Delta Apparel, Inc. believes that good corporate governance practices reflect our values and support our strong strategic and financial performance. Our Board members are committed to effectively oversee management’s performance, to act in the long-term best interests of shareholders, and to maintain the highest standards of corporate governance. In addition, the Board has established principles to assist them in carrying out their responsibilities. These principles address matters such as chief executive officer and key management succession planning, transactions with related persons, risk oversight, communications with the Board by shareholders and other interested parties, as well as the independence and qualifications of our directors. See Corporate Governance at a Glance for an overview of Delta Apparel’s corporate governance practices.
Board of Directors
Our Board is currently comprised of six independent Directors and Robert W. Humphreys, Chairman of the Board and Chief Executive Officer. See Director Biographies for further details on the members of the Board.
Our Board evaluates the independence of each director in accordance with applicable laws and regulations and the listing standards of the NYSE MKT Stock Exchange. Generally, an “independent director” is a director who is not also an officer or employee of the Company or any parent or subsidiary of the Company. In addition, no director qualifies as independent unless the Board affirmatively determines that the director does not have a material relationship with the Company that would interfere with the exercise of independent judgment. Our Board has reviewed the relationships between each member of the Board and the Company and determined that with the exception of Robert W. Humphreys, Chairman and Chief Executive Officer, each of our current directors is “independent” as required by applicable laws and meets the applicable independence requirements of the NYSE MKT Company Guide. Each director is required to keep the Board fully and promptly informed as to any developments that might affect his or her independence.
Our Board delegates various responsibilities and authority to different board committees. Committees regularly report on their activities and actions to the full board. The Board currently has an Audit Committee, a Compensation Committee and a Corporate Governance Committee (which is our nominating committee). Each member of the Audit Committee, Compensation Committee, and Corporate Governance Committee has been determined by the Board to be independent. See Committees for information on the composition of each of the Committees. Each Committee has a charter that details out the Committee’s roles and responsibilities assigned to it by the Board of Directors. See the Audit Committee Charter, the Compensation Committee Charter and the Governance Committee Charter.
Board Leadership Structure
Our governance documents provide the Board with flexibility to select the appropriate leadership structure of the Company. The Board does not have a policy on whether or not the roles of Chairman of the Board and Chief Executive Officer should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. The Board of Directors believes that it should be free to make a choice from time to time based on circumstances existing at that time to determine the structure that is in the best interests of Delta Apparel, Inc. and our shareholders. Currently, Robert W. Humphreys serves as the Chairman of the Board and as Chief Executive Officer. Mr. Humphreys is the director most familiar with our business and industry, and possesses detailed knowledge of the issues, opportunities and challenges facing us and our business. The Board believes the combined position makes the best use of Mr. Humphreys’ skills and experience with the Company and helps provide strong, unified leadership and direction on important strategic initiatives to both management and the Board, and to ensure that they act with a common purpose. The Board believes that its overall corporate governance policies and practices, combined with the presence of a Lead Independent Director, adequately addresses any governance concerns raised by the dual Chairman and Chief Executive Officer role.
Lead Independent Director
Mr. Robert E. Staton, Sr. currently serves as our Lead Independent Director. The Lead Independent Director has a number of responsibilities, including presiding at executive sessions of the Board, acting as liaison between the Chairman and the other Directors, and advising with respect to the schedule, agenda and information for Board meetings. The Lead Independent Director, along with the other non-employee directors, also provides independent oversight of management and the Company’s strategy.
Meetings and Attendance
The Board and its committees meet throughout the year on a set schedule, and hold special meetings and act by written consent from time to time as appropriate. Directors are expected to make every effort to attend meetings of the Board, assigned committees and annual meetings of shareholders. Throughout the year, our directors communicate informally with management on a variety of topics, including suggestions for Board or committee meeting agenda topics, recent developments, and other matters of interest to the Directors.
The Board of Directors conducts a self-evaluation of its performance on an annual basis, which includes a review of the Board's composition, responsibilities, leadership and committee structure, processes, and effectiveness.
The Corporate Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Board, suggestions from Company management, and shareholder recommendations. The Committee may also, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Governance Committee by submitting a written recommendation to the Committee. The Board of Directors has adopted a Director Nominations Policy setting forth the qualification standards for the selection of independent nominees for Director.
We have no formal policy regarding Board member diversity; however, the Corporate Governance Committee considers and discusses diversity in selecting nominees for Director and in the re-nomination of an incumbent Director. The Committee views diversity broadly, including gender, ethnicity, differences of viewpoint, geographic location, skills, education, and professional and industry experience, among other factors, and its goal is to nominate candidates from a broad range of experiences and backgrounds. We believe that a variety and balance of perspectives on the Board can result in more thoughtful discussions and deliberations.
Shareholder Communication with Directors
Shareholders desiring to communicate directly with the Board of Directors or any individual members of the Board may do so in writing addressed to the intended recipient or recipients, c/o Justin M. Grow, Corporate Secretary, Delta Apparel, Inc., 322 S. Main Street, Greenville, South Carolina 29601, or by email to email@example.com, or by fax to (864) 232-5199. All such communication will be reviewed by our Secretary, who will remove communications relating to solicitations, junk mail, or other correspondence relating to customer service concerns. All other shareholder communications will be promptly forwarded to the applicable member(s) of our Board of Directors or to the entire Board of Directors, as requested in the shareholder communication.
The Board’s Role in Risk Oversight
We have a comprehensive enterprise risk management process in which management is responsible for managing the Company's risks. The Board and its committees provide review and oversight in connection with these efforts. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk taking is essential for Delta Apparel, Inc. to be competitive and to achieve our strategic objectives.
The Board implements its risk oversight function both as a whole and through Committees, which play a significant role in carrying out risk oversight. The risk oversight responsibility is enabled by management reporting processes that are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These areas of focus include competitive, economic, operational, financial, legal, regulatory, compliance, safety, environmental and political risks. While the Audit Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board Committees according to the committee’s area of responsibility as reflected in the committee charters.
Compensation Risk Assessment
We have assessed the potential risk associated with Delta Apparel, Inc.’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of incentive compensation, a balance of short and long-term incentives, a balance of cash and equity incentives, and the vesting of awards over time. We do not believe our compensation program encourages excessive or inappropriate risk taking.
In light of the critical importance of executive leadership to Delta Apparel’s success, the Board has a chief executive officer and key management succession planning process that is led by the Corporate Governance Committee. The Corporate Governance Committee is charged with the responsibility of identifying and evaluating candidates to succeed the Chief Executive Officer and to report, at least annually, to the Board on the status of the succession plan. As a part of the succession planning process, the Corporate Governance Committee also reviews and assesses any concerns regarding the long-term growth and development of the executive officers and the preparedness of the Company for the possibility of an emergency situation involving the chief executive officer or other executive officers and key managers.
Code of Ethics
We maintain a code of business conduct and ethics known as the Ethics Policy Statement that applies to all salaried employees, officers and directors, including, but not limited to, the Chief Executive Officer and the Chief Financial Officer (who is also our principal accounting officer). The Ethics Policy Statement covers topics including, but not limited to, conflicts of interest, insider trading, competition and fair dealing, discrimination and harassment, confidentiality, payments to government personnel, compliance procedures and employee complaint procedures. Any amendments or waivers to provisions of our Ethics Policy Statement that are applicable to our Chief Executive Officer or our Chief Financial Officer will be posted on our internet website.
Description of Amendments to Delta Apparel, Inc. Ethics Policy Statement
On November 24, 2015, the Delta Apparel, Inc. Board of Directors approved certain amendments to the Company’s Ethics Policy Statement to: (i) generally update the policy and make various stylistic and language changes intended to improve clarity and enhance employees’ understanding of the contents and requirements of the policy; (ii) revise the Trading In Securities section of the policy to set forth and describe the specific prohibitions on insider trading contained in the Company’s insider trading policy and generally describe what information constitutes non-public information; and (iii) revise the Mail, E-Mail, Voicemail and Equipment section to encompass the usage of on-line media. None of the amendments constituted or effected a waiver of any provision of the Ethics Policy Statement.
The above summary of the nature of the amendments to the Ethics Policy Statement is qualified in its entirety by reference to the full text of the Ethics Policy Statement.
Related Party Transactions
We review all relationships and transactions in which the Company and its directors, executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. Pursuant to our Related Party Transactions Policy, on an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire which requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. In addition, the Audit Committee Charter requires that members of the Audit Committee review and approve all related party transactions for which such approval are required under applicable law, including the Securities and Exchange Commission and the NYSE MKT rules. Our Board of Directors is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest. Accordingly, as a general matter, it is our preference to avoid related party transactions.
In 2010, Congress enacted the "conflict minerals" provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to address the exploitation and trade of certain minerals that contribute to violence and human rights abuses in the Democratic Republic of the Congo and neighboring countries. These conflict minerals consist of gold, columbite-tantalite (coltan), cassiterite, and wolframite (including their derivatives, tantulum, tin and tungsten), and may include other designated minerals in the future. As set forth in our Conflict Minerals Policy, we support the Dodd-Frank Act's goals of preventing armed groups in the applicable countries from benefitting from the sourcing of conflict minerals from that region and we are committed to responsible sourcing of materials for our products. We also support greater transparency in the supply chain, particularly with respect to the sourcing of conflict minerals.