CORPORATE GOVERNANCE IN FORD MOTOR COMPANY

Student: SAMCIUC ANDREEA LARISA

Academy of Economic Studies from Bucharest Master of International Project Management

-Bucharest 2012-

Table of contents
About Ford Motor Company ........................................................................................................................ 3 Structure of ownership .................................................................................................................................. 4 Board of Directors ..................................................................................................................................... 6 Corporate Governance Principles in Ford Company .................................................................................... 7 I. Purpose .................................................................................................................................................. 7 II. Board of Directors Structure and Operations/Board Compensation .................................................... 7 III. Meetings .............................................................................................................................................. 8 IV. Responsibilities and Duties .................................................................................................................. 8 V. Annual Performance Evaluation ........................................................................................................... 8 Corporate social responsibility...................................................................................................................... 9 Financial results ............................................................................................................................................ 9 New York Stock Exchange Required Disclosures ...................................................................................... 10 Charter of the Audit Committee of the Board of Directors ........................................................................ 10 Audit Committee Report ......................................................................................................................... 11 Human Rights and Working Conditions ..................................................................................................... 12 Environmental Responsibility ..................................................................................................................... 12 Competition in Ford Motor Company ........................................................................................................ 12 Corporate Governance Principles in America ............................................................................................ 13 Conclusions ................................................................................................................................................. 13

About Ford Motor Company12 The Ford Motor Company often referred to simply as Ford, is an automobile maker founded by Henry Ford in Detroit, Michigan, and incorporated on June 16, 1903. Ford radically reformed the methods for large-scale manufacturing of cars, and large-scale management of an industrial workforce. Ford implemented the ideas of Eli Whitney, who developed the first assembly line using interchangeable parts, which made it possible to put the cars together at a much lower cost and with greater reliability and repeatability. Ford was launched from a converted wagon factory, with $28,000 cash from 12 investors. During its early years, the company produced just a few cars a day at the Ford factory on Mack Avenue in Detroit. Groups of two or three men worked on each car from components made to order by other companies. In 1908, the Ford company released the Ford Model T. The first Model T's were built at the Piquette Plant. The company was forced to move production to the much larger Highland Park Plant to keep up with the demand for the Model T, and by 1913 had developed all of the basic techniques of the assembly line and mass production. By the end of 1913, Ford was producing 50% of all cars in the United States, and by 1918 half of all cars in the country were Model Ts. Referring to the Model T, Henry Ford is reported to have said that "Any customer can have a car painted any color that he wants so long as it is black." This was because black paint was quickest to dry; earlier models had been available in a variety of colors. Ford became a publicly traded corporation in 1956; however, the Ford family still maintains a controlling interest in the company. Henry Ford's great-grandson Bill Ford is presently chairman and CEO. Today, Ford Motor Company manufactures automobiles under the highly-recognized Lincoln and Mercury brand names. In 1958, Ford introduced a new marque, the Edsel, but poor sales lead to its discontinuation in 1960. Later, in 1986, the Merkur brand was released, but met a similar fate in 1988. Ford has major manufacturing operations in Canada, Mexico, the United Kingdom, Germany, Brazil, Argentina, Australia and several other countries, including South Africa, where following divestment during apartheid, it once again has a wholly-owned subsidiary. It also has a joint venture with Mahindra in India. Ford also has a cooperative agreement with GAZ. In recent years Ford has acquired Aston Martin, Jaguar, Volvo Cars and Land Rover, as well as a controlling share of Mazda, with which it operates an American joint venture plant called Auto Alliance. It has spun off its parts division under the name Visteon. Its prestige brands, with the exception of Lincoln, are managed through its Premier Automotive Group.

en.wikipedia.org/wiki/Ford_Motor_Company http://corporate.ford.com/

Structure of ownership3 Ford Motor Company currently has 3.22 billion shares outstanding and 25.19 Billion dollars is its the current market capitalization. Major Shareholders Funds % Total % Total Shares Held Assets 1.38 1.11 0.89 0.86 0.86 0.68 0.78 0.53 4.91 0.27 0.37 4.15 0.37 0.53 0.33 2.5 Date of Portfolio 3/31/2012 12/31/2011 3/31/2012 3/31/2012 3/31/2012 3/31/2012 6/1/2012 3/31/2012

Shares Held Hartford Capital Appreciation 52,723,624 Vanguard Total Stock Mkt Idx Vanguard 500 Index Investor Janus Overseas D Vanguard Institutional Index Instl Vanguard Wellington Inv SPDR S&P 500 42,311,055 33,953,629 32,964,681 32,964,029 26,059,660 31,073,016

Hartford Capital Appreciation 20,423,310 HLS IA American Funds New Perspective A CREF Stock SSgA S&P 500 Index Strategy Janus Twenty D Oppenheimer Main Street A Fidelity Spartan 500 Index Inv Vanguard Growth Index Inv 20,000,000 19,268,218 23,168,188 14,262,445 14,050,770 13,818,592 12,471,547

0.52 0.5 0.61 0.37 0.37 0.36 0.33

0.59 0.22 0.35 2.04 2.84 0.33 0.63

3/31/2012 3/31/2012 9/30/2011 3/31/2012 4/30/2012 4/30/2012 3/31/2012

http://investors.morningstar.com

Franklin Income A Consumer Discret Select Sector SPDR Eaton Vance Large-Cap Value A Lord Abbett Fundamental Equity C Fidelity Capital Appreciation Institutions

8,000,000 9,269,671

0.21 0.23

0.16 2.97

3/31/2012 6/1/2012

7,250,000

0.19

0.77

3/31/2012

7,200,000 7,638,173

0.19 0.2

1.76 1.54

3/31/2012 4/30/2012

Shares Held Evercore Trust Company, N.A. Vanguard Group, Inc Wellington Management Company, LLP State Street Corp OppenheimerFunds, Inc. Janus Capital Management LLC Fidelity Management and Research Company Northern Trust Investments, N.A. TIAA-CREF Investment Management LLC BlackRock Fund Advisors Geode Capital Management, LLC Lord, Abbett & Co LLC Columbia Management Investment Adv LLC Norges Bank Merrill Lynch & Co Inc AllianceBernstein LP Capital World Investors Capital Research Global 261,378,778 151,753,688 117,635,051 131,311,625 82,793,462 78,367,482 44,746,617 41,993,483 29,111,775 27,910,128 26,226,570 25,840,019 24,818,316 26,980,253 22,383,992 22,382,389 22,210,210 21,423,000

% Total % Total Date of Shares Held Assets Portfolio 6.82 3.96 3.07 3.44 2.16 2.05 1.17 1.1 0.76 0.73 0.68 0.67 0.65 0.71 0.58 0.58 0.58 0.56 14.61 0.26 0.52 0.25 0.87 1.68 0.11 0.24 0.31 0.16 0.34 0.69 0.24 0.26 0.32 0.28 0.09 0.11 3/31/2012 3/31/2012 3/31/2012 12/31/2011 3/31/2012 3/31/2012 3/31/2012 3/31/2012 3/31/2012 3/31/2012 3/31/2012 3/31/2012 3/31/2012 12/31/2011 3/31/2012 3/31/2012 3/31/2012 3/31/2012

Investors Government Pension Fund of Norway - Global 24,800,234 Bank of New York Mellon 21,295,476 *Source : http://investors.morningstar.com Board of Directors4 The Board of Directors in Ford Company is formed from 16 Directors, some are insider Directors and some are outsider directors, and their main responsibilities is to serve the interests of the shareholders. Board of Directors Stephen G. Butler (1,5) Kimberly A. Casiano (1,3,5) Anthony F. Earley, Jr. (2,3,5) Edsel B. Ford II (3,4) William Clay Ford, Jr. (3,4) Richard A. Gephardt (3,5) James H. Hance, Jr. (1,4,5) Irvine O. Hockaday, Jr. (1,5) Richard A. Manoogian (2,5) Ellen R. Marram (2,3,5) Alan R. Mulally (4) Homer A. Neal (3,4,5) Gerald L. Shaheen (1,5) John L. Thornton (2,4,5) William Clay Ford (Director Emeritus) Commitee Membership Audit (1) Compensation (2) Sustainability (3) Finance (4) Nominating and Governance (5) 0.65 0.56 0.05 0.27 12/31/2011 3/31/2012

Ford Motor Company Annual Financial Report for 2011

Corporate Governance Principles in Ford Company5 I. Purpose These Corporate Governance Principles, adopted by the Board of Directors of the Company, together with the charters of the Audit Committee, the Compensation Committee, the Sustainability Committee, the Finance Committee and the Nominating and Governance Committee of the Board, provide the framework for the governance of Ford Motor Company. The Board reviews these principles and other aspects of Ford governance annually or more often, as the Board deems necessary or appropriate. The Board of Directors of the Company is elected by and responsible to the shareholders. Ford's business is conducted by its employees, managers and officers, under the direction of the chief executive officer (the CEO) and the oversight of the Board, to enhance the long-term value of the Company for its shareholders. The Board of Directors monitors the performance of the CEO and senior management to assure that the long-term interests of the shareholders are being served. II. Board of Directors Structure and Operations/Board Compensation Selection Process and Size of Board The directors are elected each year by the shareholders at the annual meeting of shareholders. Shareholders may propose nominees (other than self-nominations) for consideration by the Nominating and Governance Committee of the Board by submitting the names, qualifications, and other supporting information to: Secretary, Ford Motor Company, One American Road, Dearborn, MI 48126. Properly submitted nominations must be received by the date set forth in the most recent proxy statement to be considered by the Nominating and Governance Committee for inclusion in the following year's nominations for election. The Board proposes a slate of nominees to the shareholders for election to the Board. The Board also determines the number of directors on the Board, provided that there are at least 10 and not more than 20 directors, as provided in the By-Laws of the Company. Between annual shareholder meetings, the Board may elect directors to vacant Board positions to serve until the next annual meeting. Independence of Directors A majority of the directors must be independent directors under the New York Stock Exchange (NYSE) Listed Company rules or any other applicable regulatory requirements; as such requirements may change from time to time. The Board of Directors recognizes, however, that directors who do not meet the NYSE's independence standards have historically made, and can be expected to continue to make, valuable contributions to the Board and to the Company by reason of their experience, judgment, intelligence and wisdom. Board Committees The Board has established the following Committees to assist the Board in discharging its

http://corporate.ford.com

responsibilities: (i) Audit, (ii) Compensation, (iii) Sustainability, (iv) Finance, and (v) Nominating and Governance. The Committee chairs report on the matters considered at each of their meetings to the full Board of Directors following each Committee meeting. In addition to the requirement that a majority of the Board satisfy the independence standards discussed above, members of the Audit Committee must also satisfy additional independence requirements. Specifically, Audit Committee members may not directly or indirectly receive any compensation from the Company other than their directors' compensation. III. Meetings The Board of Directors ordinarily has 7 scheduled meetings a year. Directors ordinarily are expected to attend all scheduled Board and Committee meetings, the annual meeting of shareholders, and are expected to review the materials provided to them in advance of each meeting. IV. Responsibilities and Duties CEO/Management Oversight and Compensation In addition to the Board's general oversight of the CEO and senior management, the Board also is responsible for: selecting, evaluating and compensating the CEO and overseeing CEO succession planning; providing counsel and oversight on the selection, evaluation, development and compensation of the officers of the Company; and approving and maintaining a succession plan for the CEO and other key senior executives including an emergency succession plan for the CEO. Business, Product and Strategic Matters/Compliance with Law and Company Policy As part of its overall responsibility to serve the long-term interests of the shareholders, the Board alsoshall: review, approve and monitor fundamental financial and business strategies and major Company actions; review and discuss reports by management on the performance of the Company, its plans, products and prospects; assess major risks facing the Company -- and review and approve strategies for addressing such risks; and ensure processes are in place for maintaining the integrity and reputation of the Company -the integrity of the financial statements, compliance with law and Company policy, the integrity of relationships with customers and suppliers, and the integrity of relationships with other Company stakeholders. V. Annual Performance Evaluation The Board and each of the Committees will perform an annual self-evaluation. Each of the directors will be requested to provide his or her assessment of the effectiveness of the Board and the

Committees on which he or she serves. If determined by the Board to be desirable, the Board may retain independent corporate governance experts to assist the Board and the Committees with the self-evaluations. Corporate social responsibility6 Corporate Social Responsibility is being willing to help others, being environmentally conscious and socially tolerant. As a global business, Ford accepts the social responsibility and the commitment to people all over the world. They have designed a special program to promote tolerance and equal opportunities, and actively support social and environmental protection programs. They were also the first car manufacturer to obtain ISO 14001 certification, a stringent environmental standard, for all of the facilities worldwide. Protecting the customers They want their customers to enjoy driving a Ford. So, to help customers who suffer with dust and pollen allergies, their engineers have designed a sophisticated filter that reduces pollen and dust in the car. Its just one of the many award-winning ways they designed the vehicles to help the customers feel totally comfortable. Ford has received official allergy friendly accreditation for its range of cars including the Ka, Fiesta, Focus, C-MAX, Mondeo, S-MAX and Galaxy. The accreditation has been provided by the German standards authority TUV following a series of rigorous tests, assuring that all interiors of Ford cars minimise the allergy risk to the lowest possible level. The Ford range of allergy-friendly cars has also received the official approval from the British Allergy Foundation and the European Centre for Allergy Research Foundation (ECARF). The Ford Kuga was launched at Ford's Allergy Free garden at the Bloom Festival. Protecting children They also engineer the vehicles to be some of the safest on the road. Ford C-MAX has 4-star child protection the first car ever to achieve a 4-star Euro NCAP rating for child protection. Financial results7 In 2010, Ford earned a net profit of $6.6 billion and reduced its debt from $33.6 billion to $14.5 billion lowering interest payments by $1 billion following its 2009 net profit of $2.7 billion. In the U.S., the F-Series is the best-selling vehicle for 2010. Ford sold 528,349 F-Series trucks during the year, a 27.7% increase over 2009, out of a total sales of 1.9 million vehicles, or every one out of four vehicles Ford sold. Trucks sales accounts for a big slice of Ford's profits, according to USA Today. Ford's realignment also included the sale of its wholly owned subsidiary, Hertz Rent-a-Carto a private equity group for $15 billion in cash and debt acquisition. The sale was completed on December 22, 2005. A 5050 joint venture with Mahindra & Mahindra of India, called Mahindra Ford India, Limited (MIFL), ended with Ford buying out Mahindra's remaining stake in the company in 2005.
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http://www.socialfunds.com Financial Report 2011 from http://corporate.ford.com

Revenue grew +12.7% YoY to 136.3 billion USD. The main contributor to revenue growth was strong North American sales, boosting Automotive Sector revenue to 128.2 billion USD (about +15% YoY). Financial services revenue declined 1.6 billion USD (about 16.5% YoY). Earnings before tax (EBT) grew by about 463 million USD to 8.8 billion USD (+5.6% YoY); pretax margin declined about to about 6.4% (vs. 6.9% in FY 2010). Net income increased significantly to 20.2 billion USD (+208 % YoY); net margin was 14.8% (vs. 5.4% in FY 2010). The increase in net income and net margin was due to a one-time accounting item: a 12.4 billion add-back to deferred tax assets which the company had previously written down. The company's net income for the year marked the third year in a row that the company generated a profit following the FY 2008 financial crisis. Perhaps in an effort to tell shareholders that the company was "back", it announced the resumption of paying quarterly dividends. Wholesale volume increased by about 382,000 vehicles (+7% YoY), and the average price per vehicle increased by about 1,530 USD to about $22,511 USD. The company's balance sheet liquidity improved in FY 2011, reporting reporting a 9.8 billion USD net cash position vs. 1.4 billion USD in FY 2010. New York Stock Exchange Required Disclosures Under New York Stock Exchange (NYSE) Listed Company rules, a majority of our directors must be independent directors. The NYSE rules also provide that no director can qualify as independent unless the Board affirmatively determines that the director has no material relationship with the listed company. Based on Fords standards, 10 of the Companys current 13 Directors are independent. Two of Fords Directors are women, one Director is African-American and one Director is Hispanic. On June 9, 2010, Ford's Chief Executive Officer certified that he was not aware of any violation by the Company of the New York Stock Exchange Corporate Governance listing standards, other than has been notified to the Exchange pursuant to Section 303A.12 (b), of which there was none. Charter of the Audit Committee of the Board of Directors89 The Audit Committee provides assistance to the directors of the Company in fulfilling their responsibility to the shareholders relating to corporate accounting matters, the financial reporting practices of the Company, and the quality and integrity of the financial reports of the Company. The Audit Committee's purpose is to: (1) Assist the Board's oversight of: The reliability and integrity of the Company's accounting policies and financial reporting and disclosure practices;

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http://corporate.ford.com http://www.wikinvest.com

 The establishment and maintenance of processes to assure compliance with all relevant laws, regulations, and Company policy, including a process for receipt of complaints and concerns regarding management fraud and accounting, internal control or auditing matters; The independent auditor's qualifications and independence; and The performance of the Company's internal audit function and independent auditor. (2) Prepare the report of the Audit Committee to be included in the Company's annual proxy statement. Audit Committee Report The Audit Committee is composed of four directors, all of whom meet the independence standards contained in the NYSE Listed Company rules, SEC rules and Fords Corporate Governance Principles, and operates under a written charter adopted by the Board of Directors. A copy of the Audit Committee Charter may be found on the Companys website, www.ford.com. The Audit Committee selects, subject to shareholder ratification, the Companys independent registered public accounting firm. Ford management is responsible for the Companys internal controls and the financial reporting process. The independent registered public accounting firm, PricewaterhouseCoopers LLP (PricewaterhouseCoopers), is responsible for performing independent audits of the Companys consolidated financial statements and internal control over financial reporting and issuing an opinion on the conformity of those audited financial statements with United States generally accepted accounting principles and on the effectiveness of the Companys internal control over financial reporting. The Audit Committee monitors the Companys financial reporting process and reports to the Board of Directors on its findings. Audit Fees PricewaterhouseCoopers served as the Companys independent registered public accounting firm in 2008 and 2007. The Company paid PricewaterhouseCoopers $43.7 million and $39.0 million for audit services for the years ended December 31, 2008 and 2007, respectively. Audit services consisted of the audit of the financial statements included in the Companys Annual Report on Form 10-K, reviews of the financial statements included in the Companys Quarterly Reports on Form 10-Q, attestation of the effectiveness of the Companys internal controls over financial reporting, preparation of statutory audit reports, and providing comfort letters in connection with Ford and Ford Motor Credit Company funding transactions. Tax Fees The Company paid PricewaterhouseCoopers $5.7 million and $5.5 million for tax services for the years ended December 31, 2008 and 2007, respectively. The types of tax services provided included assistance with tax compliance and the preparation of tax returns, tax consultation, planning and implementation services, assistance in connection with tax audits, tax advice related to mergers, acquisitions and divestitures, and tax return preparation services provided to international service employees (ISEs) to minimize the cost to the Company of these assignments. Annually, the Audit Committee pre-approves categories of services to be performed (rather than individual engagements) by PricewaterhouseCoopers. As part of this approval, an amount is established for each category of services (Audit, Audit-Related, and Tax Services). In the event the

pre-approved amounts prove to be insufficient, a request for incremental funding will be submitted to the Audit Committee for approval during the next regularly scheduled meeting. A regular report is prepared for each regular Audit Committee meeting outlining actual fees and expenses paid or committed against approved fees. Human Rights and Working Conditions10 The basis of work on human rights with suppliers is the Ford Code of Basic Working Conditions. It addresses workplace issues such as working hours, child labor and forced labor as well as non-discrimination, freedom of association, health and safety, the environment and other issues. Their approach has emphasized building capability throughout the supply chain to manage working conditions effectively. Their primary focus has been on training and education about working conditions issues, in conjunction with assessments of individual suppliers in order to verify performance and progress. Their view is that all participants in the automotive supply chain from the original equipment manufacturers (OEMs) such as Ford, to the suppliers themselves, to the government agencies that set and enforce the regulations governing operations must be involved to make these efforts sustainable in the long run. Environmental Responsibility11 Since 2006, all "Q1," or preferred, production suppliers have ISO 14001 environmental management system certification for facilities supplying Ford. They also encourage their suppliers to extend the benefits of improved environmental performance by implementing similar requirements for environmental management systems in their own supply base. In 2010, Ford took significant steps to better understand the risks and opportunities of greenhouse gas (GHG) regulation and climate change for their suppliers and, by extension, for the Company. They conducted a pilot project with a select group of suppliers to better understand the collection and reporting of greenhouse gas emissions data in their supply chain and executed this pilot in cooperation with the World Resources Institute (WRI), World Business Council on Sustainable Development (WBCSD) and the Carbon Disclosure Project (CDP). The goal is to better understand the carbon footprint of the supply chain and use the data to create a broad-based carbon management approach for our supply chain. Competition in Ford Motor Company12 Ford Motors main competitors in the consumer discretionary sector are General Motors Company (GM), Toyota Motor (TM), Daimler (DDAIF), Honda Motor Company (HMC), Tesla Motors (TSLA), Navistar International (NAV), and Spartan Motors (SPAR). Jumpstart Automotive Group, a leading automotive marketing and publishing network, announced that Ford has officially separated from the rest of the automakers, trumping primary
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corporate.ford.com www.socialfunds.com 12 http://www.forbes.com

competitors like Chevrolet, Toyota and Honda across Jumpstart's portfolio of 11 automotive shopping websites. "Ford's 2010 surge reflects continuous improvement of the automaker's brand perception and awareness," said Joe Kyriakoza, Vice President of Marketing Communications at Jumpstart. "Ford vehicle redesigns and refreshes, as well as the development of industry-leading technologies like Sync, have helped the company resonate exceptionally well among consumers." It appears the shopping patterns observed by Jumpstart are translating into sales activity, with Ford enjoying a 30 percent growth in sales. Vehicles like Ford Focus, Ford Taurus and Ford Fusion are challenging the historic segment leaders, while Ford's F-Series continues its domination among competitive brands with a 35 percent sales growth from January to May of this year. Corporate Governance Principles in America13 The so-called "Anglo-American model" of corporate governance emphasizes the interests of shareholders. It relies on a single-tiered Board of Directors that is normally dominated by nonexecutive directors elected by shareholders. Because of this, it is also known as "the unitary system" Within this system, many boards include some executives from the company (who are ex officio members of the board). Non-executive directors are expected to outnumber executive directors and hold key posts, including audit and compensation committees. In the United States, corporations are directly governed by state laws, while the exchange (offering and trading) of securities in corporations (including shares) is governed by federal legislation. Many U.S. states have adopted the Model Business Corporation Act, but the dominant state law for publicly-traded corporations is Delaware, which continues to be the place of incorporation for the majority of publicly-traded corporations. Individual rules for corporations are based upon the corporate charter and, less authoritatively, the corporate bylaws. Shareholders cannot initiate changes in the corporate charter although they can initiate changes to the corporate bylaws. Conclusions Solid principles of corporate governance are key to maintaining the trust of investors in Ford Company. The management produced financial statements that fairly presented the financial condition of the company and made sufficient disclosures to investors to permit them to assess the financial and business soundness of the company. The Board of Directors of Ford Motor Company has adopted the corporate governance practices to promote the effective functioning of the Board, its committees, and the Company. The Fords corporate system is governed in accordance with US Principles of Corporate Governance and includes all the categories (Auditing; Board and management structure and process; Corporate responsibility and compliance; Financial transparency and information disclosure; Ownership structure and exercise of control rights), all this informations being available on the company website and updated continuously.

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http://en.wikipedia.org

BIBLIOGRAPHY en.wikipedia.org/wiki/Ford_Motor_Company http://corporate.ford.com/ http://investors.morningstar.com http://www.socialfunds.com Financial Report 2011 from http://corporate.ford.com http://www.wikinvest.com http://www.forbes.com Reports from the companys web-site