The Board of Directors (the Board) of Countrywide Financial
Corporation (Countrywide) has adopted the following Corporate Governance
Guidelines (Guidelines) to assist the Board in the exercise of its
responsibilities. These Guidelines have been developed and are recommended by
the Corporate Governance and Nominating Committee of the Board.
ROLE OF THE BOARD OF DIRECTORS
Oversight of Business and Management
Countrywide's business is conducted by its employees, under the direction of management with oversight by the Board. The Board represents the interests of Countrywide's stockholders in optimizing long-term value while being sensitive to the concerns of other stakeholders and interested parties including employees, customers, government agencies and the public-at-large.
Functions of the Board
As part of its oversight role, the Board considers its primary functions to include the following, which will be discharged either directly by the Board or through appropriate committees:
STRUCTURE OF THE BOARD
The Corporate Governance and Nominating Committee is responsible for reviewing with the Board, on at least an annual basis, the appropriate skills and characteristics required of Board members based on Countrywide's needs from time to time. In this assessment, the Corporate Governance and Nominating Committee's charter requires it to consider a candidate's skills and characteristics, including business acumen and experience, prominence, independence, reputation, business and social perspective, concern for the long-term interests of Countrywide's stockholders, and personal integrity and judgment - all in the context of an assessment of the perceived needs of the Board at that point in time. In addition, Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively and should be committed to serve on the Board for an extended period of time.
Size of Board
The number of directors constituting the full Board shall be determined from time to time by the Board, within the limits prescribed by Countrywide's Certificate of Incorporation and Bylaws, taking into account the size and breadth of Countrywide's business, the staffing needs of the Board's committees and other needs.
Identification of Director Candidates
The Board has delegated to the Corporate Governance and Nominating Committee the responsibility for identifying individuals qualified to become directors and reviewing and recommending nominees for membership to the Board. The Corporate Governance and Nominating Committee will review all proposed nominees for the Board, including those proposed by stockholders, in accordance with its charter. Stockholders may propose nominees for consideration by utilizing the procedures communicated to stockholders in Countrywide's annual proxy statement.
Director Orientation and Continuing Education
The Board and management will conduct an orientation for each new Director to familiarize the Director with Countrywide's strategies, financial matters, corporate governance practices and other key policies and practices. The Board also recognizes the importance of continuing education for its Directors and is committed to provide such education in order to improve both Board and committee performance. Directors are encouraged to attend appropriate continuing education programs to help ensure that they stay current on corporate governance, best board practices, financial and accounting practices, ethical issues for directors and management and similar issues. Additionally, each Director is expected to take steps reasonably necessary to be adequately informed about Countrywide and external matters affecting it and to enable the Director to function effectively on the Board and on the committees on which the Director serves.
It is the policy of the Board that a majority of the members of the Board qualify as "independent" directors. A Director may not be considered independent if the Director does not meet the criteria for independence established by the New York Stock Exchange (the "NYSE") and all applicable legal requirements. At least annually (or more frequently, if warranted by the circumstances), the Corporate Governance and Nominating Committee will review the independence of each non-employee Director and make recommendations to the Board and the Board shall affirmatively determine whether each Director qualifies as independent. In addition to reviewing each Director's compliance with the specific independence tests set forth in the rules of the NYSE, the Board has established, and will review from time to time as necessary, categorical standards to assist it in making independence determinations.
The Board recognizes that members of the Audit and Ethics Committee or the Compensation Committee may be subject to more stringent standards of "independence" pursuant to applicable rules and regulations, including NYSE listing standards, accounting and auditing rules and federal securities or tax laws.
Each Director should keep the Corporate Governance and Nominating Committee fully and promptly informed as to any developments that might affect the Director's independence.
Investment in Countrywide
The Board has adopted a stock ownership requirement that each non-employee Director own at least 10,000 shares of Countrywide's common stock. This stock ownership requirement must be fulfilled within five years of each new Director joining the Board or before November 2009 for Directors serving on the Board prior to November 2004.
The Board does not believe that arbitrary term limits in a Director's service are appropriate; nor does the Board believe that any Director should expect to be re-nominated at the end of his or her term.
Limitations on Number of Boards
Directors must limit the number of other boards on which a Director serves in order to ensure that such service does not interfere with the Director's ability to fulfill his or her duties as a member of the Board. To that end, no Director may serve on more than four publicly traded company boards and no member of the Audit and Ethics Committee may simultaneously serve on the audit committee of more than three publicly traded companies.
Change in Circumstance
If a Director (i) changes his or her employment, (ii) intends to accept an invitation to join the board of directors of another publicly traded company or (iii) is or believes he or she will be subject to events or circumstances that could adversely affect Countrywide or his or her fitness to serve on the Board or any of its committees, the Director shall notify the Corporate Governance and Nominating Committee.
The Board has established a mandatory retirement age of 75. A Director may, however, be nominated for election even though he or she will reach the age of 75 during the next term.
Only non-employee directors receive payment for serving on the Board. The Compensation Committee is responsible for recommending to the Board compensation and benefits for non-employee directors. In discharging this duty, the Compensation Committee should endeavor to ensure that director compensation is appropriate relative to the fees and benefits for directors of comparable companies and competitive so that the Board can attract and retain highly qualified directors. Director compensation will be disclosed each year in Countrywide's proxy statement relating to its Annual Meeting of Stockholders.
The Board shall have a Lead Director selected by the independent Directors. The Lead Director chairs the executive sessions of the non-employee and independent Directors of the Board, consults with the Chairman of the Board concerning the agenda for Board meetings and performs such other duties as the non-employee Directors might designate from time to time. The Lead Director, who must be an independent director, will serve a three-year term.
BOARD PROCEDURAL MATTERS
Number of Meetings and Attendance
The Board shall be responsible for determining the appropriate number of regular meetings to hold each year. Currently, the Board expects to hold at least five regular meetings each year. Each Director should make every reasonable effort to attend each meeting of the Board and any committee of which the Director is a member, and to be reasonably available to management and other Directors for consultation between meetings. Countrywide encourages each Director to attend each Annual Meeting of Stockholders.
Selection of Agenda Items for Board Meetings
The Chairman in consultation with the Lead Director will establish the agenda for each Board meeting. Each Director may suggest the inclusion of additional items on the agenda and may raise issues for discussion at any Board meeting. An overall agenda for the Board should be disseminated each year as soon as reasonably practicable following the Annual Meeting of Stockholders.
Advance Distribution of Board Materials
Information that is important to the matters that will be discussed at Board meetings should be distributed at least five days in advance of the meeting, if reasonably practicable. Materials that are proprietary, confidential or otherwise sensitive may be distributed only at the meeting. Directors should carefully review information distributed to them prior to Board and committee meetings so that meeting time can be reserved for substantive discussion.
The non-employee Directors of the Board will meet in executive session on at least a quarterly basis without participation of any member of management. The Lead Director will preside over these executive sessions and will establish and distribute an agenda for each such meeting. In addition, at least once per year, the Board will meet in executive session with only independent directors present.
Number of Committees
The current standing Committees of the Board are Audit and Ethics, Compensation, Corporate Governance and Nominating, Credit, Finance and Operations and Public Policy. From time to time, the Board may decide to form a new committee or disband an existing committee depending on the then-current circumstances. Each committee has its own written charter that sets forth each such committee's duties and responsibilities.
The Corporate Governance and Nominating Committee is responsible for recommending to the Board the assignment of Directors to committees. The Corporate Governance and Nominating Committee will consult with the Chairman and Lead Director and consider the preferences of individual Directors, the needs of Countrywide, and the qualifications of the Directors.
In general, committee chairpersons and committee members should rotate periodically, but the Board believes that such rotation may be waived in individual cases where there are reasons to maintain an individual Director's committee membership.
All members of the Audit and Ethics, Compensation and Corporate Governance and Nominating Committees will be independent directors.
Committee Chairpersons and Committee Agenda
Each committee will have a chairperson who, in consultation with the appropriate members of management, will develop the committee's agenda and will direct management to prepare and distribute appropriate written materials prior to the meeting.
Each committee will prepare annually a schedule of agenda items to be discussed by that committee for the ensuing year (to the degree these can be foreseen).
The committee chairperson, in consultation with committee members, will determine the frequency and length of the meetings of the committee. Board members who are not members of a committee may generally attend meetings of that committee as observers, and may participate in discussions at the discretion of the chairperson, but shall not have voting rights. Attendance of other non-committee members at committee meetings, such as members of management or outside consultants, will be at the pleasure of the committee. Committees should regularly meet in executive session. The committee chairperson is responsible for apprising the full Board on a regular basis of all committee proceedings, determinations and recommendations.
During an executive session of the Board, the Chairman shall submit an annual report on succession planning to the Board. The Chairman shall also make available, on a continuing basis, his recommendation as to his successor should he become unexpectedly unavailable.
Evaluating the Board's and each Committee's Performance
The Board and each committee shall conduct an annual self-evaluation process that is coordinated and led by the Corporate Governance and Nominating Committee. In carrying out this responsibility, the Corporate Governance and Nominating Committee will undertake primary responsibility for reviewing and making recommendations to the Board, from time to time and no less than annually, concerning the role and effectiveness of the Board, committees and, in general, sound practices as to the corporate governance process. This assessment shall include a review of the Board's and each committee's overall effectiveness.
Access to Management
Directors shall have full and unrestricted access to Countrywide's management. It is assumed that Directors will use judgment so that this contact is not distracting to the operations of Countrywide. Furthermore, the Board encourages the Chairman, from time to time, to invite members of management into Board meetings who: (a) can provide additional insight into the items being discussed because of their personal involvement in these areas; and/or (b) have certain potential that should be cultivated through their exposure to the Board.
Access to Independent Advisors
The Board vests its committees with the authority to obtain advice and assistance from and to retain, at Countrywide's expense, independent outside financial, legal or other advisors and experts as each committee determines are necessary or appropriate to carry out its duties.
Board Interaction with Third Parties
Management should coordinate all contacts with outside constituencies, such as the press, customers, investors, analysts or the financial community.
Code of Business Ethics; Conflicts of Interest
Each Director is required to comply with the applicable provisions of Countrywide's Code of Business Ethics in effect from time to time. Directors are expected to be mindful of their fiduciary obligations to Countrywide and avoid any action, position or interest that conflicts with an interest of Countrywide or gives the appearance of a conflict.
Guidelines Subject to Periodic Review
These Guidelines will be subject to a periodic review, first by the Corporate Governance and Nominating Committee and then the full Board to assure that they are in accordance with sound corporate governance. These Guidelines are not intended to change or interpret any law or regulation, or Countrywide's Certificate of Incorporation or Bylaws.