SWS GROUP, INC. CORPORATE GOVERNANCE GUIDELINES
2003 Governance Charter: SWS
I. The Board of Directors
1. Size of Board.
The Board's optimum size is seven to nine members.
2. Mix of Directors; "Independent" Directors.
A majority of the directors shall satisfy the independence requirements of the New York Stock Exchange and any other regulatory authority.
The Board believes that it should not have more than one management director.
3. Board Membership Criteria.
The Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and be selected based upon contributions they can make. The Company does not limit the number of boards on which a director may sit. Directors should plan to make a significant time commitment to the Company.
4. New Directors.
The Nominating/Corporate Governance Committee has, as one of its responsibilities, the recommendation of director candidates to the full Board. The Nominating/Corporate Governance Committee will maintain an orientation program for new directors.
5. Retirement; Resignation.
a. Term Limits.
The Board does not favor term limits for directors, but believes that it is essential to monitor overall Board performance as well as the performance of individual Board members.
b. Retirement Policy.
The Board does not favor a mandatory retirement policy for directors.
c. Resignation Policy - Management Directors.
Management directors shall offer to resign from the Board upon their resignation, removal or retirement as an officer of the Company.
d. Directors Changing Their Present Job Responsibilities.
The Board expects directors to offer to resign from the Board upon a change in their business position including, without limitation, retirement from the position held upon nomination as a director.
1. Board Meetings.
a. Selection of Agenda Items and Executive Sessions.
The Chairman and Chief Executive Officer will establish the agenda for Board meetings. The non-management directors of the Board will meet in executive session during each of the Board's regularly scheduled meetings without any management directors and any other members of the Company's management who may otherwise be present. The non-management directors will rotate the presiding position among the chairs of the authorized Board Committees and will disclose this process in the annual proxy statement.
b. Distribution of Materials.
The Company shall distribute, sufficiently in advance of meetings to permit meaningful review, written materials for use at Board meetings.
c. Attendance of Non-Directors.
The Board believes that attendance of key executive officers augments the meeting process.
d. Number of Meetings; Attendance and Preparation.
The Board of Directors shall hold a minimum of 4 meetings per year. Directors are expected to attend all meetings and, prior to the meetings, to have reviewed all written meeting materials distributed to them in advance. Directors are expected to be physically present at all regularly scheduled meetings. Conference telephone, videoconference, or similar communication equipment attendance at a meeting will generally only be permitted if it is necessary to constitute a quorum.
2. Conflicts of Interest.
Directors are expected to avoid any action, position or interest that conflicts with an interest of the Company, or gives the appearance of a conflict. The Company annually solicits information from directors in order to monitor potential conflicts of interest, and directors are expected to be mindful of their fiduciary obligations to the Company.
3. Consulting Arrangements with Directors.
The Board believes that the Company should not enter into paid consulting arrangements with outside directors or their employers, without obtaining the Board's approval. Such approval may, in appropriate circumstances, be granted on an annual basis.
4. Share Ownership by Directors.
The Board encourages equity ownership in the Company by directors, but believes the number of shares of the Company's stock owned by each director is a personal decision.
5. Compensation Review.
The Compensation Committee will annually review, and (when it deems appropriate) recommend to the full Board changes in, director compensation and benefits.
6. Assessing Board and Committee Performance.
The Board shall conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Board's self-evaluation shall be based, in part, on the Nominating/Corporate Governance Committee's assessment questionnaire.
7. Access to Senior Management.
Board members have complete and open access to senior members of management. The Chief Executive Officer shall invite key employees to attend Board sessions at which the Chief Executive Officer believes they can meaningfully contribute to Board discussion.
8. Management Succession.
The Nominating/Corporate Governance Committee shall develop management succession plans.
9. Interaction with Third Parties.
The Board believes that management should speak for the Company and that the Chairman should speak for the Board.
The Board believes maintaining confidentiality of information and deliberations is an imperative.
II. Committees of the Board