We classify a director as affiliated when the director has a material financial, familial or other relationship with the company or its executives but is not an employee of the company. This includes directors whose employers have a material financial relationship with the company. In addition, we view a director who owns or controls 20 percent or more of the company’s voting stock as an affiliate.
We apply different financial thresholds for different types of related-party transactions. Where no amount is disclosed, we assume the transaction surpasses our applicable threshold. The strictest threshold is applied to situations in which a director (or a family member) is paid for a service he or she agreed to perform for the company, outside of his or her service as a director, including professional or other services. Our next threshold applies to situations where a director (or a family member) is employed by a professional services firm such as a law firm, investment bank or consulting firm and the company pays the firm, not the individual, for services. This threshold would also apply to charitable contributions to schools where a director (or a family member) is a professor, or charities where a director (or a family member) serves on the board or is an executive, and any aircraft or real estate dealings between the company and a director’s firm. Lastly, we apply our most lenient threshold to all other business relationships where a director (or a family member) is an executive officer of a company that provides products/services to or receives products/services from the company.
We apply a 5-year look-back period to former company employees and a 3-year look-back period to related-party transactions other than interlocking directorships and charitable contributions, for which we generally do not apply a look-back period.