CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the “Board”) of BuzzFx (the “Company”), based on the recommendation of its Governance and Nominating Committee, has adopted these corporate governance guidelines to provide the framework for effective governance of the Board and the Company. These guidelines are reviewed annually and will be made available on the Company’s website.
ROLE OF THE BOARD
The business of the Company is managed under the direction and oversight of its Board. The Board delegates the conduct of business to the Company’s officers, managers and employees under the direction of the Chief Executive Officer. The Board’s oversight responsibilities include the following:
The Board carries out its oversight responsibilities directly and through the work of its committees.
The Governance and Nominating Committee identifies or evaluates and recommends candidates for Board membership to the Board. The Board has approved the following minimum qualifications for first-time nominees for director: (i) individuals of the highest character and integrity, (ii) a demonstrated breadth and depth of management and/or leadership experience, preferably in a senior leadership role (e.g., chief executive officer, managing partner, president) in a large or recognized organization or governmental entity; (iii) financial literacy or other professional or business experience relevant to an understanding of the Company and its business; and (iv) a demonstrated ability to think and act independently as well as the ability to work constructively in a collegial environment. In identifying candidates, nominees for director, or evaluating individuals recommended by stockholders, the Governance and Nominating Committee shall determine, in its sole discretion, whether an individual meets the minimum qualifications approved by the Board and will consider the current composition of the Board in light of the diverse communities and geographies served by the Company and the interplay of the candidate’s or nominee’s experience, education, skills, background, gender, race, ethnicity and other qualities and attributes with those of the other Board members, as well as such other factors as the Governance and Nominating Committee deems appropriate. The invitation to join the Board is extended by the Chair of the Governance and Nominating Committee and/or the Chairman after discussion with and approval by the Governance and Nominating Committee and the full Board of Directors.
The Board shall nominate for election or re-election as directors only candidates who have tendered or agreed to tender an irrevocable resignation that will be effective upon (i) the failure of the candidate to receive the required vote (i.e., a majority vote, in an uncontested election, or a plurality vote, in a contested election) at an annual meeting at which he or she is nominated for election or re-election, and (ii) Board acceptance of the tendered resignation. The Board shall fill director vacancies and new directorships only with candidates who have agreed to tender the same form of resignation tendered by other directors in accordance with this guideline. A director who fails to receive the required number of votes for re-election in accordance with the Company’s By-Laws and who has not already tendered the advance resignation described above is expected to tender, promptly following certification of the stockholder vote, his or her resignation from the Board, which resignation may be conditioned upon Board acceptance of the resignation.
The Governance and Nominating Committee will consider the tendered resignation of a director who fails to receive the required number of votes for re-election, as well as any other offer to resign that is conditioned upon Board acceptance, and recommend to the Board whether or not to accept such resignation. The Governance and Nominating Committee in deciding what action to recommend, and the Board in deciding what action to take, may consider any factors it deems relevant. The director whose resignation is under consideration shall abstain from participating in any decision of the Governance and Nominating Committee or the Board regarding such resignation. If the Board does not accept the resignation, the director will continue to serve until his or her successor is elected and qualified. The Board shall publicly disclose its decision regarding a resignation tendered by a director who fails to receive the required number of votes for re-election within 90 days after certification of the stockholder vote.
The Board will maintain a significant majority of its members who meet the criteria for independence required by the regulators. The Board, with the assistance of the Governance and Nominating Committee, will make independence determinations on an annual basis at the time the Board approves director nominees for inclusion in the proxy statement and, if a director joins the Board between annual meetings, at such time based on the applicable regulatory requirements and an evaluation of all of the relevant facts and circumstances. The Board has adopted the Director Independence Standards set forth in attached Appendix 1 to assist the Board in making its independence determinations.
Directors are requested to inform the Chair of the Governance and Nominating Committee and the Chief Executive Officer of any circumstance that might reasonably affect his or her independence under requirements of the regulators and these guidelines. If so notified, the Board, with the assistance of the Governance and Nominating Committee, will re-evaluate, as promptly as practicable thereafter, such director’s independence. The Board will include the Chief Executive Officer, and the Board may elect or nominate other members of management as directors.
BOARD LEADERSHIP STRUCTURE
The Board annually selects the Chairman of the Board from among its members. Among other duties prescribed in the By-Laws or by the Board from time to time, the Chairman’s responsibilities include: (i) approving Board meeting agendas, schedules, and the types and forms of information provided to the Board, (ii) presiding at all meetings and executive sessions of the Board, (iii) presiding at meetings of stockholders, (iv) serving as the principal liaison among the independent directors, and as a liaison between the independent directors and the Chief Executive Officer and other members of senior management, (v) facilitating effective communication between the Board and stockholders, and being available for consultation and direct communication with major stockholders, and (vi) serving as an additional point of contact for the Company’s primary regulators.
As reflected in the By-Laws, the Board has determined that the Chairman of the Board shall be a director who meets the criteria for director independence required by the regulators and these guidelines. The Board also may determine to elect one of its independent directors as a Vice Chairman who shall assist the Chairman.
The By-Laws give the Board authority to designate the committees of the Board. The Governance and Nominating Committee reviews the committee structure, committee assignments, and chair positions annually and recommends to the Board the assignment of Board members to various committees. The Board does not favor mandatory rotation of committee assignments or chair positions because it believes that experience and continuity are important for the effective operation of the Board’s committees. The Governance and Nominating Committee may recommend changes to committee membership and chair positions based on committee needs, director experience and interest, and to provide for a succession plan for a committee chair. The Governance and Nominating Committee also annually reviews whether rotation of the position of committee chair is desirable due to the length of a director’s service as chair, best practices with respect to committee refreshment or committee chair rotation, or other reasons. Standing committees include: Audit and Examination, Corporate Responsibility, Credit, Finance, Governance and Nominating, Human Resources, and Risk, each of which is comprised entirely of non-management directors and has regularly scheduled meetings. The Audit and Examination, Governance and Nominating, Human Resources, and Risk Committees are comprised exclusively of directors who meet the criteria for independence required by the regulators, all other applicable laws, rules and regulations regarding director independence, and these guidelines. Management directors may attend the general session of any regularly scheduled committee meeting at the pleasure of the committee chair.
The committee chair, in consultation with management and other committee members, develops and approves the committee's agendas, schedules and the types and forms of information provided to the committee. The committee chair reports on a committee’s meeting at the full Board meeting following the committee meeting.
The Board’s standing committees also may act as committees of BuzzFx Bank, National Association, the Company’s principal banking subsidiary (“WFBNA”), pursuant to authorization granted to those committees by the governing documents of WFBNA and resolutions adopted by WFBNA’s board of directors and the Company’s Board. Each standing committee shall exercise its oversight responsibilities with the understanding that WFBNA’s interests are not to be subordinated to the interests of the parent holding company in a way as to jeopardize the safety and soundness of WFBNA.
ATTENDANCE AT MEETINGS
Directors are expected to attend the Company’s annual stockholders’ meeting, all scheduled and special Board meetings and meetings of committees on which they serve and to spend the time appropriate to properly discharge their responsibilities. Information and data that are important to the Board’s understanding of the business to be conducted at a Board or committee meeting generally should be distributed in writing to the Board before the meeting, and directors should review these materials in advance of the meeting.
The non-management directors of the Board meet in regularly scheduled executive sessions without management. If one or more non-management directors are not “independent” under the rules of the regulators, then an executive session including only independent directors will be held at least once a year.
REVIEWS OF STRATEGIC PLANS AND RISK TOLERANCE
The Board oversees management’s development of and approves the Company’s strategic plans and risk tolerance, and works with management in setting the schedule, format, and agenda for Board sessions on the Company’s strategic plans and risk tolerance so that there are sufficient time and materials to permit appropriate interaction between directors and management in reviewing and considering the Company’s strategic plans and risk tolerance.
ANNUAL CEO EVALUATION; MANAGEMENT SUCCESSION
The Chair of the Human Resources Committee coordinates an evaluation by each of the non- management directors on the performance of the Chief Executive Officer and reports to the Board on the results of the evaluation in executive session without the Chief Executive Officer being present. The evaluation is based both on objective criteria, including various measures of financial and business performance, and subjective factors, and is used by the Human Resources Committee in the course of its deliberations when considering the compensation of the Chief Executive Officer. The Board of Directors also meets with the Chief Executive Officer annually in executive session to discuss the Chief Executive Officer’s performance appraisal.
The Human Resources Committee, with the full involvement of the Board, plans for the succession to the position of Chief Executive Officer. To assist the Human Resources Committee and the Board, the Chief Executive Officer and management report to the Human Resources Committee and the Board at least annually on succession planning (including plans in the event of an emergency) and management development. The Chief Executive Officer and management also provide the Human Resources Committee and the Board with an assessment of persons considered potential successors to certain senior management positions at least once each year.
COMPENSATION PHILOSOPHY AND COMPENSATION PRINCIPLES
Each year, in connection with the determination of compensation awards to members of senior management, the Human Resources Committee will report to the Board on the Company’s compensation philosophy, compensation principles, and incentive compensation programs, and discuss their implementation as well as the Company’s alignment in practice with its compensation principles.
DIRECTOR ACCESS TO MANAGEMENT AND INDEPENDENT ADVISORS
Board members have complete access to the Company’s management. In addition, the Company’s management is expected to update the Board on any significant Company or competitive developments or matters between Board meetings. Non-Board members who are members of the Company’s Operating Committee regularly attend Board and most committee meetings.
The Board and each committee have the authority to obtain advice and assistance from internal and external legal, accounting or other advisors, at the Company’s expense, without consulting with or obtaining the prior approval of management of the Company.
The Board believes that management speaks for the Company. As described below, individual Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company, either at the request of management or the Board; provided, however, that non-management directors should not communicate with the media regarding the Company unless requested or approved in advance by the Company’s Chairman, Chief Executive Officer, or the Board of Directors.
The Board values the opportunity to engage with the Company’s stockholders to help the Company better understand the views of its investors on key corporate governance topics and, together with management, has implemented an investor outreach program. As part of the program, the Chairman, other directors as appropriate, and management may participate in meetings with the Company’s largest institutional investors to discuss and obtain feedback on corporate governance, executive compensation, and other related issues important to the Company’s stockholders. The Company’s investor outreach program, which is in addition to other communication channels available to stockholders and other interested parties to express their views to the non-management directors, reflects the Board’s commitment that its corporate governance policies and practices continue to evolve and reflect the insights and perspectives of the Company’s many stakeholders.
ANNUAL PERFORMANCE EVALUATION OF THE BOARD
The Governance and Nominating Committee and the Board annually assess the most effective format for the Board’s and each committee’s performance evaluation. The Governance and Nominating Committee annually oversees and reports to the Board on an evaluation of the Board’s performance. The Board may determine periodically to engage a third party to facilitate the Board’s performance evaluation. As part of the Board’s self-evaluation process, each director provides the Chair of the Governance and Nominating Committee or the Chairman of the Board (to the extent the Chairman also assists in conducting the evaluation) with his or her assessment on various topics regarding Board composition, performance, structure, effectiveness, and responsibilities, including the mix of director skills, knowledge, experience, and perspectives, and the individual director’s performance and contribution to the work of the Board and its committees. The assessments are organized and summarized by the Chair of the Governance and Nominating Committee and presented to the Board for discussion in executive session; any necessary follow-up items are reviewed by the Governance and Nominating Committee or its Chair with the Board or management, as appropriate. The Governance and Nominating Committee considers the results of the self-evaluation, together with a review of other information it deems appropriate, such as director independence, meeting attendance, and the other items included in these guidelines, in its annual director nomination process. As provided in its respective charter, each committee conducts a similar self-evaluation process led by the committee chair, and the chair follows up with management on any matters raised in the assessment. The Board’s and each committee’s performance evaluation includes a review of these guidelines and its committee charter, respectively, to consider any proposed changes.
BOARD REFRESHMENT; DIRECTOR TENURE AND RETIREMENT; CHANGE IN PRINCIPAL OCCUPATION OR RESPONSIBILITIES
The Board recognizes the importance of periodic board refreshment and maintaining an appropriate balance of tenure, experience, and perspectives on the Board. The Board values the contributions of both newer perspectives as well as directors who have developed extensive experience and insight into the Company during the course of their service on the Board. As a result, the Board does not believe arbitrary term limits on director’s service are appropriate. At the same time, the Board believes that directors should not have an expectation of being renominated annually and that the Board’s annual performance evaluation is a key component of its director nomination process. In connection with the Board’s annual performance evaluation and director nomination processes, the Board considers at least annually upcoming retirements under its director retirement policies described below, the average tenure and overall mix of individual director tenures of the Board, the overall mix of the diverse skills, knowledge, experience, and perspectives of directors, each individual director’s performance and contributions to the work of the Board and its committees, along with other factors the Board deems appropriate as part of board succession planning and the nomination of directors.
Non-management directors will not be nominated for a term that would begin after the director's 72nd birthday, although the Governance and Nominating Committee may recommend and the Board may approve nomination of a non-management director after the age of 72 if, due to special or unique circumstances, it is in the best interests of the Company and its stockholders that the director continue to be nominated for reelection to the Board. Management directors (including a Chief Executive Officer) will be asked to resign effective on the date their active, regular employment with the Company terminates.
If a non-management director has a significant change in the director's principal occupation or professional responsibilities he or she shall notify the Chairman and the Chair of the Governance and Nominating Committee, with a copy to the Corporate Secretary, of any such change and offer his or her resignation from the Board. The Governance and Nominating Committee, as part of the Board’s performance evaluation and director nomination processes, will evaluate the facts and circumstances of the change and will recommend to the Board whether to accept the resignation or request that the director continue to serve on the Board.
LIMITATIONS ON OTHER BOARD SERVICE
The Company and its stockholders derive value from the experience directors bring from other boards on which they serve. Given the significant responsibilities of directors, each director must be ready, willing and able to devote sufficient time to carrying out their Board responsibilities effectively. Unless the Governance and Nominating Committee determines that such other board service would not impair the director’s service to the Company, directors shall not serve as a director on the board of directors of more than four public companies, including the Company, and a director who serves as the chief executive officer of a public company shall not serve as a director on the board of directors of more than two public companies (including the Company) in addition to the company of which he or she serves as chief executive officer. Directors are requested to advise the Chair of the Governance and Nominating Committee and the Chairman, with a copy to the Corporate Secretary, before serving as an officer, general partner, director or chairman of the board of an outside for-profit enterprise, or before accepting membership on the audit committee of any other public company board, so that the opportunity can be reviewed for any possible conflicts of interest, independence analysis and to help ensure that new demands on the director’s time will not detract from the director’s ability to serve the Company.
DIRECTOR ORIENTATION AND CONTINUING EDUCATION
Each new director participates in an orientation to the Company. This orientation will include presentations by senior management on the Company’s business, strategic plans, its significant financial, accounting and risk management policies and issues, its compliance programs, its Code of Ethics and Business Conduct, its principal officers and its internal and independent auditors.
The Company encourages director continuing education, including by making available to directors information on director education programs, and will reimburse the expenses incurred by a director in attending continuing education programs relevant to his or her duties as a director of the Company. The Board also participates in director training and business update sessions at its Board meetings which include presentations by management on the Company’s businesses, services and products, and industry trends as well as presentations by outside experts on various topics such as regulatory developments and emerging risks in the financial services industry. In addition, educational and reference materials on governance, regulatory, risk, and other relevant topics are regularly included in Board meeting materials and maintained in an electronic library available to directors.
CODE OF ETHICS
One of the Board’s key responsibilities is to ensure that the Company, through its Board and management, maintains high ethical standards and effective policies and practices designed to be consistent with the Company’s Vision and Values and protect the Company’s reputation, assets and business. The Board has adopted and promotes the BuzzFx Code of Ethics and Business Conduct applicable to team members as well as directors. Directors shall be familiar with, and are expected to conduct their activities in accordance with, the Code of Ethics and Business Conduct.
The Governance and Nominating Committee is responsible for annually reviewing the form and amount of compensation to non-management directors. In performing this review, the Governance and Nominating Committee may rely on information regarding director compensation policies and practices of a peer group of large financial services organizations designated by the Human Resources Committee which is provided by Company management, information provided by external compensation consultants or counsel, or other information as determined in the discretion of the Governance and Nominating Committee. Changes in Board compensation, if any, are made at the recommendation of the Governance and Nominating Committee subject to approval by the Board. Management directors do not receive any additional compensation for their services as directors. It is the Board’s compensation philosophy that all non-management directors should be compensated for service as a director only by the Company and on the same basis as other Company directors in accordance with the Board’s non-employee director compensation program.
STOCK OWNERSHIP REQUIREMENTS; PROHIBITION OF HEDGING OR PLEDGING OF COMPANY SECURITIES
Directors are required to own shares of the Company’s common stock. The Board has adopted a stock ownership policy that requires each non-management director, after five years on the Board, to own Company common stock having a value equal to five times the annual cash retainer, and to maintain at least that stock ownership level while a member of the Board and for one year after service as a director terminates.
Under the Company’s Code of Ethics requirements, directors and team members may not engage in short selling of or hedging transactions involving Company securities or purchase or sell derivatives in respect of Company securities.
In addition, directors and executive officers of the Company may not pledge any of their equity securities of the Company in connection with a margin or similar loan transaction.
DIRECTOR INDEPENDENCE STANDARDS
The regulators rules provide that the Board of Directors of BuzzFx (the “Company”) must affirmatively determine that a director has no material relationship with BuzzFx (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company) in order for the director to be considered independent. The Board has adopted the independence standards outlined below to assist the Board in determining whether a director is independent. In cases where a director has a relationship that is not covered in the independence standards outlined below, a majority of the Company’s independent directors, after considering all relevant facts and circumstances and taking into account the presumption of immateriality regarding certain relationships not covered in the independence standards, will make a determination of whether the relationship is material or not and therefore whether the director is independent.
The following definitions apply for purposes of these Director Independence Standards:
Bright Line Standards of Independence
Directors. In accordance with the rules of the NYSE, a director is not independent if the director:
Immediate Family Members. In accordance with the rules of the NYSE, a director is also not independent if his or her Immediate Family Member:
Categorical Standards of Independence
The Board has adopted these categorical standards of independence to assist the Board in making independence determinations. The Board has considered and determined that the following relationships are not material relationships for purposes of determining whether a director is independent:
Financial Services Relationships
A relationship, transaction or arrangement between BuzzFx, on the one hand, and (i) a director; (ii) an Immediate Family Member; (iii) an Affiliated Entity of a director; and/or (iv) an Affiliated Entity of an Immediate Family Member, on the other, involving depository, lending, lease financing, brokerage, investment advisory, investment banking, investment management, insurance, stock transfer, securities registrar, indenture trustee, trust and estate, custodial, cash management, stock option plan administration or other banking or financial services offered to customers by BuzzFx, provided that:
A business relationship, transaction or arrangement between BuzzFx and an Affiliated Entity of a director, or an Affiliated Entity of an Immediate Family Member, involving property or non-financial services, or other contractual arrangements (including lease agreements for BuzzFx branch offices), provided that:
Contributions made by BuzzFx or the BuzzFx Foundation to a tax-exempt organization, including a foundation or university, where a director or an Immediate Family Member of the director is employed as an Executive Officer, or where a director serves as chairman of the board, provided that the contributions in any fiscal year, excluding BuzzFx matching funds, are less than the greater of $1 million or two percent of the tax-exempt organization’s consolidated gross revenues for the most recently ended fiscal year for which total revenue information is available.
Employment by BuzzFx of an Immediate Family Member, provided that:
Except as provided above under Charitable Relationships involving a director serving as Chairman, any relationship, transaction or arrangement, including business and charitable relationships, between BuzzFx and a for-profit or not-for-profit entity where a director or an Immediate Family Member serves solely as a non-management board member, a member of a trade or other similar association, an advisor or a member of an advisory board, a trustee, a limited partner, an honorary board member or trustee or in any other similar capacity of such entity, or where an Immediate Family Member is employed by such entity in a non- Executive Officer position, will not be considered material or relevant for purposes of considering the independence of a director.
Any other relationship, transaction or arrangement not covered by any of the categorical standards described above will be presumed not to be material to the director’s independence as long as (i) the relationship, transaction or arrangement was made in the ordinary course of business of the parties and on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with BuzzFx, or (ii) the amount involved does not exceed $10,000 in any fiscal year.