1 governance 1. board size and composition 2. board committee structure 3. board membership and...
TRANSCRIPT
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Governance
• 1. Board Size and Composition
• 2. Board Committee Structure
• 3. Board Membership and Recruitment
• 4. Director Compensation and Ownership
• 5. Senior Management team Succession
• 6. Other Governance Matters
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1. Board Size and Board composition
• Board size: 3-25 members in 10th district states
• Board composition: outsiders bring diversity of knowledge, skills and experience to the board table, which is invaluable in advising management and making business decisions.
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2. Board Committee Structure
• Bank boards use loan committee, ALM committee and investments committee to monitor and manage their credit, liquidity and market risk exposure.
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4. Director Compensation and Ownership
• Should director compensation take the form of long-term equity
• Good governance recommends for significant stock ownership by directors.
• In US community bank survey indicate that CEOs, on average, own or control about 25% of the outstanding stock in their banks or BHC.
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Pledge for the Loan and ROA: Quadratic Relation
Source: thesis
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Pledge for the Loan and ROA:Quadratic Relation
Source: thesis
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Pledge for the Loan and ROA: Quadratic Relation Source: thesis
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Pledge for the Loan and Stock Returns: Little Related
(Insignificant)
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Pledge for the Loan and Stock Returns: Little Related
(Insignificant)
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Pledge for the Loan and Stock Returns: Little Related (Insignificant)
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Governance Practice
• Has majority of independent directors
• Business expertise is major recruiting criteria
• Outside directors have equity ownership that represents 25% or more of their personal assets
• Inside directors have equity ownership that represents 25% or more of their personal assets
• Board paid for attendance• Had directors participating
training in 2003
Under $150Min assets
Family Non-family
2 3
1 1
1 1
3 3 3 3
2 1
Over $150M
in assetsFamily Non-family
2 4
1 2
1 1
3 3
3 3
2 1
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• Performed director assessments
• Has mandatory director retirement
• Has equity ownership by CEO• Has written succession plan• Has a code of ethics• Has a loan committee• Has an ALM committee• Has an investment committee
Under $150M
in assetsFamily Non-family
2 1
1 1
2 1
2 2
3 3
4 4
4 4
4 4
Over $150M
in assetsFamily Non-family
2 2
1 1
2 1
2 1
4 4
4 4
4 4
4 4
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• Has a operations risk committee
• Has an audit committee • CEO does not serve on audit
committee• Outside directors are a majori
ty of the audit committee• Has a nominating committee• CEO does not serve on nomi
nating committee
Under $150M
in assetsFamily Non-family
3 3
4 4
2 2
2 3
2 3
1 1
Over $150M
in assetsFamily Non-family
3 **
4 4
2 2
2 4
2 **
** **
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Under $150M
in assetsFamily Non-family
2 3
3 4
1 1
2 4
Over $150M
in assetsFamily Non-family
** **
4 **
1 **
3 **
• Outside directors are a majority of the nominating committee
• Has a compensation committee
• CEO does not serve on compensation committee
• Outside directors are a majority of the compensation committee
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We might also use the similar criteria to do the first evaluation. However, Bank Governance in
different countries have different check marks
• In US, the CEO may not have many shares • In Taiwan, it should have some minimum requirement.
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Furthermore, US Bank Stresses CSR, in Taiwan, banks also do but
talk less