Cendant Announces Corporate Governance

Cendant Corporation (NYSE:CD) today announced additional enhancements in corporate governance designed to strengthen the Board of Directors` oversight of management and to serve the long-term interests of stockholders. These new requirements are in addition to the corporate governance initiatives implemented by Cendant since 1999. The current actions implement requirements of the Sarbanes-Oxley legislation and the proposed New York Stock Exchange listing requirements, as well as Cendant`s own requirement to be in the forefront of enhanced governance and disclosure standards.

Cendant Chairman and CEO, Henry R. Silverman stated, “The capital markets demand the highest level of corporate governance standards and transparency in disclosures. Cendant intends to maintain its leadership in this area through the adoption of the enhanced corporate governance and disclosure initiatives outlined below. Through these initiatives, we have further empowered our Board with the oversight tools to diligently oversee management while adhering to unimpeachable ethical standards.”

The following is a summary of the new governance and disclosure initiatives:

- Cendant will require two-thirds of its Directors to be independent. Currently, 10 of Cendant`s 14 Directors are independent under both the proposed NYSE standards and Cendant`s new enhanced independence criteria.
// Cendant will increase the transparency of its financial statements by only reporting GAAP earnings per share and discontinuing the use of pro forma earnings per share beginning with first quarter 2003 financial results. In addition, to further increase transparency, on February 3, 2003, Cendant acquired FFD Development Company, LLC, an affiliated entity, and, to the extent possible, intends to acquire another affiliated entity, Trip Network, Inc., during 2003. // Audit Committee members must meet an additional “independence” test under Sarbanes-Oxley: their Directors` fees must be the only compensation they receive from the Company. Cendant will also apply this stricter test to members of the Compensation Committee and the Nominating and Corporate Governance Committee, even though not required by law to do so.
// Non-employee Directors will meet without management regularly following meetings of the Board. The Board has appointed Leonard S. Coleman, currently the Chairman of the Compensation Committee, as presiding Director at these meetings. As a result of such appointment, Mr. Coleman will no longer serve on the Audit Committee and will be replaced with another independent Director, Cheryl D. Mills. // Each year, the Board will supplement existing management interaction through an intensive two-day retreat to discuss each of the Corporation’s businesses, strategy, risks, and the performance of management.

- A Corporate Governance Committee has been formed solely of independent Directors to monitor corporate governance issues.
// Corporate Governance Guidelines have been adopted to assist the Board in the exercise of its responsibilities.
// The Board has approved a new Code of Ethics to promote the highest level of ethical conduct from senior executives and finance officers.
// The Board has established an annual self-evaluation process under which information will be gathered annually and then discussed at both Board and Committee meetings in February of each year.
// The responsibilities of the Audit Committee have increased, and it will meet at least six times per year. These responsibilities include: review of public disclosure processes and public financial disclosures; review of key auditing principles and decisions; approval of independent auditor and all audit and non-audit work; concurrence in the appointment of the head of the internal Corporate Audit Staff; review of the annual audit plan conducted by both internal and independent auditors; and separate quarterly meetings with head of internal auditors and with the independent auditor.
// To align its interests with the long-term interests of shareowners, the Board decided that Deferred Stock Units (DSUs) will be approximately 70 percent of the annual Director compensation in the future. The common stock underlying the DSUs will not be transferable until a Director leaves the Board. DSUs will replace stock options as the equity portion of annual Director compensation going forward.
In addition to the corporate governance enhancements announced today, the Company had previously implemented sweeping corporate governance reforms since 1999 that today constitute the basis for good corporate governance, including:
- The adoption of a very strict definition of independence for a majority of the Company`s Directors;
- A compensation committee comprised of only independent Directors;
- An audit committee comprised of at least three independent Directors and including at least one Director with accounting or financial expertise;
- A nominating committee comprised entirely of independent Directors;
- A requirement of shareholder approval prior to any re-pricing of employee stock options;
- A requirement of shareholder approval of all new stock options plans that grant Cendant common stock to any of the Company`s Board of Directors, its chairman, president and CEO and his direct reports or otherwise result in material dilution;
- A prohibition against utilizing its external auditors for certain non-audit matters;


- A restriction against the hiring of employees of its external auditor who participate in auditing the financial statements of the Company;
- The creation of an emergency governance committee of the Board of Directors to assume the duties of the CEO and/or search for a successor in the event of the sudden death or incapacity of the CEO;
- The establishment of new procedures and guidelines governing securities trades by Company personnel, including significant limitations on the ability of senior officers to trade in the Company`s securities other than in a limited period following the Company`s announcement of quarterly earnings or pursuant to 10b5-1 plans;
- The adoption of a policy limiting future severance arrangements with the Company`s executive officers; and
The submission of a proposal to shareholders to elect all Directors on an annual basis.
The documents outlining the new governance enhancements are available on Cendant`s web site at www.cendant.com. The documents include: Cendant`s corporate governance guidelines; the code of ethics for senior executives and financial officers; new director independence criteria; committee charters and a list of Board and committee members. Cendant is currently developing a more comprehensive corporate governance web site at www.cendant.com/governance, which it expects to unveil during the first quarter of 2003.

Cendant Corporation is primarily a provider of travel and residential real estate services. With approximately 85,000 employees, New York City-based Cendant provides these services to business and consumers in over 100 countries. More information about Cendant, its companies, brands and current SEC filings may be obtained by visiting the Company`s Web site at http://www.cendant.com or by calling 877-4-INFOCD (877-446-3623).