Our Business Practices
We adhere to the highest standards of corporate governance and ethical conduct. We believe that accountability, transparency and good decision-making support our business, serve our customers and create value for our shareholders.
Discover Financial Services
Corporate Governance Guidelines
1. Board Membership Criteria.
The Board of Directors (the "Board") seeks members who combine a broad and relevant spectrum of experience and expertise with a reputation for ethics and integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and be selected based upon contributions they can make to the Board and management, their ability to represent the interests of shareholders, their ability to think independently, and their willingness to appropriately challenge management while working constructively as part of a team. The Board will also consider the diversity of a candidate's perspectives, background, and other demographics and experience.
2. Selection of New Directors; Nomination Process.
Based on the Board Membership Criteria set forth above, the Nominating, Governance and Public Responsibility Committee (the "NGPR Committee") identifies and recommends director candidates to the full Board. Determinations of qualifications, including independence, shall be made by the NGPR Committee using its business judgment. The NGPR Committee will consider director candidates proposed by shareholders in accordance with the Company’s Policy Regarding Director Candidates Recommended by Shareholders.
In addition, the Board is committed to providing a director nomination process that is fair and equitable to all nominating shareholders, and as such, the Board will not, without shareholder consent, adopt any amendments to the Bylaws of the Company that would expressly (1) require nominating shareholders that are investment funds or other investment vehicles to disclose the identities of less than five percent shareholders, members, limited partners, or holders of similar economic interests solely on account of such holders’ economic interests (so long as such holders do not have or share control over the nominating shareholder and are not participating in the shareholder’s solicitation of proxies); (2) require nominating shareholders to disclose plans to nominate candidates to the board of directors of other public companies; or (3) require nominating shareholders to disclose prior shareholder proposals or director nominations that such a shareholder privately submitted to other public companies. If the Board, in its exercise of its fiduciary responsibilities, deems it to be in the best interests of the Company's shareholders to adopt such provision without the delay that would come from the time reasonably anticipated to seek such a shareholder vote, the Board will either submit the advance notice bylaw to shareholders for ratification or cause the advance notice bylaw to expire within one year.
3. Assessing Board, Committee, and Individual Director Performance.
The Board and each Board committee will conduct an annual self-evaluation to determine whether they are functioning effectively. The NGPR Committee will oversee the annual self-evaluation process, which will include an assessment of Board and committee performance, the qualifications and contributions of individual directors, and any other factors the NGPR Committee deems to be important. Comments regarding individual directors that arise during these reviews will be directed to the Board Chair or Lead Director, if applicable, and to the Chair of the NGPR Committee for their consideration. Comments regarding the Board Chair or Lead Director, if applicable, may be directed to the NGPR Committee Chair.
4. Mix of Inside and Outside Directors.
The Board should have a significant majority of independent directors.
5. Board Refreshment; Director Retirement AND Term Limits.
Board refreshment over time is critical to ensuring that the Board as a whole maintains an appropriate balance of tenure, diversity, skills, perspectives, and experience needed to provide effective oversight in light of the Company’s current and future strategic needs. The Company benefits when there is a mix of experienced directors with a deep understanding of the Company and newer directors who bring a fresh perspective and new ideas. The Board does not believe that mandatory term limits on a director’s service are necessary. Rather,the Board favors an evaluation of each director annually, taking into account the Company’s needs, the results of voting by shareholders in director elections, the director’s participation in and contributions to the activities of the Board, and any other factors deemed appropriate by the NGPR Committee and the Board.
A director shall not be eligible for nomination or election after their 75th birthday. However, the Board may waive this requirement on the recommendation of the NGPR Committee if, in light of all of the circumstances, a director’s continued service is in the best interests of the Company and its shareholders.
6. Change in Director's Professional Responsibilities.
A director who substantially changes their professional responsibilities must so advise, and offer to tender their resignation to, the Chair or Lead Director, if applicable. The Chair or, if applicable, the Lead Director should refer the matter to the NGPR Committee to consider whether the change directly or indirectly impacts the director’s ability to fulfill their directorship obligations. The NGPR Committee should evaluate the facts and circumstances and, if necessary, recommend to the Board if it believes the Board should accept the director's resignation.
7. Executive Sessions of Directors.
Non-employee directors must meet regularly in executive Session without management present. If any non-employee directors are not independent, then the independent directors shall meet in a separate executive session at least once per year. The Chair or, if the Chair is not a non-employee and independent director, the Lead Director has the authority to call and will preside over all executive sessions. The Chair or the Lead Director, as applicable, may retain independent legal, accounting, or other advisors in connection with these sessions, and the Company shall provide appropriate funding therefor.
8. Positions of Chair and Chief Executive Officer.
The Company's Bylaws provide that the office of the Chair and the office of the Chief Executive Officer ("CEO") may be, but need not be, held by the same person. The Board will periodically determine whether the current leadership structure with respect to having combined or separate Chair and CEO roles continues to be in the best interest of the Company.
9. Board Committees: Independent Audit, Compensation and Leadership Development, NGPR, and Risk Oversight Committees.
The Board maintains standing Audit, Compensation and Leadership Development Committee (the "CLD Committee"), NGPR, and Risk Oversight Committees, which shall consist solely of directors qualified to serve on the committees pursuant to the requirements of the New York Stock Exchange ("NYSE") and applicable laws and regulations, who are recommended for committee service by the NGPR Committee. The Board also may maintain additional committees to facilitate discharging its responsibilities. Before establishing any additional committee, the Board shall consider whether the membership of the committee should be limited solely to independent directors.
A committee may be a joint committee of the Company and Discover Bank. A joint committee may hold separate sessions if necessary to address issues that are relevant to one entity but not the other or to consider transactions between the two entities or other matters where the Company and Discover Bank may have different interests. In addition, any such joint committee should consult with internal or outside counsel if, in the opinion of the joint committee, any matter under consideration by the joint committee has the potential for a conflict between the interests of the Company and those of Discover Bank or the Company's other subsidiaries in order to ensure that appropriate procedures are established for addressing such potential conflict.
Each standing committee shall have its own charter setting forth the purposes and responsibilities of the committee. The standing committees' charters also will provide that each standing committee will evaluate its performance and present the results of the evaluation to the Board. The charters are posted publicly on the Company's website.
In the absence of a committee chair at any meeting of a committee, the members of the committee may designate one of its members to serve as the chair.
10. Frequency and Length of Board Committee Meetings.
The Chair should regularly consult with committee chairs to obtain their insights and to optimize committee performance. The committee chairs, in consultation with committee members and the appropriate members of management, should establish the frequency and length of committee meetings.
11. Development of Committee Agendas.
The committee chairs, in consultation with the appropriate members of management, should develop committee agendas. All standing committees should meet regularly during the year and receive reports from Company personnel on developments affecting the committee's work.
12. Selection of Agenda Items and Meeting Schedule for Board Meetings.
The Chair, in consultation with members of the Board, should establish the agendas and schedules for Board meetings. If the Company has a Lead Director separate from the Chair, the Lead Director shall advise the Chair regarding Board meeting agendas and schedules, and may request the inclusion of additional agenda items.
13. Distribution of Materials for Board Meetings.
The Board believes it is critical for members to have materials on topics to be discussed sufficiently in advance of the meeting date and for Board members to be kept abreast of developments between Board meetings. Therefore, the Company regularly informs Board members of Company, competitive, and risk-related developments. Further, to the extent possible, the Company distributes, in advance of the meeting, written materials for use at Board meetings. If the Company has a Lead Director separate from the Chair, the Lead Director shall advise the Chair of the Board's informational needs, including recommendations for Board meeting topics and materials that reflect consultation with the other non-management directors and that are sufficient in scope, detail, and analysis to enable the Board to make sound, well-informed decisions and consider potential risks. A director should not hesitate to ask questions, to request additional information in connection with and outside of regular meetings, and, in particular, to ask for the facts and any assumptions underlying conclusions and opinions presented to the Board..
14. Attendance of Non-Directors at Board and Board Committee Meetings.
The Company's CEO, Chief Financial Officer, General Counsel, Chief Risk Officer, and Chief Human Resources Officer regularly attend meetings of the Board and Board committees. The Chair encourages these persons to respond to questions posed by Board members relating to their areas of expertise. Such persons do not attend executive sessions, either of the Board or Board committees, unless requested.
The Board believes that the attendance of key executive officers at Board and committee meetings enhances the ability of the Board to conduct its oversight duties. The CEO and other members of senior management can assist the Board with its deliberations and provide critical insights and analysis, particularly when the Board considers presentations on the business plan for the upcoming year and on medium and long-term strategic issues. Attendance of such officers allows the most knowledgeable and accountable executives to communicate directly with the Board. It also provides the Board direct access to individuals critical to the Company's management succession planning.
15. Board Access to Senior Management and Employees.
Board members have complete and open access to senior members of management and any other Company employee. In addition, the Chair may invite key employees to attend Board sessions at which the Chair believes they can meaningfully contribute to Board discussion.
16. Board Compensation; Director Share Ownership.
The NGPR Committee is responsible for reviewing the effectiveness of the nonemployee director compensation and benefit programs in supporting the Company's ability to attract, retain, and motivate qualified directors. The NGPR Committee reviews director compensation at least every other year and considers a variety of factors, including the Company's financial performance, general market conditions, director compensation at companies with which we compete for talent, director responsibilities, and trends in director compensation practices. Any recommendations for changes in director compensation are made to the Board. The Board believes that total compensation should include a significant equity component because this more closely aligns the long-term interests of directors with those of shareholders and provides a continuing incentive for directors to foster the Company's longterm success. Directors who are employees of the Company or any of its subsidiaries do not receive compensation for their service as directors.
Non-employee directors receive restricted stock units when they are first elected to the Board and when they are reelected. This incentive helps align non-employee directors’ interests with those of shareholders. The NGPR Committee has approved share ownership guidelines that provide that directors shall hold Company common stock equal to 5X the annual cash retainer with a five-year attainment window. Common stock to be counted towards the share ownership target includes actual shares owned beneficially by a director in "street" accounts or otherwise, unvested restricted stock units, and deferred restricted stock units.
17. Size of the Board.
While the Board need not adhere to a fixed number of directors, the number of directors shall be as permitted by the Company’s Bylaws. The Board may review from time to time the appropriate size of the Board and any recommendations of the NGPR Committee concerning changes to the size of the Board, taking into consideration the overall responsibilities of the Board and its committees, the number of committees, and the workload of the Directors.
18. Lead Director.
If the Chair does not qualify as a non-employee and independent director, the Board believes that it is in the best interest of the Company for the independent directors to appoint a Lead Director from among themselves. The Lead Director:
- Presides at all meetings of the Board at which the Chair is not present, and shall have the authority to call, and will lead, executive sessions of the non-employee and independent directors;
- Helps facilitate communication between the Chair/CEO and the independent directors;
- Advises the Chair on the Board's informational needs;
- Approves Board meeting agendas and schedules, and requests the inclusion of additional agenda items, as necessary;
- Acts as a key advisor or mentor to the CEO;
- Provides leadership during any crisis;
- Advises the Chair on the retention of advisors and consultants to the Board;
- Ensures Board discussions demonstrate credible challenge of management;
- Facilitates teamwork and communication among the independent directors;
- Fosters a positive culture for the Board generally, as it relates to governance and communication;
- Helps ensure that the Board reviews the Company's long-term strategy and that the Board oversees management's execution of the long-term strategy;
- Communicates with major shareholders as necessary; and
- Carries out such other duties as are requested by the independent directors or the Board from time to time.
If the Chair of the Board is independent and no Lead Director has been appointed, the Chair will be responsible for performing the foregoing duties to the extent applicable.
19. Definition of "Independent" Director.
The Board has established the following guidelines to assist it in determining whether or not directors qualify as "independent" pursuant to the NYSE's Corporate Governance Rules. In the following guidelines, "immediate family member" means a person's spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares such person's home. In each case, the Board will broadly consider all relevant facts and circumstances and apply the following standards (in accordance with the guidance, and subject to the exceptions, provided by the NYSE in its Commentary to its Corporate Governance Rules). To the extent that the language below conflicts with the NYSE Corporate Governance Rules, the NYSE Corporate Governance Rules and its accompanying guidance will control.
Employment and Commercial Relationships Affecting Independence.
A director will not be independent if: (i) the director is a current partner or current employee of Discover's internal or external auditor; (ii) an immediate family member of the director is a current partner of Discover's internal or external auditor; (iii) an immediate family member of the director (a) is a current employee of Discover's internal or external auditor and (b) personally works on Discover's audit; or (iv) the director is a current employee, or an immediate family member of the director is a current executive officer, of an entity that has made payments to, or received payments from, Discover for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company's consolidated gross revenues.
Relationships within Preceding Three Years.
A director will not be independent if, within the preceding three years: (i) the director is or was an employee of Discover; (ii) an immediate family member of the director is or was an executive officer of Discover; (iii) the director or an immediate family member of the director (a) was a partner or employee of Discover's internal or external auditor and (b) personally worked on Discover's audit within that time; (iv) the director or an immediate family member of the director received more than $120,000 in direct compensation in any twelvemonth period from Discover, other than (1) director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) and (2) compensation received by an immediate family member for service as an employee of Discover (other than an executive officer); or (v) a present Discover executive officer is or was on the compensation committee of the board of directors of a company that at the same time employed the Discover director or an immediate family member of the director as an executive officer.
- Current Relationships.
Relationships not deemed material for purposes of director independence.
In addition to the provisions of Section 19, Subsection 1 above, each of which must be fully satisfied with respect to each independent director, the Board must affirmatively determine that the director has no material relationship with Discover (either directly or as a partner, shareholder, or officer of an organization that has a relationship with the Company). To assist the Board in this determination, and as permitted by the NYSE's Corporate Governance Rules, the Board has adopted the following categorical standards of relationships that are not considered material for purposes of determining a director's independence. It is not possible to anticipate, or explicitly to provide for, all circumstances that might signal potential conflicts of interest, or that might bear on the materiality of a director's relationship to the Company. Thus, any circumstances brought to the attention of the Board concerning independence for a director, regardless of these categorical standards, will be considered based upon all relevant facts and circumstances in determining such director's independence, and the Board shall disclose the basis for such determination in the Company's proxy statement.
A relationship arising solely from a director's ownership of an equity or limited partnership interest in a party that engages in a transaction with Discover, so long as such director's ownership interest is less than 10% of the total equity or partnership interests in that other party.
Any transaction where the director's interest arises solely from the ownership of a class of equity securities of the Company and all holders of the class of equity securities of the Company received the same benefit on a pro rata basis (e.g., dividends).
A relationship arising solely from a director's position as (i) director or advisory director (or similar position) of another company or for-profit corporation or organization or (ii) director or trustee (or similar position) of a tax-exempt organization.
Ordinary Course Business.
A relationship arising solely from banking or electronic payments transactions, including but not limited to consumer lending, securitization and deposit taking, or from other transactions for products or services, between Discover and a company of which a director is an executive officer, employee, or owner of 10% or more of the equity of that company, if such transactions are made in the ordinary course of business and on terms and conditions and under circumstances that are substantially similar to those prevailing at the time for comparable transactions, products, or services for or with unaffiliated third parties; do not involve more than the normal risk of collectability or present other unfavorable features; and are not disclosed as past due, nonaccrual, or troubled debt restructurings in the Company's consolidated financial statements; and do not violate the standards in Section 19, Subsection 1 above.
A relationship arising solely from a director's status as an executive officer, employee, or owner of 10% or more of the equity of a company to which Discover is indebted at the end of Discover's preceding fiscal year, so long as the aggregate amount of the indebtedness of Discover to such company is not in excess of 5% of Discover's total consolidated assets at the end of Discover's preceding fiscal year.
Compensation and Indemnification.
Director compensation and indemnification arrangements, if such arrangements have been reported and approved by the Board and otherwise meet applicable requirements.
A relationship arising solely from a director's status as an executive officer of a tax exempt organization, and the charitable contributions by Discover in the preceding three years (directly or through any foundation or similar organization established by Discover) to the organization do not exceed, in any single year, the greater of $1,000,000 or 2% of the organization's consolidated gross revenues during the organization's preceding fiscal year (automatic matching of employee charitable contributions are not included in Discover's contributions for this purpose).
Products and Services.
A relationship arising solely from a director utilizing products or services (e.g., credit cards or ATM/debit networks) of Discover in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable products or services provided to unaffiliated third parties.
Professional, Social, and Religious Organizations and Educational Institutions.
A relationship arising solely from a director's membership in the same professional, social, fraternal, or religious association or organization, or attendance at the same educational institution, as an executive officer.
Any relationship or transaction between an immediate family member of a director and Discover shall not be deemed a material relationship or transaction that would cause the director not to be independent if the standards in this Section 19, Subsection 2 would permit the relationship or transaction to occur between the director and Discover.
- Equity Ownership.
20. Management Development and Succession Planning.
The CLD Committee oversees plans for management development and succession. Senior Company executives serving on the Executive Management Committee should evaluate, nominate, and compile a succession plan for their areas of responsibility that should be reviewed with the CEO. The CEO should provide input on each succession plan and discuss the plans with the CLD Committee. The CEO reviews with the CLD Committee succession planning for his or her successor at least annually. The CLD Committee periodically reviews with the Board succession plans for the CEO and the areas of responsibility for senior executives serving on the Executive Management Committee. Succession planning should include policies and principles for CEO selection and performance review, as well as policies regarding succession in the event of an emergency or the retirement of the CEO.
21. Board Communication Policy.
The Board believes that under ordinary circumstances, management speaks for the Company and the Chair speaks for the Board. At the request of management, the relevant Board members may meet or communicate with the Company's various constituencies, including, without limitation, shareholders on issues where Board-level involvement is appropriate. Directors should coordinate such communications or meetings with the Chair, CEO (if separate), and General Counsel.
22. Repricing of Stock Options.
The Board opposes repricing of incentive-based options by a reduction in the option's exercise price. The Board favors equitable adjustment of an option's exercise price in connection with a reclassification of the Company's stock; a change in the Company's capitalization; a stock split; a restructuring, merger, or combination of the Company; or other similar events in connection with which it is customary to adjust the exercise price of an option and/or the number and kind of shares subject thereto.
23. Service on Multiple Boards.
Directors are expected to devote sufficient time to carry out their duties and responsibilities effectively. Accordingly, in advance of accepting an invitation to serve on another public company board, directors shall notify the Chair of the NGPR Committee and the General Counsel, who will notify and consult with the NGPR Committee regarding such additional board service. The NGPR Committee shall consider the nature of, and time involved in, a director’s service on other public company boards in evaluating whether any additional participation may impair the director’s ability to objectively and effectively serve on the Company’s Board. Generally, no director shall serve on more than a total of four public company boards (i.e., including the Company’s Board). A director who is an executive officer of a publicly traded company may serve on a total of two public company boards (i.e., including the Company’s Board). A director may not serve on the audit committees of more than three public companies (including the Audit Committee of Discover’s Board) unless the Board determines that such service would not impair the director’s ability to effectively serve on the Audit Committee of Discover’s Board. For purposes of this section, the phrase “public company board” shall be deemed to exclude subsidiary companies, private companies, and nonprofit organizations. If a director sits on several mutual fund boards within the same fund family, it will count as one public company board.
24. Orientation for New Directors; Continuing Education for Directors.
The General Counsel and Corporate Secretary shall be responsible for providing an orientation program for new directors, with oversight from the NGPR Committee. The orientation program shall include personal briefings by senior management on the Company's strategic plans, its financial statements, and its key risks, policies, and practices. The General Counsel and Corporate Secretary shall make available to directors the opportunity to attend educational sessions on subjects that would assist them in discharging their duties. The Company will reimburse directors for reasonable costs incurred in attending these sessions.
25. Director Access to Independent Advisors.
The Board and its committees shall have the right, at any time, to retain at the expense of the Company independent outside financial, legal, or other advisors as they may deem necessary.
26. Director Responsibilities.
Directors are expected to reinforce a culture of ethics and compliance and exercise their business judgment to act in good faith, on an informed and independent basis, and in what they reasonably believe to be the best interest of the Company and its shareholders. In discharging that obligation, the Board relies on the honesty, integrity, business acumen, and experience of the Company’s management, its outside advisors, and its independent registered public accounting firm.
The Board acts as an advisor and counselor to the CEO and oversees management's development and implementation of the Company's annual strategic, capital, and financial plans, as well as the Company's risk governance framework and risk appetite statement, each of which are approved by the Board. The Board monitors the performance of senior management against these plans and holds them accountable for their implementation, including for alignment with the Company's risk appetite. In exercising its oversight responsibilities, the Board is expected to question and effectively challenge, when necessary, recommendations and decisions made by management.
Directors are expected to attend all meetings of the Board and Board committees on which they serve and to review in advance materials distributed before the meeting.
The Board believes that director attendance at shareholder meetings is appropriate and can assist directors in carrying out their duties. Each director will attend annual shareholder meetings unless he or she is unable to do so due to extenuating circumstances.
27. Review of Resignations Tendered by Certain Incumbent Directors.
The Board expects that an incumbent director who fails to receive a majority of the votes cast in an election that is not a Contested Election (as defined in the Company's Bylaws) and who tenders their resignation pursuant to the Company's Bylaws shall not participate in any proceedings by the Board or any committee thereof regarding whether to accept or reject such director's resignation, or whether to take other action with respect to such director.
Nonpublic information about the Company and its performance is confidential, and a director should deal in confidence on all matters involving the Company until the Company has made a general public disclosure concerning the matter.
Pursuant to their fiduciary duties of loyalty and care, Directors are required to protect and hold confidential all such information obtained as part of their directorship position absent the express permission of the Board or as may be permitted or required by law. Accordingly, confidential information may not be used by any director for their own benefit or for the benefit of others, and no director shall disclose confidential information outside the Company, either during or after their service as a director, except with the authorization of the Board or as may be otherwise permitted or required by law.
29. Ethical Conduct and Conflicts.
The Company has adopted a Code of Ethics and Business Conduct (the "Code"), which is applicable to all directors, officers, and employees of the Company. The Code is intended to be a guide and set expectations for the ethical and legal responsibilities that all covered individuals share as members of the Company.
Directors must avoid any activities, interests or relationships that might interfere with, or appear to interfere with, their ability to act in the best interest of the Company. Directors cannot take personal advantage of their position or authority with the Company or engage in conduct that is detrimental to the Company's interests or reputation in any way.
Conflicts of interest may arise due to the Company's interests and its relationships with multiple customers, counterparties, and suppliers. Conflicts, for example, can occur between different customers and between customers and the Company itself. Each director's day-to-day responsibilities may expose them to situations that potentially raise personal conflicts of interest. Directors should avoid any investment, activity, interest, or relationship outside the Company that could impair their judgment or interfere with (or give the appearance of interfering with) their responsibilities to the Company, its customers, its regulators, or its shareholders. If a business opportunity arises either because of a director's position with the Company or using corporate property or information, it belongs to the Company.
Directors should disclose any actual or potential conflicts of interest to the Chair or Lead Director, if applicable, and the General Counsel, who shall determine the appropriate resolution. All directors must recuse themselves from any Board discussion or decision affecting their personal, business, or professional interests.
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The Board may amend these Guidelines from time to time.
As Amended: October 26, 2023