2003 Governance Charter: GDW
Public trust in Golden West and its World Savings and Atlas subsidiaries is based upon the Company's solid reputation for maintaining the highest standards of business conduct. The Board of Directors has adopted the corporate governance guidelines, Board committee charters, and codes of conduct on this Web page that provide the framework for the Company's conduct.
Corporate Governance Guidelines
Audit Committee Charter
Nominating and Corporate Governance Committee Charter
Compensation and Stock Option Committee Charter
Code of Conduct and Ethics for Financial Officers and Directors
Code of Business Conduct and Ethics for All Employees
Corporate Governance Guidelines
1. Director Qualifications
The Board will have a majority of directors who meet the criteria for independence required by the New York Stock Exchange. The Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics of new Board members as well as the composition of the Board as a whole. This assessment will include members' qualification as independent, as well as consideration of diversity, age, skills, and experience in the context of the needs of the Board. Nominees for directorship will be selected by the Nominating and Corporate Governance Committee in accordance with the policies and principles in its charter. The invitation to join the Board should be approved by the Board itself and extended by the Chairman of the Board or his or her designee.
The Board of Golden West currently has 9 members. It is the sense of the Board that the size of the Board provides a diversity of viewpoints and backgrounds while still being small enough to permit full engagement and discussion by the directors. However, the Board would be willing to go to a somewhat larger size in order to accommodate the availability of an outstanding candidate.
No director may serve on more than three other public company boards. Directors should advise the Chairman of the Board and the Chair of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another public company board.
The Board believes that longstanding experience in business, investments and the professions and with the Company have been invaluable to the Company's success. Thus, the Board has not adopted a mandatory retirement age. In its evaluation of directors, however, it is expected that the Nominating and Corporate Governance Committee will assess, among other things, that all serving directors and persons nominated to be a director are able to devote appropriate time and energy to the functions required of a director and are able to contribute to the Board process.
The Board likewise does not believe it should establish term limits. While term limits could help ensure that there are fresh ideas and viewpoints available to the Board, they hold the disadvantage of losing the contribution of directors who have been able to develop, over a period of time, increasing insight into the Company and its operations and, therefore, provide an increasing contribution to the Board as a whole. As an alternative to term limits, the Nominating and Corporate Governance Committee will review each director's renomination to the Board every three years when his or her elected term is expiring.
The Board has no policy with respect to the separation of the offices of the Chairman of the Board and Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination when it elects the Chief Executive Officer(s).
2. Director Responsibilities
The basic responsibility of a director is to exercise his or her business judgment to act in what he or she reasonably believes to be the best interests of the Company and its shareholders. In discharging that obligation, directors should be entitled to rely on the honesty and integrity of the Company's senior executives and its outside advisors and auditors. The directors should also be entitled to the benefits of indemnification to the fullest extent permitted by law and the Company's charter, bylaws and any indemnification agreements, and to exculpation as provided by applicable law and the Company's charter.
Directors are expected to attend Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary 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 should generally be distributed in writing to the directors before the meeting, and directors should review these materials in advance of the meeting.
The Chairman of the Board will establish the agenda for the Board meeting. Each Board member is free to suggest the inclusion of items on the agenda. Each Board member also is free to raise at any Board meeting subjects that are not on the agenda for that meeting. The Board will review the Company's long-term strategic plans and the principal issues that the Company will face in the future during at least one Board meeting each year.
The non-management directors will meet in executive sessions at each regularly scheduled board meeting and, upon request of any director, at any specially called Board meeting. The process by which directors are selected to preside at these meetings will be determined by the non-management directors, and the relevant process and the names of selected directors will be disclosed in the annual proxy statement. Interested parties who would like to express any concerns to the non-management directors may do so by sending a letter addressed to "Non-management Directors," care of the Corporate Secretary at the Company's headquarters at 1901 Harrison Street, Oakland, CA 94612.
The Board reaffirms that management speaks for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies that are involved with the Company. It is expected that Board members would engage in such communication, however, with the knowledge of management and, absent unusual circumstances or as contemplated by the committee charters, only at the request of management.
3. Board Committees
The Board will have at all times an Audit Committee, a Compensation and Stock Option Committee, and a Nominating and Corporate Governance Committee. All of the members of these committees will be independent directors under the criteria established by the New York Stock Exchange, as well other applicable independence criteria related to the particular committee. Committee members will be appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee with consideration of the desires of individual directors. It is the sense of the Board that consideration should be given to rotating committee members periodically, but the Board does not feel that rotation should be mandated as a policy. Each of these committees will select its Chair.
Each of these committees will have its own charter. The charters will set forth the purposes, goals and responsibilities of the committees as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure and operations and committee reporting to the Board. The charters also will provide that each committee will annually evaluate its performance.
The Chair of each committee, in consultation with the committee members, will determine the frequency and length of the committee meetings consistent with any requirements set forth in the committee's charter. The Chair of each committee, in consultation with the appropriate members of the committee and management, will develop the committee's agenda. At the beginning of the year, each committee will establish a schedule of agenda subjects to be discussed during the year (to the degree these can be foreseen). The schedule for each committee will be furnished to all directors.
The Board and each committee has the power to hire independent legal, financial or other advisors as it may deem necessary, without consulting or obtaining the approval of any officer of the Company in advance. The Company shall provide appropriate funding, as determined by the Board or committee, for the costs of such independent advisors.
The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.
4. Director Access to Officers and Employees
Directors have full and free access to officers and employees of the Company. Any meetings or contacts that a director wishes to initiate may be arranged through the CEOs or the Secretary or directly by the director. The directors will use their judgment to ensure that any such contact is not disruptive to the business operation of the Company and will, to the extent not inappropriate, copy the CEOs on any written communications between a director and an officer or employee of the Company.
The Board will continue its longstanding practice of having senior officers of the Company attend various sessions of the Board meetings.
5. Director Compensation
The form and amount of director compensation will be determined by the Compensation and Stock Option Committee in accordance with the policies and principles set forth in its charter, and the Compensation and Stock Option Committee will conduct a bi-annual review of director compensation. The Compensation and Stock Option Committee will consider that directors' independence may be jeopardized if director compensation and perquisites exceed customary levels, if the Company makes substantial charitable contributions to organizations with which a director is affiliated, or if the Company enters into consulting contracts with (or provides other indirect forms of compensation to) a director or an organization with which the director is affiliated.
The Board is aware that the Company and/or affiliates of the Company occasionally make donations to nonprofit organizations with which some of the directors are affiliated. The Nominating and Corporate Governance Committee has suggested, and the Board has ratified, the determination that so long as the aggregate of contributions from the Company or its affiliates to a nonprofit organization of which a director is an employee does not exceed 2% of the annual revenues of the nonprofit organization, the director will continue to be considered independent, absent other circumstances. Likewise, the Nominating and Corporate Governance Committee has suggested, and the Board has ratified, the determination that if a director serves or is designated to serve as a trustee of a trust established by an executive officer or another director of the Company and serves, or will serve, in that capacity without compensation, the director will continue to be considered independent, absent other circumstances.
6. Director Orientation and Continuing Education
All new directors must participate in the Company's Orientation Program. This orientation, which should be conducted within a reasonable period of time after new directors are nominated or elected, will include presentations by management to familiarize new directors with the Company's strategic plans; its significant financial, accounting and risk management issues; its compliance programs; its codes of business conduct and ethics; its principal officers; and its internal and independent auditors. In addition, the Orientation Program will include visits to Company headquarters and, to the extent practical, some of the Company's other significant facilities. All other directors also are invited to attend the Orientation Program.
7. CEO Evaluation and Management Succession
The Compensation and Stock Option Committee will conduct an annual review of the CEOs' performance, as set forth in the committee's charter. The Board will review the Compensation and Stock Option Committee's report in order to ensure that the CEOs are providing the best leadership for the Company in the long- and short-term, and taking into account the financial and ethical performance of the Company.
The Nominating and Corporate Governance Committee shall discuss succession planning at least bi-annually with the entire Board and/or with the non-management directors, at which time the CEOs should make available their recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals. The Board will work with the Nominating and Corporate Governance Committee to nominate and evaluate potential successors to the CEOs.
8. Annual Performance Evaluation
The Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating and Corporate Governance Committee will receive comments from all directors and report annually to the Board with an assessment of the Board's performance. This will be discussed with the full Board following the end of each fiscal year. The assessment will focus on the Board's contribution to the Company and specifically focus on areas in which the Board or management believes that the Board could improve.
(Revised July 31, 2003)
Audit Committee Charter ^Top of Page
The Audit Committee is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the independent outside auditors' qualifications and independence, (3) the performance of the Company's internal audit function and independent outside auditors, and (4) the compliance by the Company with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the "Commission") to be included in the Company's annual proxy statement.
The Audit Committee does not itself prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company's financial statements. Accordingly, while the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent outside auditors.
The Audit Committee shall consist of no fewer than three members. The members of the Committee shall meet the independence requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"), the rules and regulations of the Commission, and the standards of the Federal Deposit Insurance Corporation. At least one member of the Audit Committee shall be an "audit committee financial expert" as defined by the Commission. The members of the Committee shall be financially literate, as interpreted by the Board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. At least two members of the Committee shall have banking or related financial management expertise as required by Section 36(g) of the Federal Deposit Insurance Act. At least one member shall have accounting or related financial experience as required by the NYSE.
The members of the Audit Committee may not receive any compensation from the Company other than director's fees. Committee members shall not simultaneously serve on the audit committees of more than two other public companies.
The members of the Audit Committee shall be appointed by the Board on the recommendation of the Nominating and Corporate Governance Committee. Audit Committee members may be replaced by the Board.
Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace the independent outside auditors (subject, if applicable, to shareholder ratification). The Committee shall be directly responsible for the compensation, evaluation and oversight of the independent outside auditors (including resolution of disagreements between management and the independent outside auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent outside auditors shall report directly to the Committee.
The Audit Committee shall preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent outside auditors, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act which are approved by the Committee prior to the completion of the audit. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the full Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent outside auditors for the purpose of rendering or issuing an audit report and to any advisors employed by the Audit Committee.
The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Committee shall meet periodically with management, the internal auditors and the independent outside auditors in separate executive sessions. The Committee may request any officer or employee of the Company or the Company's outside counsel or independent outside auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
The Audit Committee, to the extent required by law or otherwise as it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent outside auditors the annual audited financial statements, including disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent outside auditors the Company's quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent outside auditors' review of the quarterly financial statements.
3. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including any significant changes in the Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and any special steps adopted in light of material control deficiencies.
4. Review and discuss reports from the independent outside auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments, if any, of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent outside auditors.
(c) Other material written communications, if any, between the independent outside auditors and management, such as any management letter or schedule of unadjusted differences.
5. Discuss with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, if any, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).
6. Discuss with management and the independent outside auditors the effect of regulatory and accounting initiatives as well as off-balance sheet structures, if any, on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies.
8. Discuss with the independent outside auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, any significant disagreements with management, and management response.
9. Review disclosures made to the Audit Committee by the Company's CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Outside Auditors
10. Review and evaluate the lead partner of the independent outside auditor team.
11. Obtain and review a report from the independent outside auditors at least annually regarding (a) the independent outside auditors' internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent outside auditors and the Company. Evaluate the qualifications, performance and independence of the independent outside auditors, including considering whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence, taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent outside auditors to the Board.
12. Ensure the rotation of the audit partners as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
13. Set policies for the Company's hiring of employees or former employees of the independent outside auditors who participated in any capacity in the audit of the Company.
14. Discuss with the independent outside auditors issues on which they consulted with their national office and matters of audit quality and consistency.
15. Meet with the independent outside auditors prior to the audit to discuss the planning and staffing of the audit.
Oversight of the Company's Internal Audit Function
16. Review the appointment and replacement of the senior internal auditing executive.
17. Review the significant reports to management prepared by the internal auditing department and management's responses.
18. Discuss with the independent outside auditors and management the internal audit department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
Compliance Oversight Responsibilities
19. Obtain from the independent outside auditors assurance that the firm is unaware of information indicating an illegal act has or may have occurred that gives rise to the procedures set forth in Section 10A(b) of the Exchange Act.
20. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with applicable provisions of the Company's Code of Conduct and Ethics for Financial Officers and Code of Business Conduct and Ethics for All Employees.
21. Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
22. Discuss with management and the independent outside auditors any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Company's financial statements or accounting policies.
23. Discuss with the Company's General Counsel legal matters that may have a material impact on the financial statements or the Company's compliance policies.
In addition to the above responsibilities, the Audit Committee will undertake such other duties as the Board delegates to it. The Committee shall have the power to investigate any matter falling within its jurisdiction.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Committee shall annually review the Committee's own performance.
(Revised July 31, 2003)
Nominating and Corporate Governance Committee Charter ^Top of Page
The Nominating and Corporate Governance Committee is appointed by the Board to (1) assist the Board by identifying individuals qualified to become Board members, and recommend to the Board the director nominees for the next annual meeting of shareholders; (2) approve, review and reassess the adequacy of the Company's Corporate Governance Guidelines; (3) lead the Board in its annual review of the Board's performance; and (4) recommend to the Board the director nominees for each committee.
The Nominating and Corporate Governance Committee shall consist of no fewer than three members. The members of the Nominating and Corporate Governance Committee shall meet the independence requirements of the New York Stock Exchange.
The members of the Nominating and Corporate Governance Committee shall be appointed and replaced by the Board.
Authority and Responsibilities
1. The Nominating and Corporate Governance Committee shall establish criteria for selecting new directors. The Committee shall seek out candidates who possess high ethical standards and the competence, experience, and integrity required of a director of a federal savings bank by OTS Regulation 574.7. The Committee shall also consider, among other things, whether a candidate understands financial statements and reports, has experience with housing and real estate markets, has other professional experiences that would be beneficial to the Company, has knowledge of community affairs (including in markets served by the Company), and/or would qualify as an "independent" director under NYSE and other applicable regulations.
2. The Nominating and Corporate Governance Committee shall consider, from time to time, individuals qualified to become board members for recommendation to the Board.
3. The Nominating and Corporate Governance Committee shall recommend to the Board the nominees for election as directors at the annual meeting of stockholders.
4. The Nominating and Corporate Governance Committee shall receive comments from all directors and report annually to the Board with an assessment of the Board's performance and the interaction with management, to be discussed with the full Board following the end of each fiscal year.
5. The Nominating and Corporate Governance Committee shall, from time to time, review and reassess the adequacy of the Corporate Governance Guidelines of the Company and recommend any proposed changes to the Board for approval.
6. The Nominating and Corporate Governance Committee shall assess any proposed Company transactions brought to the Committee's attention that may pose a potential conflict of interest with a director and determine whether the proposed transaction may proceed in compliance with the Company's policies and applicable law. As appropriate, and in accordance with the Company's Corporate Governance Guidelines and Codes of Conduct, the Committee will report its findings and make recommendations to the Board.
7. The Nominating and Corporate Governance Committee shall have authority to obtain advice and assistance from internal or external legal, accounting or other advisors. In the limited instances where a search firm might be used, or when the Committee otherwise uses external legal, accounting or other advisors, the Committee shall have the sole authority to retain and terminate any such firm or advisor.
8. The Nominating and Corporate Governance Committee may form and delegate authority to subcommittees when appropriate.
The Nominating and Corporate Governance Committee shall make regular reports to the Boards.
The Nominating and Corporate Governance Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Nominating and Corporate Governance Committee shall annually review its own performance.