FIRSTFED FINANCIAL CORP.
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 (“NYSE”) and the Director independence guidelines set forth below.  Directors should be independent, in both fact and appearance.  Board independence depends not only on Directors’ individual relationships – persona, employment, or business – but also on the overall attitude of the board and the individual Directors toward the corporation and management.  Providing objective independent judgment in a constructive manner is at the core of the board’s oversight function, and the board’s composition should reflect this principle.


The Governance & Nominating 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, range of ages, skills, and experience in the context of the needs of the Board. 


All Directors should individually be persons demonstrating the attributes of honesty and integrity. 


The Board should monitor what combination of skills and expertise exists in its members and attempt to recruit members who compliment or enhance existing skills and expertise.


The Board presently has 9 members.  It is the sense of the Board that its size is about right.  However, the Board would be willing to go to a somewhat larger size in order to accommodate the availability of an outstanding candidate.


It is the sense of the Board that individual Directors who change the responsibility they held when they were elected to the Board should volunteer to resign from the Board.  It is not the sense of the Board that in every instance the Directors who retire or change from the position they held when they came on the Board should necessarily leave the Board.  There should, however, be an opportunity for the Board through the Governance & Nominating Committee to review the continued appropriateness of Board membership under the circumstances.


Directors should advise the Chairman of the Board and the Chairman of the Governance & Nominating Committee in advance of accepting an invitation to serve on another public company board.  Pursuant to the Bylaws, the current retirement age for Board membership is 73.


The Board does not believe it should establish term limits.  While term limits could help insure 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 Governance & Nominating Committee will review each Director's continuation on the Board every three years.

2.       Director Independence

The Board, acting on the recommendation of the Governance & Nominating Committee, has adopted a set of director independence principles to promote independent functioning of the Board's activities.  A director is independent when the Board affirmatively determines that he or she has no material relationship with the Company, other than as a director. This determination is made in accordance with these Corporate Governance Guidelines, which are consistent with the applicable rules of the NYSE and federal securities laws. Currently, the Chief Executive Officer and President are the only directors who are members of the Company’s management.  All other directors are considered independent.


The Governance & Nominating Committee is responsible for reviewing with the Board annually the appropriate criteria and standards for determining director independence consistent with all applicable legal requirements, including the NYSE rules and applicable federal securities laws. In accordance with applicable NYSE and Securities and Exchange Commission (“SEC”) rules, the Company has established categories of immaterial relationships that are deemed not to have any bearing on a director’s independence. Accordingly, the Corporate Governance Guidelines provide that no Company director will be considered non-independent solely as a result of any of the following relationships:

        • if currently or at any time during the preceding three years the director was an employee or executive officer of, or a member of his or her immediate family was an employee or an executive officer of another company that makes payments to or receives payments from the Company for property or services in an amount which is less than $1 million and less than two percent (2%) of the annual consolidated gross revenues of the other company, determined for the most recent completed fiscal year;
  • if currently or at any time during the preceding three years the director or a member of his or her immediate family was a director of another company that makes payments to or receives payments from the Company for property or services in an amount which is less than the greater of $1 million and two percent (2%) of the annual consolidated gross revenues of the other company, determined for the most recent completed fiscal year;
  • if the director or a member of his or her immediate family is an executive officer of another company which is indebted to the Company, or to which the Company is indebted, and the total amount of indebtedness either of them owes to the other is less than one percent (1%) of the total consolidated assets of the other company;
  • if the director or a member of his or her immediate family serves as an officer, director or trustee of a tax exempt organization, and the Company’s discretionary contributions to the organization are no greater than the greater of $50,000 or one percent (1%) of that organization’s total annual consolidated gross revenues (determined for the most recent completed fiscal year);
  • if the director or a member of his or her immediate family serves as a non-employee director of another company (and has not been determined by such other company to be non-independent), on whose board one or more other Company directors sit as non-employee directors;
  • if the director or a member of his or her immediate family maintains one or more deposit accounts with the Company, provided that there is no obligation or requirement to maintain the existence of such accounts and such accounts exist on terms and conditions that are no more favorable than those offered to the general public; or
  • if the director or a member of his or her immediate family maintains one or more loans with the Company, provided that there is no obligation or requirement to maintain the existence of such loans and such loans are made on substantially the same terms as those prevailing at the time for comparable transactions with non-affiliated persons, except for the interest rates and loan fees charged with respect to a director in accordance with the Company’s Employee Loan Benefit Program.

The Board will annually review all business, commercial and charitable relationships of the directors. Whether directors meet these categorical independence tests will be reviewed annually. The Board will make its determination of director independence public annually prior to director elections. The Company will explain in its annual proxy statement the basis for any determination by the Board that a relationship was immaterial despite the fact that it did not meet the categorical standards of immateriality set forth above.


These director independence guidelines are subject to future changes by the Board, upon recommendation of the Governance Committee, as it may find necessary or advisable for the Company to achieve its governance objectives or as required by law or pursuant to the rules and regulations of the NYSE and the SEC.


3.        Director Responsibilities

The basic responsibility of each 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.  Directors owe the Company and its shareholders the duty of loyalty and the duty of care.  The Directors' role is to oversee or govern, but not to manage, the Company.  The Directors should work together effectively and come to consensus on Board issues.  Members should be participatory and respect the confidentiality of the Board meetings and the documents transmitted to Board members. 


Effective Directors maintain an attitude of constructive skepticism.  They ask relevant, incisive, probing questions and require accurate, honest answers.  They are direct and forthright in their discussions with the board and management, but not hostile.


Effective Directors have a broad understanding of the corporation’s business and risk profile, its strategic, financial and operating opportunities and plans, and its internal and disclosure controls and systems.  They understand the corporation’s financial statements, the basic accounting principles critical to the corporation’s business and how the choice of principles, and the making of judgments and estimates, impacts the reported financial results.


Effective Directors support the board’s policy decisions and management in carrying out board policies.  They demonstrate a commitment to the corporation, its business plans and creating and sustaining shareholder value.  They understand and respect the roles of board and management. They do not undermine board or management decisions.  They observe the confidentiality of board deliberations, corporate plans and information and do not disparage the corporation, other Directors or management.


Effective Directors observe the Corporate Governance and other policies and guidelines adopted by the board.
Effective Directors avoid personal or other interests that conflict or may appear to conflict with or impair their ability to perform their responsibilities.  They promptly inform the board of any such interests and recuse themselves from participating in any decision affected by these interests.


Effective Directors actively participate in board meetings, review relevant materials, prepare for board meetings and for discussions with management, and take advantage of orientation and continuing education opportunities.  They make every reasonable effort to attend meetings in persona and are prepared to travel, to spend the time needed and to meet as frequently as necessary to educate themselves and to properly discharge their responsibilities.  They make every reasonable effort to raise issues and concerns openly in board meetings and to avoid behind-the-scenes communications.


Effective Directors carefully consider the effects of their individual actions, both as members of the board and of the business community, upon the corporation and the board as a whole.  They act in a manner to further the corporation’s success and the effectiveness of the board and avoid actions that are detrimental to these interests.


In discharging their obligations, 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 shall also be entitled to have the Company purchase reasonable directors' and officers' liability insurance on their behalf, to the benefits of indemnification to the fullest extent permitted by law and the Company's Articles and by-laws, and to exculpation as provided by state law and the Company's charter.


The Board is responsible for the selection of the Chairman and the Chief Executive Officer.  The Board has no policy with respect to the separation of the offices of Chairman and the 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 a new Chief Executive Officer.


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.


The Chairman will establish the agenda for each Board meeting.  Each Board member is free to suggest the inclusion of items on the agenda.  Each Board member 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 Board believes that information, documentation and data that are important to the Board's understanding of the business should be distributed in writing to the Board before the Board meets.  Management will endeavor to provide material that is concise, informative and clear on a timely basis.


Background materials for presentations on specific subjects should be sent to the Directors sufficiently in advance so that Board meeting time may be conserved and discussion time focused on questions that the Board has about the material.  On those occasions when the subject matter is highly sensitive or confidential, the presentation will be discussed at the meeting.


The non-management Directors will meet in executive session at least quarterly.  The presiding Director will be determined by an alphabetical rotation of all of the non-management Directors.


The Board believes that management speaks for the Company.  Individual Board members may, from time to time, meet or otherwise communicate with various constituencies other than Company employees that are involved with the Company.  But it is expected that Board members would do this with the knowledge of management and, absent unusual circumstances or as contemplated by the committee charters, only at the request of management.


4.        Election of Directors


In an uncontested election (i.e., an election where the only nominees are those recommended by the Board of Directors), any nominee for Director who receives a greater number of votes "withheld" from his or her election than votes "for" such election (a "Majority Withheld Vote") shall promptly tender his or her resignation following certification of the shareholder vote.

The Corporate Governance & Nominating Committee shall consider the resignation offer and recommend to the Board whether to accept it.   In considering whether to accept or reject the resignation, the Corporate Governance and Nominating Committee will consider all factors deemed relevant, including without limitation, the underlying reasons for the Majority Withheld Vote (if ascertainable), the length of service and qualifications of the director whose resignation has been tendered, the director's contributions to the Company, the past board evaluations of the performance of the director, compliance with listing standards, and the Company's Corporate Governance Guidelines.  The Board will act on the Corporate Governance & Nominating Committee's recommendation within 90 days following certification of the shareholder vote.

Thereafter, the Board will promptly disclose their decision whether to accept the Director's resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a press release to be disseminated in the manner that Company press releases typically are distributed.


To the extent that one or more directors' resignations are accepted by the Board, the Corporate Governance and Nominating Committee will recommend to the Board whether to fill such vacancy or vacancies or to reduce the size of the Board.


Any Director who tenders his or her resignation pursuant to this provision shall not participate in the Corporate Governance & Nominating Committee recommendation or Board action regarding whether to accept the resignation offer.

However, if each member of the Corporate Governance & Nominating Committee received a Majority Withheld Vote at the same election, then the independent Directors who did not receive a Majority Withheld Vote shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board whether to accept them.

However, if the only Directors who did not receive a Majority Withheld Vote in the same election constitute three or fewer Directors, all Directors may participate in the action regarding whether to accept the resignation offers.


This corporate governance guideline will be summarized or included in each proxy statement relating to an election of directors of the Company.


5.         Board Committees

The Board will have at all times an Audit Committee, a Compensation Committee and a Governance & Nominating Committee.  All of the members of these committees will be independent Directors under the criteria established by the New York Stock Exchange.  Committee members will be appointed or removed by the Board upon recommendation of the Governance & Nominating 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 committee will have its own charter.  The charters will set forth the purposes, goals and responsibilities of the committees.


The Chairman 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 Chairman of each committee, in consultation with the appropriate members of the committee and management, will develop the committee's agenda.


The Board and each committee have the power to hire independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining the approval of any officer of the Company in advance.

The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.


6.        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 CEO or Secretary or directly by the Director.  The Directors will use their judgment to ensure that any such contact is not disruptive to the business operations of the Company and will, to the extent not inappropriate, copy the CEO on any written communications between a Director and an officer or employee of the Company.

The Board welcomes regular attendance at each Board meeting of the General Counsel and Secretary of the Company.  Other senior officers may attend parts of the Board meeting to present reports to the Board.  If additional attendees are necessary, this suggestion should be brought to the Board for approval.

7.         Director Compensation


The form and amount of Director compensation will be recommended to the full Board by the Compensation Committee in accordance with the policies and principles set forth in its charter, and the Compensation Committee will conduct periodic reviews of Director compensation. 

The Compensation 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.


8.         Director Selection, Orientation and Continuing Education


The Governance & Nominating Committee will identify and recommend Director candidates as openings occur.  Nominees for directorship will be presented to the Board by the Governance & Nominating Committee in accordance with the policies and principles in its charter. 

The invitation to join the Board should be extended by the Chairman of the Governance & Nominating Committee and the Chairman of the Board on behalf of the Board.  All new Directors must participate in the Company's Orientation Program, which should be conducted within two months of the time new Directors are elected or appointed.  This orientation will include presentations by senior management to familiarize new Directors with the Company's strategic plans, its significant financial, accounting and risk management issues, its compliance programs, its Code of Business Conduct and Ethics, its principal officers, its regulators and its internal and independent auditors.  All other Directors are also invited to attend the Orientation Program.  The Company's Directors are expected to remain informed about the Company's business by following relevant legal, regulatory and market developments with the advice of management and other advisors.


9.         CEO Evaluation and Management Succession


The Board will conduct an annual review of the CEO's performance.  After review by the Compensation Committee, the report will be communicated to the CEO by the Chair of the Compensation Committee.

The Governance & Nominating Committee will make an annual report to the Board on succession planning.  The entire Board will work with the Governance & Nominating Committee to nominate and evaluate potential successors to the CEO.  The CEO should at all times make available his or her recommendations and evaluations of potential successors to the CEO and other critical senior management positions, along with a review of any development plans recommended for such individuals.

10.       Annual Performance Evaluation


The Board of Directors will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively.  The Governance & Nominating 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.