Board of Directors' Charter

Board of Directors' Charter

Purpose

FCW’s mission is to “ensure that THE CUSTOMER COMES FIRST by providing superior service at competitive rates, in a timely, professional, and ethical manner.” The Board of Directors (Board) adopts this Charter to support the Board's leadership and oversight role in the accomplishment of this mission.

Powers and Duties

The Board has the authority and responsibility to direct the operations of FCW. The Board acting primarily through it’s Audit Committee will oversee the activity of FCW’s Director of Internal Audit and may also use reasonable amounts of time of FCW’s independent accountants, internal and outside lawyers, and other internal staff, and also shall have the authority to hire independent accounting experts, lawyers, and other consultants to assist and advise the Board in connection with its responsibilities. The Board shall keep the Chief Executive Officer (CEO) advised as to the general range of anticipated expenses for such consultants hired by the Board.

Key Responsibilities

The Board's primary responsibilities include:

  • Having a basic understanding of FCW’s primary and other lines of business including the:
    • key business opportunities and the strategies in place to pursue them, and
    • significant risk areas and the tools to monitor and manage the risk.
  • Selecting, evaluating, and compensating the CEO. Redirecting or replacing the CEO, when appropriate.
  • Developing FCW's long-term vision and conducting the long-term planning and strategic thinking needed to realize the vision. The review and approval of the annual business plan is the Board’s primary method of providing guidance to management as to their expectations for the coming year. The Board will require quarterly reports regarding management’s progress towards the achievement of the strategies and key indicators contained in the plan.
  • Establishing policies that provide overall direction to management for day-to-day operations.
  • Utilizing the broad range of experiences and perspectives of directors to advise and counsel senior management on significant issues facing FCW.
  • Delegating authority to management through policies and other means and holding senior management accountable for the results achieved.
  • Overseeing FCW’s:
    • Performance (profitability, achievement of business plan goals, etc.,
    • Risk management (appropriate capital levels, effective internal controls, identified levels of interest rate, credit, and operational risk),
    • Financial reporting and disclosure,
    • Compliance with laws and regulations, and
    • Internal and external audit processes, results, and corrective actions.
  • Maintaining high standards of excellence in conducting Board business by:
    • Taking adequate time to prepare for and deliberate on matters coming before the Board,
    • Asking questions and considering options and the advantages/disadvantages of issues presented to the Board,
    • Reasonably relying on management, auditors, and advisors,
    • Exercising objectivity and autonomy to make independent, informed decisions, and
    • Demonstrating leadership and taking action, when appropriate.

Key Roles

The Board's key roles include:

  • Fostering a healthy, but arms-length, relationship with management by:
    • Respecting differing roles served by the Board and management,
    • Using executive sessions as needed to encourage open, candid, and productive discussions among Board members on problems, strategic opportunities, or on matters such as compensation or performance,
    • Maintaining a sense of continued trust and confidence in management when questioning, probing, or opposing management's position or recommendations on an issue before the Board, and
    • Speaking with a unified voice to management.
  • Fostering a sound relationship with FCW’s customers by:
    • Interacting with FCW customers,
    • Effectively communicating the positions of FCW,
    • Listening and engaging in discussion of business issues, and
    • Maintaining focus on the interests of FCW’s customers.
    • Establishing the tone for Board communications with stockholders and other important external parties,
    • Representing FCW in venues determined to be important to FCW and/or the System.

Board Size/Composition

The FCW Board is currently comprised of fourteen elected directors and two appointed directors.

The Board is committed to the principle that there be adequate representation from all areas of FCW’s territory and also, to the extent possible, that all major commodity groups financed by FCW are represented on the Board. To this end, the Board’s intent is to work with the nominating committee to ensure that there are at least two directors from each of FCW’s four local advisory committee territories, plus such other directors, including appointed directors, as are necessary to fill all needed qualifications on the Board.

Types of Director Positions

The types of director positions on FCW’s Board are discussed below:

Elected Directors

These positions are elected by FCW Class C stockholders. A candidate for an elected director position, by law and Farm Credit Administration Regulations, must be a Class C stockholder of FCW. Annually, each director will be evaluated by the Board for independence, based on the criteria discussed below. The determination of a director's status to not be independent does not change the director's status on the Board, but could affect Board Committee assignments.

Appointed Directors

These positions are appointed by the elected directors. Candidates for these positions cannot have a borrowing relationship with FCW.

Qualifications

Elected Directors

In addition to FCW Bylaw requirements, following are desirable qualifications for elected directors:

  • Actively involved in production agriculture practiced in FCW's territory,
  • An understanding of financial and credit matters,
  • A working knowledge of financial disclosure and compliance (audits, financial statements, internal controls),
  • Background, education, or experience in the areas of agricultural business, agricultural economics, or management, and
  • Knowledge and experience in political advocacy with strong political relationships being advantageous.

Appointed Directors

For appointed directors, in addition to FCW Bylaw requirements, the following general qualifications will be considered, although specific areas may be emphasized based on the needs of the Board related to the position being filled:

  • Experience and/or emphasis in business, financial services, economics, accounting, financial reporting, auditing, or legal experience,
  • An understanding of Generally Accepted Accounting Principles (GAAP) and financial statements and the ability to assess the general application of GAAP in connection with the accounting for estimates, accruals, and reserves,
  • Experience in analyzing or evaluating financial statements similar to those of FCW,
  • An understanding of internal controls and procedures for financial reporting and Audit Committee functions,
  • Knowledge and experience in political advocacy with strong political relationships being advantageous.

Personal Characteristics

Board members should have the following personal characteristics to most effectively perform the responsibilities and roles of a director:

  • Commitment to the Farm Credit System, to FCW, and to supporting the needs of FCW customers in a responsible manner, and dedication of the time needed for a Board position,
  • Ability to apply common sense to resolve problems or issues,
  • Respect for fellow Board members and the ability to find a balance between assertiveness and cohesiveness,
  • Effective communication skills,
  • Good people skills and a team player orientation,
  • Willingness to contribute and speak out in the course of deliberations and then support the final decision of the Board,
  • Integrity,
  • Loyalty,
  • Willingness to delegate to management,
  • Void of real or potential conflicts of interest.

Director Independence

All directors must exercise independent judgment in deciding matters in FCW's best interest. The Board will be vigilant to ensure that independence is not jeopardized. Appropriate codes of ethics and standards of conduct are in place and will be followed to maintain the highest standards of governance for FCW.

All FCW directors are independent from the perspective that no FCW management or staff serve as Board members. However, FCW is a financial service cooperative, and the Farm Credit Act and Farm Credit Administration Regulations require elected directors to have a loan relationship with FCW.

The elected directors, as borrowers of FCW, have a vested interest in ensuring that FCW remains strong and successful. However, in some situations, this borrowing relationship could be viewed as having the potential to compromise the independence of an elected director. For this reason, the Board has established independence criteria to manage and maintain this independence and to ensure that the loan relationship does not compromise the independence of an FCW Board member.

Annually, in conjunction with FCW's analysis and reporting of director loans, each director will provide financial information and any other documentation and/or assertions needed for the Board to determine the independence of the Board member. Stockholders will be informed of the independence evaluation results.

If the percent of independent directors falls below 75%, the Board will notify the Nominating Committee of the need and desire for independent directors to be elected by the stockholders.

Director Independence Criteria

The Board has identified the following criteria to determine director independence. The criteria for loan volume are based on elected director and spouse obligations, including ownership share of corporate assets and liabilities, but excluding contingent liabilities.

  • The director's loans do not exceed 5% of the total loan volume of FCW.
  • The director's loan is not adversely classified.
  • The director, or the spouse of the director, is not an employee, director, or more than a 10 percent owner of a non-System financial institution that has more than 5% of its loans in agricultural loans.
  • The director does not directly or indirectly accept any consulting, advisory or other non-director compensatory fees from FCW.
  • The director has no outside business relationship or family relationship with any member of FCW’s senior management.
  • The Board has not deemed the director to not be independent.

Each director must meet all the established criteria to be considered an independent director. Annually, an analysis will be completed, as of September 30, to assist the Board in determining the independence of each director. This determination by the Board will be utilized in determining Board committee eligibility and in year-end disclosures.

In addition, FCW will notify the director, and the director will notify FCW, as soon as reasonably possible, of any information that arises that would cause the director to not meet any test for director independence at any time during such director's term. When the director cures any criteria test which was not met, the director will be considered by the Board for redesignation as an independent director.

Leadership

Chairperson

The Chairperson will preside at all meetings of the Board. The Chairperson will coordinate and direct the activities of the Board and will perform such other duties as required by the FCW Bylaws (typically presiding at stockholder meetings) or as the Board shall determine from time to time.

The Board's role can be best accomplished through an interactive Board that has sound and constructive leadership. It is the Board's desire to elect officers that are both willing and capable of providing appropriate leadership. Open and candid discussion to avoid politicizing the process is encouraged. Generally, the Board believes that no director should be precluded from the opportunity to serve as Chairperson. To that end, the terms of the Chairperson position will generally be limited to no more than two consecutive years.

Desired attributes for the Chairperson include the ability to:

  • lead fairly, but firmly, and to maintain an environment of trust and respect among members,
  • welcome diversity of opinion,
  • promote fair, open deliberation in a timely, orderly, and concise manner,
  • encourage participation by directors who may not verbally express themselves during Board discussions,
  • enforce the Board's own agreed upon rules of conduct;
  • represent the Board to the public, other System institutions, and other important external parties,
  • understand group dynamics and decision making,
  • know when to bring discussions to a close and keep the meeting running smoothly,
  • maintain a key role with management to:
    • promote a mutually beneficial environment,
    • represent the Board in working with management, and
    • encourage two-way communication with the CEO on developing issues.
  • accept the responsibilities of the Chairperson and devote the extra time required of the position,
  • take an impartial stance during discussions,
  • communicate with and help prepare the Vice Chairperson for possible leadership responsibilities in the event of the absence of the Chairperson.

Committees

The Board has chartered a Corporate Governance Committee, an Audit Committee, an Enterprise Risk Management and a Human Capital Committee, each composed of designated members of the Board. In determining whether to create a Committee, the Board will evaluate whether the use of a Committee will assist it in fulfilling a Board function. If the decision is to use a Committee, the Board will consider the advantages and disadvantages of using a Committee composed of fewer than all members. In addition, the following guidelines will be utilized:

  • The full Board will approve a clear charter of authorities, composition, and roles and responsibilities for the Committee,
  • The Audit Committee will be chaired by an independent director and will have a majority of independent members with at least one member having accounting and financial management expertise,
  • Formal minutes will be kept, Qualifications and selection of members will be correlated to the Board functions that the Committee has been formed to address,
  • If a Committee composed of less than the full Board is utilized:
    • Committee members' independence, personal characteristics, qualifications, and number will be considered,
    • Evaluation, training, orientation, and recruitment programs for the Committee members and its Chairperson will be considered,
    • Any director may sit in on any Committee meeting, and
    • Communication and reporting back to the full Board will occur.

Training and Maintenance

Evaluation, training, orientation, and recruitment programs will be in place to maintain trained and skilled Board members. The Board will periodically evaluate director training needs and will develop an annual Board Training Calendar based on needs identified therein. The needed director skills that are outlined in this Charter will be considered when developing the training calendar and in determining individual training programs.

Meetings

The Board will meet at such frequency and at such locations as may be necessary and appropriate to fulfill its responsibilities and conduct its business. Guidelines for Board meetings include:

  • An annual calendar of meeting dates, times, and locations will be developed by the Chairperson and the CEO for the review and approval of the Board,
  • Meeting agendas will be developed by the CEO with input from and final concurrence of the Chairperson,
  • Other members of the Board may also ask for agenda adjustments before or during the meetings,
  • Material relating to matters to be taken up at meetings will ordinarily be furnished to the Board sufficiently in advance of the meetings to provide reasonable time for review and consideration,
  • Executive sessions will be held periodically to promote open, candid discussion of sensitive or internal matters and to ensure that the Board is unified in its strategies, positions, and communications.

Reports to the Board

The Board will require reports, advice, and other information to monitor performance, make decisions, and keep informed on important issues and events relating to FCW, and the System. Information will be from such sources, at such frequency, and in such form as may be satisfactory to the Board. Ordinarily, management will serve as a primary source of the Board's information needs. However, depending on the circumstances, the Board also may use external experts, advisors, and customers as additional resources.

In addition, each Board policy will address Board reporting requirements.

Charter Review

The Board recognizes that, for this Charter to be useful, it must be kept current and relevant. To that end, the Board will conduct a Charter review at least annually and make any changes that are needed to meet the Charter's purpose.

Disclosure of the Charter

This Charter will be posted on FCW’s website and also will be available in print to any shareholder requesting it.