The following sample outlines a set of policies and procedures that define the limits of authority designated to specified positions of responsibility within a company, and to establish the types and maximum amount of obligations that may be approved by individuals.
Prepared By: ______________
Approved By: ______________
Revision Date: ______________
Effective Date: ______________
Purpose:
This Delegation of Authority policy is established to define the limits of authority designated to specified positions of responsibility within the Company and to establish the types and maximum amount of obligations that may be approved by individuals. The approval of commitments and transactions outlined in this policy must always be made by the parties that have been designated the responsibility for final approval.
All employees should be aware that conduct that violates the policy set forth is always considered outside the scope of their employment. Violating the policy could significantly damage the Company and expose it to unintended legal and commercial liabilities. In addition, individuals who violate these policies are subject to appropriate disciplinary action by the Company, including possible termination of employment.
Persons who have employees reporting to them should take all necessary steps to ensure their employees know and follow the policy. In this connection, all managers should periodically consult with their staff members to determine that appropriate procedures for implementation of the policy have been developed and are being followed.
Scope:
This policy is applicable to Company X, each of its subsidiaries, and any ventures that are controlled by the Company.
Policy:
Compliance with the policy by each Operating Division and each Corporate Department is the responsibility of the Division Vice President or the Vice President of each Corporate Department. Each Division and Corporate Department is required to implement approval policies and controls at their respective divisions, departments, and joint venture companies within their divisions that are controlled by Company X to insure compliance with this policy.
The policies and controls of each Division, Corporate Department, and joint venture companies must be consistent with this policy and be approved by two of the following three positions: the Executive Vice President – Operations, Executive Vice President & Chief Financial Officer, and Senior Vice President & General Counsel.
Definitions:
- President & CEO: The President & Chief Executive Officer of Company X.
- Executive Vice President & CFO: The Executive Vice President and Chief Financial Officer of Company X.
- Executive Vice President – Operations: The Executive Vice President of Company X’s Operating Divisions.
- Division Vice President: A Vice President of an Operating Division of Company X.
- Corporate Vice President: A Vice President or other executive officer of Company X (public parent company).
Procedures:
Section 1 General
1.1 Combining Transactions
Dividing a commitment or transaction into two or more parts to evade a limit of authority is prohibited and is a violation of the policy. This policy shall be interpreted broadly so that a series of reasonably related transactions shall be considered as a single transaction for purposes of determining approval and authority levels required by this policy.
1.2 Delegation of Authority to Subordinates
It is emphasized that commitments and transactions cannot be approved by individuals having a lower level of approval authority than the specified transaction requires, except pursuant to a delegation of temporary authority or delegation pursuant to a Division or Corporate Department Delegation of Authority policy adopted pursuant to this policy.
Temporary authority may be designated whenever an individual with approval authority will be out of the office for prolonged periods. The temporary authorization is to be in writing and specify the effective length of time and must be approved by the supervisor of the individual who is delegating authority.
This policy also requires that each Operating Division/Corporate Department adopt division/department policies and/or procedures consistent with this policy. Any delegations, which shall be approved by both Company X’s Executive VP & Chief Financial Officer and Senior VP & General Counsel, shall be permitted under this policy.
1.3 Compliance Documentation
Employees executing contracts and approving transactions are required to ensure that all appropriate approvals and reviews required by this policy and Company X’s other policies and procedures have been obtained, and to ensure that appropriate documentation of these approvals is maintained. Appropriate documentation can take various forms, including the initialing of final contracts, approval forms, or memorandums. All contracts shall be maintained with documentation of the appropriate approvals and the original or a copy sent to the Corporate Legal Department for filing.
1.4 Policy Interpretations and Amendments
Inevitably, it will be necessary for Company X to issue interpretations of various provisions of this policy as unanticipated facts and circumstances occur that are not specifically addressed in this policy. Such interpretations shall be in writing and shall be approved by the Senior VP & General Counsel and Executive VP & CFO. In addition, from time to time Company X may elect to amend this policy to change specific delegations of authority contained herein. The President & CEO, Executive VP – Operations, and Executive VP & CFO shall approve such policy amendments.
Section 2 Banking and Investment Matters
2.1 Borrowing Funds
Only the Executive VP & CFO or VP Treasury & Investor Relations or their designee is authorized to borrow funds under Company X’s existing credit facilities.
2.2 Granting Liens
Approvals by (i) the Executive VP & CFO or VP Treasury & Investor Relations (either) and (ii) the Senior VP & General Counsel are required in order to grant a lien on any Company asset.
2.3 New Credit Facilities/Borrowings
Approvals by the Executive VP & CFO, VP Treasury & Investor Relations, and Senior VP & General Counsel are required prior to entering into any new credit facility or borrowing arrangement.
2.4 Opening/Closing Bank Accounts
Only the Executive VP & CFO or VP Treasury & Investor Relations or their designees may open or close bank accounts.
2.5 Hedging and Derivative Transactions
The signatures of both the Executive VP & CFO and VP Treasury & Investor Relations are required to authorize any hedging/derivative transactions (unless specifically designated in writing by such individuals). In the event one individual holds the CFO/Treasurer titles, the signature of the VP - Controller & Chief Accounting Officer is required.
2.6 Letters of Credit and Guarantees
Approvals by (i) the Executive VP & CFO or VP Treasury & Investor Relations (either) and (ii) the Senior VP & General Counsel are required prior to executing any parent or other guarantee of any subsidiary, third-party obligation, or any letter of credit. Letters of Credit and Guarantees shall be interpreted broadly to include surety bonds, bid bonds, make-whole and keep-well letters and agreements and similar understandings (i.e., commitments to
ensure performance,
make up any deficits,
cause Company X to perform and similar type language).
2.7 Investor Relations/ External Communications
Only the President & CEO, Executive VP & CFO, VP Treasury & Investor Relations, or their designee is authorized to contact, disclose, or share information regarding Company X with the public, i.e. analysts, portfolio managers, or reporters.
Section 3 Expenditure Authority
3.1 Disbursement Authorization
Commitments and transactions will not be processed in Purchasing, Accounting, or Treasury that are not approved in accordance with this policy and any appropriately authorized Division/Corporate Department Policy. Only when the underlying transaction, contract (including purchase order), or agreement has been properly approved and satisfactory evidence is available that the obligation is due, shall disbursement of Company X funds be permitted.
3.2 Capital Expenditures
All capital expenditures must be approved and made in compliance with the expenditure policy.
3.3 Operating Expenses
Each Operating Division shall establish procedures relating to the authorization and approval of operating expenses. Where there is an underlying transaction, contract, or agreement that has been properly approved and satisfactory evidence that the obligation is due, the authority for disbursement approval is designated as follows:
| Title | Authority Level |
| President & CEO | Above $X |
| Executive VP & CFO or Executive VP – Operations | Up to $X |
| Division Vice President | Up to $X |
3.4 General and Administrative Expenses
Each Operating Division and Corporate Department shall establish clear procedures relating to the authorization of general and administrative expenses. At a minimum, such policies shall contain the following limits:
| Title | Authority Level |
| President & CEO | Above $X |
| Executive VP & CFO or Executive VP – Operations | Up to $X |
| Division Vice President | Up to $X |
| Corporate Vice President | Up to $X |
The following authority levels also shall be granted in the following specific areas:
- Legal related matters: Senior VP & General Counsel $X;
- Insurance: Executive VP & CFO $X; VP Treasury & Investor Relations $X;
- Interest expense in accordance with loan agreements: VP Treasury & Investor Relations or Executive VP & CFO approval of applicable calculated amounts;
- Services by external auditors: the hiring of, or payments for the services from external auditors anywhere in the world must be approved by the VP – Controller & CAO. The VP – Controller & CAO is required to obtain pre-approval for all such engagements of external auditors from the Audit Committee of the Board of Directors of Company X.
3.5 Expense Reports
Every expense report of $X or more must be approved by a Division or Corporate Vice President or higher. Expense reports also shall be approved in accordance with Company X’s published policies and procedures for such expenses.
Section 4 Sales and Marketing Authority
4.1 Sales of Assets
Prior to any sale of assets outside the ordinary course (including all equipment sales) with an aggregate book value exceeding $X, the Legal Department shall be notified. In addition, sales of assets outside the ordinary course are subject to the following approval levels.
| Title | Authority Level |
| President & CEO | Above $X |
| Executive VP & CFO or Executive VP – Operations | Up to $X |
| Division Vice President | Up to $X |
4.2 Standard Terms and Conditions
All sales shall be made in compliance with Company X’s standard terms and conditions unless the approval of the Legal Department is obtained.
4.3 Master Services Agreements
Approval of a Division Vice President (or designee) is required prior to execution of a Master Service Agreement. Review by the Legal Department also is required.
4.4 Bids and Bid Contracts
Bids and Bid Contracts shall be reviewed according to the Contract Review Policy.
4.5 Agency Agreements
Approval of the Executive VP – Operations and the Senior VP & General Counsel is required prior to the execution of any agency agreements. Also, compliance with Company X’s Foreign Corrupt Practices Act (FCPA) policy must be maintained. Appropriate efforts shall be made to ensure that Company X’s Operating Divisions utilize the same agents in the same regions, unless it is unreasonable or impracticable to do so.
Section 5 Real Estate Matters
5.1 Purchases
The Legal Department and the applicable Division Vice President must review all purchases of real estate. In addition, the following approval thresholds are applicable:
- President & CEO over $X;
- Executive VP – Operations or Executive VP & CFO up to $X.
5.2 Sales
All sales of real estate must be approved by the Legal Department. In addition, the following approval thresholds are applicable:
- President & CEO over $X;
- Executive VP – Operations or Executive VP & CFO up to $X.
5.3 Leases
All real estate and equipment leases are required to be approved by the Legal Department. In addition, the following approval thresholds, representing the cumulative lease payments over the lease term, are applicable:
| Title | Authority Level |
| President & CEO | Over $X |
| Executive VP & CFO or Executive VP – Operations | Up to $X |
| Division Vice President | Up to $X |
5.4 Required Environmental Reviews
Prior to Company X selling, purchasing, or leasing real property (other than leases relating only to office space) Company X’s Corporate Department will be notified and will determine any required environmental assessment to be performed.
Section 6 Employment Related Matters
6.1 Hiring and Firing of Employees
Approval for the hiring and firing of employees is addressed in Company X’s various human resource policies.
6.2 Employee Agreements and Certain Offers of Employment
All employment agreements shall be reviewed by the Legal Department. In addition, the approval of Company X’s President & CEO and Senior VP - Human Resources is required prior to entering into an employment agreement. Unless otherwise authorized in writing, only Company X’s President & CEO or Senior VP - Human Resources may execute an employment agreement.
All bonuses, including, but not limited to defined incentive plans, statutory, special, discretionary or one-time, must be approved by the President & CEO or Senior VP – Human Resources.
6.3 Severance Agreements
All severance agreements shall be approved by the Legal Department. Unless otherwise authorized in writing, only Company X’s President & CEO or Senior VP - Human Resources may execute a severance agreement binding Company X.
6.4 Consulting Agreements/Contract Employees
The engagement of a consultant or contract employee for a period of more than three months (consecutively or within a 12-month period) shall be approved by a Division or Corporate Vice President or higher.
6.5 Recruiting Services
The engagement of a recruiting/search firm to assist in finding and interviewing potential candidates for employment must be approved by the Senior VP - Human Resources.
Section 7 Legal Matters
7.1 Settling Claims:
Litigation Claims and Commercial Disputes – Approval of Company X’s Senior VP & General Counsel or designee is required prior to Company X settling any litigation claims (including any administrative proceeding in front of a governmental/regulatory agency) or commercial disputes. In addition, approval by each of the following individuals shall be required prior to settling any litigation or threats of litigation or commercial disputes:
| Title | Authority Level |
| President & CEO | Amounts Above $X |
| Executive VP & CFO or Executive VP – Operations | Up to $X |
| Division Vice President | Up to $X |
Commercial Claims (non-litigation) – In situations in which the settlement of claims does not involve litigation (for instance, settlement of warranty claims), each Division shall establish clear approval levels for the settlement of such claims. At a minimum, each Division policy shall establish that the applicable Division Vice President must approve all commercial settlements above $X and that Company X’s Executive VP & CFO and Senior VP & General Counsel shall approve any settlements above $X.
Insurance Claims/Refunds – All insurance claims filed by the Operating Divisions require approval by Company X’s Risk Manager. Approval by the VP Treasury & Investor Relations and Senior VP & General Counsel will also be required for those claims in excess of $X. In addition, the resolution of disputed claims must have the approval of the Senior VP & General Counsel and Executive VP & CFO.
7.2 Formation/Dissolution of New Legal Entities and Branch Offices
Only the Legal Department may authorize the formation/dissolution of a new entity or branch office. Approval of Company X’s Tax Director and VP Treasury & Investor Relations also are required prior to the formation/dissolution of any such entity.
7.3 Powers of Attorney
Approval of the Legal Department is required prior to the execution of any power of attorney. Only the President & CEO, Executive VP & CFO, or Senior VP & General Counsel may execute a power of attorney unless (1) expressly designated by such officer in writing or (2) otherwise required by the constituent documents of the relevant subsidiary, in which case, the appropriate corporate officer of the subsidiary will execute the power of attorney and the President & CEO, Executive VP & CFO, or Senior VP & General Counsel will approve the power of attorney. Approval of Company X’s Senior VP & General Counsel is required prior to executing any power of attorney that remains in effect for a period of greater than one year. Approval by Company X’s VP Treasury & Investor Relations is also required for any power of attorney governing banking matters.
Section 8 Acquisitions/Divestitures of Businesses and Licenses
Approval of the President & CEO, Executive VP & CFO, and Senior VP & General Counsel is required prior to Company X purchasing or selling any new or existing business or product line.
All license agreements shall be approved by the Legal Department.
Approval of the Senior VP & General Counsel and Executive VP – Operations is required prior to Company X entering into any license (whether as licensee or licensor). In addition, the approval levels relating to operating expenses shall apply.
Section 9 Political Contributions
No political contributions may be made on behalf of Company X without the written approval of the Senior VP & General Counsel.
Section 10 Policy Update and Notification
Company X reserves the right to revise the conditions of this policy at any time by giving notice via the Policy Update Procedure. Employees are responsible for understanding or seeking clarification of any rules outlined in this document and for familiarizing themselves with the most current version of this policy.
