their teams to follow. Magna’s leaders are also expected to be diligent and alert to any potential violations of the Code and report concerns on a timely basis. They must also maintain an environment in which employees can feel comfortable raising compliance concerns. This leadership by example is critical in establishing and maintaining the company-wide standards of behaviour outlined in this Code. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 5
Driving Integrity In Business Dealings 7 7 8 9 Conducting Business with Integrity, Fairness and Respect Compliance with Antitrust and Competition Laws Compliance with Anti-Bribery Laws Lobbying and Political Participation 6 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Conducting Business with Integrity, Fairness and Respect Our operating philosophy is that all of us, employees and management alike, share in the responsibility to ensure Magna’s success. To live up to this responsibility, we must all act with integrity. This means that we must obey the letter and spirit of laws that apply to us, uphold this Code, and honour our commitments. We must also be fair in our dealings with other employees, customers, suppliers or other stakeholders. It is also essential that we respect others who may have different thoughts and opinions, act with sensitivity and concern toward the cultures and customs of countries in which we operate, and strive to consider our impact on the communities and environments where we conduct business. Compliance with Antitrust and Competition Laws We compete vigorously, but with respect for free and fair competition. As a result, Magna employees are committed to complying with all applicable antitrust and competition laws. We will not engage in any activities that violate these laws such as agreeing with our competitors to fix prices, discounts or terms of sale, limit production, divide markets, coordinate bidding activities or boycott customers or suppliers. Our Policy on Antitrust and Competition provides a more complete explanation on how we uphold this commitment. Q: At Auto Shanghai, I ran into a former sales colleague who now works for a competitor. Over lunch, he asked if we could come up with a joint strategy to deal with a difficult new buyer. I told him I would get back to him. What should I have done? A: While having a casual lunch with a former colleague need not be a problem, any attempt to coordinate strategy with a competitor is strictly prohibited. In such a situation, you should immediately end the conversation about strategy coordination and tell your lunch companion that you do not wish to discuss the topic. You should then promptly inform your manager or a Legal Compliance expert. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 7
Compliance with Anti-Bribery Laws We do not offer or accept bribes or kickbacks, either directly or through third parties. In giving or accepting things of value, we must think about whether doing so could influence a business decision or give others that impression. We must also always ensure that the records of all payments we make are accurate and complete. These obligations apply in all cases, but are especially strict in matters involving government officials. Our commitment to anti-bribery applies, without exception, to all of our operations, no matter what the local laws or cultural practices may be. We also expect any third parties acting on our behalf to uphold this principle. To find out more about our commitment to conducting business free of bribery, see our Policy on Bribery & Improper Payments. Q: In my country, it is common to give government workers a small payment (typically under $100) so that work gets done more quickly. Am I allowed to make these payments under our Code and Policies? A: No. Our Code and Policy on Bribery & Improper Payments prohibit the making of these payments. The type of payment you describe is often referred to as a “facilitation payment” or “grease payment”. Although these payments are legal and common in some countries, they are illegal in many others. Q: A government official who oversees our safety compliance gave me her nephew’s résumé and asked that I consider him for any positions that might be open in my department. I’ve reviewed the resume and he has strong credentials. What should I do? A: You should immediately let your manager or a Legal Compliance expert know about this request. As a qualified applicant, he should be treated the same as other qualified applicants for the position. Requests like this need to be handled with care to ensure that we respect the law and our values while preserving our relationships. 8 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Lobbying and Political Participation Because laws governing lobbying and political contributions can be very complex and vary greatly across the locations where we do business, we need to approach our lobbying and political participation efforts, including funding and support, with great care. Do not engage in lobbying with any level of government or make political contributions (including monetary donations, goods or services) on Magna’s behalf without written permission from a corporate office representative specifically authorized to handle these issues. For more information, please speak to a Legal Compliance expert or a member of the Government Affairs team or go to the Government Affairs page on MagNET. Q: Magna is having some difficulty in obtaining city council approval for the building design of its new plant. I happen to know one of the city councillors well and would like to invite her to coffee to explain to her why she should support it. Can I do so? A: No. Since this type of meeting with an elected government official would be for the purpose of influencing public decision making, it is likely to constitute lobbying under local law. We should not engage in any act of lobbying without written permission from a corporate office representative specifically authorized to handle these issues. Our operating philosophy is that all of us, employees and management alike, share in the responsibility to ensure Magna’s success. To live up to this responsibility, we must all act with integrity. This means that we must obey the letter and spirit of the laws that apply to us, uphold this Code, and honour our commitments. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 9
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Driving Integrity Through TransparentReporting 12 13 13 Financial Reporting Improper Securities Trading Public Disclosures To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 11
Financial Reporting Magna’s credibility depends on the accuracy of our financial reports and we must follow all applicable laws related to financial reporting. We must also be completely accurate in our financial entries. Q: I work in accounting and recently received a number of large supplier invoices. My boss asked that I record them in the next quarter. She said that doing so would improve our financial results and help our share price. Should I follow her instructions? A: No. Inaccurate dating or delayed reporting of expenses would lead to overstated earnings this quarter, and could affect our financial results. Failure to accurately record all financial information, even if it is done with the intention of helping Magna, is a violation of the Code and generally accepted accounting principles. If your boss is asking you to do this, you should refuse. If you don’t feel comfortable or continue to be pressured by your boss, you must immediately report it to a financial officer at group or corporate office or a Legal Compliance expert. You can also report the issue using the Magna Hotline. Our financial controls are designed to ensure the accuracy and timeliness of our reports. We will not tolerate anyone taking any step, or ordering someone else to take any step, to circumvent these controls through false or misleading entries. Doing so is a serious violation of the Code and could also be a criminal offense. 12 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Improper Securities Trading Our employees may sometimes gain access to confidential information about Magna, our suppliers, competitors, customers or business partners through their work. This inside information, if used by an employee for investment purposes, could give that employee an unfair advantage over other investors. Buying or selling securities, like stocks and bonds, based on inside information is illegal and the penalties can be severe. Therefore, if you have inside information about Magna or another company, you are prohibited from making investments in that company until that information becomes public and investors have had a chance to evaluate it. Employees are also not permitted to share inside information with co-workers or people outside Magna if they are not authorized to receive it. This prohibition extends to sharing inside information with relatives or close friends. There are even more demanding requirements for the directors and officers of Magna and other designated individuals listed in the Policy on Insider Trading and Reporting. These individuals are prohibited from buying or selling Magna securities during certain time periods. Our Policy on Insider Trading and Reporting provides guidance on how to avoid insider trading and improper disclosure. Q: Based on internal reports, I know that Magna’s sales have increased significantly and that our profit this quarter will be higher than anticipated by industry analysts. Can I tell my sister to buy Magna stock before we publicly announce our quarterly earnings? A: No. Using inside information for the benefit of yourself or others, including your family and friends, is contrary to our Code and illegal. Public Disclosures As a public company, Magna has a responsibility to provide full, accurate and timely information in its public documents. We take that responsibility very seriously and strive to follow all applicable laws related to disclosure of our business, operations and financial conditions. To comply with these complex legal requirements, Magna has established a Corporate Disclosure Committee consisting of senior corporate management. Any employee authorized to speak to the media or shareholders, or to make public disclosures of any kind, must comply with applicable securities laws and our Policy on Corporate Disclosure. More details can be found in our Policy on Corporate Disclosure. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 13
Driving Integrity Within Our Workplace 15 15 16 16 The Environment and Occupational Health and Safety Protection of Personal Information Respect for Human Rights Diversity and Inclusion 14 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
The diversity of our employees is a source of strength for our global company. We therefore value and respect people of different backgrounds, capabilities and opinions. The Environment and Occupational Health and Safety It is essential that Magna employees work in safe and clean environments. We seek to be an industry leader in occupational health and safety and environmental responsibility in all our operations. We are committed to meeting or exceeding all health, safety and environmental laws and regulations that apply to us and seek to monitor and review each operation with a goal of continuous improvement. Our commitment to health, safety and the environment is explained in our Employee’s Charter and our Operational Principles and explained in greater detail in our Health, Safety & Environmental Policy. Protection of Personal Information We respect the privacy of our employees and are committed to protecting their personal information. We will collect, use and disclose personal information only for legitimate business or employment purposes or if required by the law. We will also take reasonable steps to protect the confidentiality of personal information we have collected. Q: I work in the Human Resources department at a division. A marketing company recently asked me for the home addresses of all of our employees so that they can send out some valuable information about a new medical clinic. Even though the employees would probably benefit from the information, I turned the marketing company down. Did I do the right thing? A: Yes, you did. Our employees’ home addresses are private information and should only be disclosed for legitimate business and employment reasons, or if required by law. In this case, marketing a service to employees is not an acceptable reason for revealing this personal information. Doing so would violate the Code and may be illegal under local privacy laws. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 15
Respect for Human Rights Respect for the human rights of our employees and other stakeholders is important to our business. We intend to comply with all human rights laws and regulations that apply to us. We provide fair working conditions for our employees and do not tolerate the use of child labour or forced labour in our supply chain. We also expect any supplier or other company that we work with to act ethically and comply with the law. Q: I suspect that one of our suppliers may be using underage workers. What should I do? A: If you suspect that one of our suppliers is using child labour, you must promptly report it to your manager or a Legal Compliance expert. Q: I’m considering promoting someone in our Troy, Michigan, office to a role interfacing with our North American suppliers. While she has all the required qualifications, I’m worried that some of our suppliers might be uncomfortable with her physical disability. Is this a legitimate reason to give someone else the promotion? A: No. We strive to provide equal advancement opportunity to everyone without discrimination on legally protected grounds such as physical disability. If the employee has the right qualifications for the job, you must not deny her the promotion based on her physical disability. Diversity and Inclusion The diversity of our employees is a source of strength for our global company. We therefore value and respect people of different backgrounds, capabilities and opinions. We abide by all applicable labour and employment laws, including those prohibiting discrimination and harassment and those providing for reasonable accommodation of differences. We are committed to providing equal employment and career advancement opportunities to everyone, without discrimination based on sex, race, ethnic background, religion, disability or any other personal characteristic protected by law. 16 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 17
Driving Integrity Through Our Actions 19 19 20 21 21 Use of Confidential Information Investments and Corporate Opportunities Self-Dealing and Interacting with Relatives or Friends Outside Positions Gifts, Meals, Entertainment 18 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Use of Confidential Information Like any other asset, confidential information, which includes trade secrets and proprietary information relating to us, our customers and suppliers, is a valuable part of our business and we are obligated to safeguard it. Such information should not be shared with anyone outside Magna unless it is required by law or for an authorized business purpose. Q: What can I do to protect Magna’s confidential information? A: There are many steps you can take to help Magna protect its confidential information. You should treat confidential records and information with great care and not leave your electronic devices unattended for long periods, especially during travel or business events. You should also avoid discussing Magna business in public areas, for example on a crowded elevator or airplane. Investments and Corporate Opportunities As Magna employees, we must avoid situations where our personal interests come into conflict with Magna’s interests, or situations which give that impression. Q: I work in engineering and during the course of my work I have come up with a new transmission design that I think could be of interest to a few of our automotive customers. Since I came up with the design, can I market it directly to them? For example, if you discover a business opportunity because of your position, or through the use of Magna’s property or information, you must not take personal advantage of it. You must also refrain from using Magna resources for your personal gain. You must also never be involved in any activity that puts you in competition with Magna. A: No, doing so would violate the Code. Any intellectual property you create as part of your job belongs to Magna. In addition, the design you developed during the course of your employment and using Magna resources provides Magna with a valuable business opportunity. You may not take personal advantage of it without seeking Magna’s approval. Confidential information is a valuable part of our business and we are obligated to safeguard it. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 19
Self-Dealing and Interacting with Relatives or Friends We should not allow our personal interests and relationships to interfere with our work responsibilities. Therefore, it is inappropriate for any of us to directly supervise relatives or close friends, or to be in a direct reporting relationship with them. It is also not appropriate to be in a position to hire, evaluate, provide funding to, or enter into contracts or other business relationships with a relative or close friend, or a business or organization in which either we or our relatives or close friends have a significant interest. Q: I’m a buyer in the purchasing department. My wife was recently hired as the head of sales for one of our suppliers. Is this a conflict? A: Yes. It is likely that your wife’s new role will affect your business judgement or give others that impression. You should therefore approach your supervisor with this information. That way, management can assess the situation and take appropriate measures. Doing so helps Magna, and protects you and your wife from any allegation of improper conduct. Specifically, if your work decisions may be affected, or appear to be affected, by the position or interests of a relative or close friend, or by any significant interest that you or your relatives or close friends have in another business or organization, you must inform a supervisor. You must then comply with any process that may be put in place to ensure all dealings and decisions are made on a fair and transparent basis. 20 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Outside Positions To help Magna succeed, we must devote our full time and attention to our jobs during working hours. Therefore, you may not accept outside commitments that would reduce the time and attention you can devote to your job. Unless it has been discussed with a supervisor and the necessary authorizations have been obtained, you are prohibited from accepting paid or unpaid positions that might pose a conflict of interest with Magna or give that impression. Gifts,Meals,and Entertainment Our relationship with all of our business partners must be based on integrity and sound business judgment. As a result, if we give or receive gifts or entertainment, we must be careful not to compromise, or appear to compromise, our commitment to fair dealing and to making decisions that benefit Magna. In our business relationships with customers or suppliers, it is acceptable to give or receive business gifts or entertainment as long as they are reasonable, occasional and of modest value. Any gift or entertainment that we provide must be recorded accurately and transparently in our expense reports and Magna’s books and records. Because of increased legal risks, we must all take special care when dealing with government officials. Offering gifts or entertainment to government officials requires written approval from certain authorized persons in Magna. A discussion of the approval needed, as well as additional information about gifts and entertainment can be found in our Policy on Gifts & Entertainment. Q: One of our suppliers has offered to fly me to see my favourite team play in the championship. Is that okay? A: No. Our business decisions must always be motivated solely by Magna’s best interest. Accepting this extravagant gift would give the impression that you may favour that supplier in future sourcing decisions. You may only accept business gifts and entertainment that are reasonable, occasional and modest in value. If you are ever in doubt, check with your General Manager or a Legal Compliance expert. Q: A government auditor who has conducted environmental audits on my division several times over the years is having a child next month. I would like to give him a bottle of whiskey as a present. Would that be permitted? A: Giving a gift or entertainment to a government official requires extra caution and approval from an authorized person. You should speak to your General Manager or a Legal Compliance expert. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 21
Driving Integrity With Good Communication 23 24 Careful Communication The Magna Hotline 22 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Careful Communication We must ensure that what we write and say while on the job and outside of work reflects the integrity and standards expected of us. To protect Magna’s reputation and your own, it is important that all of your written communications be prepared with care and with the understanding that they could one day be made public. While you enjoy freedom of speech and all legal entitlements to communicate on the Internet during non-working hours using your own personal computer systems, you must also be careful not to post to social media material that defames the company, disparages suppliers or customers, reveals trade secrets, or violates Magna’s copyright and patent rights. Additionally, if someone such as a news media reporter, an industry professional or a shareholder asks you to discuss or comment on matters related to Magna, you must refer them to an authorized Magna spokesperson without providing comments. Magna’s Policy on Careful Communication, our Global Email, Internet and Social Media Policy and our External Media Communications Policy are all useful resources for issues concerning communication. Q: I occasionally air out my frustrations with one of our suppliers on my Facebook page, where I have 250 friends. I do this on my own time and my settings are private so that only my friends and family can see these updates. Is that okay? Q: I found some inaccurate information about Magna’s recent financial results in a newspaper article posted online. I would like to leave a comment on the newspaper’s website with the correct information. Should I do so? A: No. Postings on social media do not always remain private. You must refrain from disparaging Magna’s suppliers in any public forum. If your concern about our supplier relates to violations of the Code, you must report it to a supervisor or a Legal Compliance expert, or use the Magna Hotline. Other concerns are best addressed by using Magna’s Open Door Process. A: No. You should promptly inform someone in Corporate Communications or Investor Relations about the inaccurate information. If you post about Magna’s business, you are acting as an unauthorized spokesperson for the company. We must ensure that what we write and say while on the job and outside of work reflects the integrity and standards expected of us. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 23
The Magna Hotline If you are aware of a violation of this Code, or any related policies, you can always speak to your supervisor or a Legal Compliance expert. You can also contact Magna’s Magna Hotline. You can submit a report online at www.magnahotline.com or you can look up the local, toll-free phone number for your country. This service is provided through an independent, outside company and is available 24 hours a day, 365 days a year. Unless otherwise prohibited by law (in which case you will be informed before you make your report), you can report your concerns anonymously. However, please provide sufficient details so your concern can be investigated effectively. You should never hesitate to make a good faith report of a concern about any violations of the Code of Conduct and Ethics. We prohibit anyone from retaliating against an employee who reports genuine concerns in good faith. Retaliation can take many forms and includes being penalized, discharged, demoted, suspended, threatened or harassed. We will not tolerate any such retaliatory actions taken against a person who has reported a genuine concern about a violation of the Code of Conduct and Ethics. Our Policy on Anti-Retaliation provides more information on this issue. Q: I think my supervisor may be violating the Code, but I’m worried that reporting his behaviour may negatively affect my employment. Will Magna protect me if my supervisor finds out I reported his conduct? A: Yes. Our Policy on Anti-Retaliation prohibits your supervisor from taking retaliatory action against you and protects employees like you who make good faith reports about violations of the Code. Q: What happens when I report a violation using the Magna Hotline? A: When we receive a report through the Magna Hotline, we perform a thorough investigation to determine whether the Code has been violated. We take care to conduct the investigation responsibly and seek help from experts when appropriate. Any report of a Code violation is initially reviewed by our Magna Hotline Administrators (made up of Magna’s Chief Compliance Officer, Vice President of Enterprise Risk Management, and at least one member of the Corporate Legal department.) The Administrators determine whether an investigation is needed and whether it should be handled by the corporate office or at the group level. If an investigation is required, it is conducted by a dedicated investigation team. The results of the investigation are reported to the Magna Hotline Administrators along with recommendations for corrective and disciplinary actions. 24 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Support from Legal Compliance Experts If you have any questions or need more information about our Code of Conduct and Ethics, you can contact Magna’s Legal Compliance experts. A list of such experts can be found on magna.com or the Ethics & Legal Compliance page on MagNET. To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 25
Glossary Bribe: Giving or offering to give something of value to someone for his or her personal benefit in order to obtain business or some other advantage. This includes the payment of small sums – sometimes called “facilitation payments” or “grease payments” – to low-level government officials to obtain routine services to which the person would otherwise be entitled. Compliance: Following the letter and spirit of the law, this Code, and all Magna policies. Good faith: With an honest and sincere intention. Government official: An officer or employee of a government, department or agency, any public international agency, or any person acting in any official capacity on behalf of the government, department or public international agency, as well as any other person deemed to be a government official by Magna’s procedures. Inside information: Information not known by investors or the public that, if it was known, would significantly change their view regarding the value of a company, or its stock or bonds. Examples include a significant acquisition or merger, changes in senior management, significant litigation or labour disputes. Kickback: A form of bribe in which a sum of money already paid or due to be paid is returned as a personal reward for fostering a business arrangement. Lobbying: Communications with government officials at any level of government, including individuals elected to public office, staff and employees of government agencies, intended to promote, oppose or otherwise influence decision-making. Relatives or close friends: Includes a spouse, domestic partner, child, parent, grandparent, grandchild, sibling, aunt, uncle, niece, nephew, in-law relative, step/adoptive/foster relationships, an individual related to you who resides in your home, and a friend with whom you socialize outside of work. Thing of value: Can take the form, among many other things, of money, gifts, donations to charity, excessive travel and entertainment expenses, educational expenses, promises of future employment, or shares of a company. Third Party: A person, organization or business operating external to Magna. 26 MAGNA INTERNATIONAL | CODE OF CONDUCT AND ETHICS
Originally Enacted: May 1, 2016 Current Version: May 9, 2019 Next Review: Q2 2022 Issued by: Ethics and Legal Compliance Approved by: Board of Directors magna.com To report suspected violations of Magna’s Code of Conduct and Ethics, visit The Magna Hotline at www.magnahotline.com 27
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