2018 Guide to Effective Proxies

2.14 Board and director evaluation | 205 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES CAPITAL ONE FINANCIAL CORPORATION EBAY GOLDMAN SACHS GROUP, INC. INVESCO LTD SECTIONI-CORPORATEGOVERNANCEATCAPITALONE Annual Board and Committee Evaluations In order to monitor and improve their effectiveness, and to solicit and act upon feedback received, the Board and its committees engage in a formal self-evaluation process. The Board believes that in addition to serving as a tool to evaluate and improve performance, evaluations can serve several other purposes, including the promotion of good governance, integrity of financial reporting, reduction of risk, strengthening of the board-management partnership, and helpingset and oversee board expectations of management. In assessingtheir performance, the Board and its committees take a multi-year perspective to identify and evaluate trends and assure themselves that areas identified for improvement are appropriately and timely addressed. As part of the Board’s evaluation process, directors consider various topics related to Board composition, structure, effectiveness and responsibilitiesand the overallmix of director skills, experienceand backgrounds. Whilethe Board and each of its committees conducts a formal evaluation annually, the Board considers its performance and that of its committeescontinuouslythroughouttheyearandsharesfeedbackwithmanagement. To ensure the process stays fresh and continues to generate rich insights, the Board follows a cyclical, programmatic approach to conducting Board and committee evaluations. This approach includes regular, holistic reviews of the evaluation framework, methodology and form. In 2017, the Board and its committees conducted theirevaluationsusingthefollowingprocess: Initiation of Process The Lead Independent Director developed and circulated a list of potential topics to directors for consideration in advance of the Board’s evaluation discussion. The Lead Independent Director solicited input from the Corporate Secretary, the Corporate Governance Office, and members of the Board in formulating the questions. Committeechairsfollowedasimilarprocessfortheirrespectivecommittees. Discussion TheLeadIndependentDirectorscheduledtimewitheachindividualdirectorinadvance of the Board evaluation discussion to gather input and feedback and leveraged those discussions to lead the evaluation discussion held during the executive session at the Board’s meeting held during the second quarter. Committee chairsledtheirrespective committeediscussionsduringexecutivesession. Follow-Up The Lead Independent Director shared a summary of the Board results with management to address any requests or enhancements in practices that may be warranted.CommitteechairsreportedontheirrespectiveevaluationstothefullBoard. Topicsconsideredduringthe2017annualevaluationsprocessincluded: Settingcorporatecultureand“toneatthetop” LeadIndependentDirector’srole ChairmanoftheBoard’srole AssessmentoftheCEO’sperformance CEOandexecutivemanagementsuccessionplanning Executivecompensation Companyperformance Corporatestrategy(bothshort-andlong-termstrategicobjectives) Executivetalentdevelopment AccesstoCompanyexecutivesandassociates Boardandcommitteecompositionincludingdirectorskills,background,expertise,anddiversity Oversight of enterprise risk, including the stature of the risk management function and appropriateness of the Company’s risk appetites and risk management in light of the scale and complexity of the Company’s business Overall Board governance including quality and quantity of materials and information, conduct of meetingsandsupportforthoseactivitiesfrommanagement 24 CAPITALONEFINANCIALCORPORATION 2018PROXYSTATEMENT Total of 02 pages in section CorporateGovernance| OurCorporateGovernancePractices BoardandCommitteeEffectiveness;BoardAnnualSelf-Assessment;BoardEducation ItisimportantthattheBoardanditscommitteesareperformingeffectivelyandinthebestinterestsofthe Companyanditsstockholders.TheBoardandeachcommitteeperformanannualself-assessmentto evaluateitseffectivenessinfulfillingitsobligations.Aspartofthisannualself-assessment,directorsareable toprovidefeedbackontheperformanceofotherdirectors.TheChairoftheCorporateGovernanceand NominatingCommitteeleadstheBoardinitsreviewoftheresultsoftheannualself-assessmentandtakes furtheractionasneeded.Inaddition,theCompanyprovidesmembershipintheNationalAssociationof CorporateDirectorstoallBoardmembers,aswellastheopportunitytoattenddirectoreducationprograms atotherinstitutions,toassisttheminremainingcurrentwithexemplaryboardandcommitteepracticesand developmentsincorporategovernance. RESULTSANALYZED Results of the self-assessmentanalyzed anddiscussedwith CorporateGovernance and NominatingCommittee SUMMARYOFRESULTS Summary ofBoard and Committee self-assessment resultsprovided to fullBoard FEEDBACK INCORPORATED Policies and practices updatedas appropriate asa resultof theannual self-assessmentand ongoing feedback ONGOINGFEEDBACK Directorsareencouraged to provide ongoing feedback in addition to the annual self-assessment Annual Self-Assessment REVIEWOFPROCESS TheChair ofourCorporate GovernanceCommittee periodically reviews the self-assessmentprocess INDIVIDUALDISCUSSIONS TheChairof ourCorporate GovernanceandNominating Committee engageswith individual directors as appropriate SELF-ASSESSMENT QUESTIONNAIRE Provides director feedback on theBoardandeach of theCommittees aswellas each director TheBoardalsohasdevelopedasetofguidingprinciplesrelatingtoBoardmembership.TheBoardbelieves thatinlightoftherapidlychangingenvironmentinwhichtheCompany’sbusinessesoperate,theBoard mustaddmemberswithhighlyrelevantprofessionalexperience.Inaddition,theBoardbelievesthata certainamountofdirectorturnoveristobeexpectedanddesirable,andwhileitdoesnothavetermlimits, theBoardbelievesthatuptonineto12yearswillgenerallybetheexpectedtimecommitmentfromany individualdirector. 15 13 Director independence For a director to be considered independent, the Board must affirmatively determine that the director does not have any material relationship with the company either directly or as a partner, shareholder or officer of an organization that has a relationship with the company. Such determinations are made and disclosed according to applicable rules established by the New York Stock Exchange (“NYSE”) or other applicable rules. As part of its independence determinations, the Board considers any direct or indirect relationship between a director (or an immediate family member of such director) and the company or any third party involved with the company. As part of its independence determinations with respect to director Sarah E. Beshar, the Board considered (i) a real estate lease by the company of certain office space located in New York, New York from Marsh & McLennan (“MMC”) which employs Ms. Beshar’s spouse as an executive officer (Executive Vice President and General Counsel); and (ii) various human resources- related transactional and administration services (e.g., third-party benefits administration and benchmarking market data) which are non-professional and nonadvisory in nature provided by subsidiaries of MMC. The total amount paid to MMC in 2017 for all such items was less than one percent (1%) of MMC’s 2017 publicly reported revenue. In accordance with the rules of the NYSE, the Board has affirmatively determined that it is currently composed of a majority of independent directors, and that the following current directors are independent and do not have a material relationship with the company: Sarah E. Beshar, Joseph R. Canion, C. Robert Henrikson, Ben F. Johnson III, Denis Kessler, Sir Nigel Sheinwald, G. Richard Wagoner, Jr. and Phoebe A. Wood. Board evaluation process 1 Annual board and committee evaluations TheBoard engages an independent external advisor specializing in corporate governance to coordinate the Board’s self assessment by itsmembers. The advisor has each director complete a questionnaire and then performs one-on-one confidential interviewswith directors. In addition to the questionnaires and interviews of each director, interviews are also conductedwith thosemembers of executivemanagementwho attendBoardmeetings on a regular basis. 2 Report to board The advisor prepares and presents in person a report to the Board,which discusses the findings of the advisor based upon its reviews. The report also discusses governance trendswhich theBoardmaywant to take into consideration. 3 Board and committee review TheBoard then discusses the evaluation to determinewhat action, if any, could further enhance the operations of the Board and its committees. PROXY-BRO-1 03-18.indd 13 3/20/18 4:13PM Total of 02 pages in section CorporateGovernance |StructureofourBoardandGovernancePractices BOARDANDCOMMITTEE EVALUATIONS BoardandCommitteeevaluationsplayacriticalroleinensuringtheeffectivefunctioningofourBoard.Itis importanttotakestockofBoard,Committeeanddirectorperformanceandtosolicitandactuponfeedback receivedfromeachmemberofourBoard.Tothisend,undertheleadershipofourLeadDirector,ourGovernance CommitteeisresponsibleforevaluatingtheperformanceofourBoardannually,andeachofourBoard’s Committeesalsoannuallyconductsaself-evaluation. REVIEWOFEVALUATIONPROCESS Our LeadDirector andGovernanceCommittee periodically review the evaluation process toensure that actionable feedback is solicited on the operation of our Board and itsCommittees, aswell as on director performance Over the last several years,we have refined the format of the questionnaire and added specific evaluations of the LeadDirector, eachCommitteeChair and each individual director ONGOING FEEDBACK Directors provide ongoing, real- time feedback outside of the evaluation process Lines of communicationbetween ourdirectors andmanagement are alwaysopen FEEDBACK INCORPORATED Policies and practices updated as appropriate as a result of the annual and ongoing feedback Examples includechanges to Committeestructure,additional presentationsonvarious topics, refinements tomeetingmaterialsand presentation formatandadditional AuditandRiskCommitteemeetings EVALUATIONSUMMARY Summary ofBoard andCommittee evaluations results provided to fullBoard CLOSEDSESSION Closed session discussion of Board andCommittee evaluations led by our LeadDirector and independentCommitteeChairs Joint discussion across our Committees provides for a synergistic review ofBoard and Committee performance ONE-ON-ONEDISCUSSIONS One-on-one discussions between our LeadDirector and each non- employee director Provides further opportunity for candid discussion to solicit additional feedback aswell as to provide individual feedback. Feedback onLeadDirector performance provided to him by theSecretary to ourBoard QUESTIONNAIRE Providesdirector feedback on an unattributed basis Feedback from questionnaire informs one-on-one and closed sessiondiscussions 2017 Evaluations A Multi-Step Process REVIEWOFEVALUATIONPROCESSOurLeadDirectorandGovernanceCommitteeperiodicallyreviewtheevaluationprocesstoensurethatactionablefeedbackissolicitedontheoperationofourBoardanditsCommittees,aswellasondirectorperformanceOverthelastseveralyears,wehaverefinedtheformatofthequestionnaireandaddedspecificevaluationsoftheLeadDirector,eachCommitteeChairandeachindividualdirectorQUESTIONNAIREProvidesdirectorfeedbackonanunattributedbasisFeedbackfromquestionnaireinformsone-on-oneandclosedsessiondiscussionsONGOINGFEEDBACKDirectorsprovideongoing,real-timefeedbackoutsideoftheevaluationprocessLinesofcommunicationbetweenourdirectorsandmanagementarealwaysopen2017EvaluationsAMulti-StepProcessONE-ON-ONEDISCUSSIONSOne-on-onediscussionsbetweenourLeadDirectorandeachnon-employeedirectorProvidesfurtheropportunityforcandiddiscussiontosolicitadditionalfeedbackaswellastoprovideindividualfeedback.FeedbackonLeadDirectorperformanceprovidedtohimbytheSecretarytoourBoardFEEDBACK INCORPRATEDPoliciesandpracticespdatedasappopriateasaresultftheannualanongoingfeedbackExamplesinludechagesoCommitteestructure,additionalpresentationsonvari stpics,refinementstomeetingmaterialsandpresentationformatandadditionalAuditndRiskCommittemetingsEVALUATIONSUMMARYSummaryofBoardndCommitteevaluatinsresultsprovddtofullBoardCLOSEDSESSIONClosedsessiondiscussionofBoardandCommitteeevaluatonsledbyourLeadDirectorandndependentCommitteeChairsJointdiscuacrosourCommitteesprovidesforasynegisticreviewfBoardandCommitteeperformanc ProxyStatementforthe2018AnnualMeetingofShareholders | GoldmanSachs 27