Providian Financial Corporation
Corporate Governance Guidelines
Amended and Restated: January 25, 2005
1. Director Qualifications and Board Composition
Size of the Board. It is the sense of the Board that the Board's effectiveness will be facilitated if the Board is not too large. The Board will periodically review its size to determine that it is appropriately tailored to the needs of the Company.
Change of Status. It is the sense of the Board that any individual director who changes his or her principal occupation, position or responsibility should volunteer to resign from the Board. It is not the sense of the Board that in every instance directors who retire or change their occupation, position or responsibility should necessarily leave the Board. There should, however, be an opportunity for the Board, through the Nominating and Corporate Governance Committee, to review the appropriateness of continued Board membership under the circumstances.
Other Directorships. Directors should advise the Chairman of the Board and the Chairman of the Nominating and Corporate Governance Committee in advance of accepting an invitation to serve on another public company board. The Board, through the Nominating and Corporate Governance Committee, shall review a director's availability to fulfill his or her responsibilities as a director if he or she serves on more than three other public company boards. If a member of the Audit and Compliance Committee serves on the audit committee of more than two other public companies, the Board will determine whether such simultaneous service impairs the director's ability to effectively serve on the Company's Audit and Compliance Committee, and will disclose its determination in the Company's annual proxy statement.
Retirement Age. Directors generally may not be nominated to new terms if they would be age 70 or older at the time of the election.
Term Limits. 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 thereby 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 continuation on the Board at the conclusion of his or her term of service. This will allow each director the opportunity to conveniently confirm his or her desire to continue as a member of the Board.
Stock Ownership Guidelines. The Board believes that it is important that the interests of the Board and management be aligned with the interests of shareholders and that such alignment can, in part, be accomplished by Board and senior management ownership of Company stock. The Board has adopted, and will annually review, guidelines that encourage Board members and senior management to own shares of Company stock.
2. Director Responsibilities
Business Judgment; Indemnification. The basic responsibility of the directors is to exercise their business judgment in good faith to act in what they reasonably believe 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 their fellow directors and the Company's senior executives, 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 charter, by-laws and any indemnification agreements, and to exculpation from liability for monetary damages to the extent permitted by state law as provided in the Company's Certificate of Incorporation.
Meetings. 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 in sufficient time to thoroughly review these materials in advance of the meeting. Where the context requires, requests for action by the Board shall be supported by a recommendation from management.
Chairman and CEO. 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.
Matters to Be Considered. The Chairman will establish the agenda for each Board meeting. At the beginning of the year, the Chairman will establish a schedule of agenda subjects to be discussed during the year (to the degree this can be foreseen). 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 minutes of the Board meetings shall be recorded by the Secretary of the Company or, in the Secretary's absence or incapacity, by an Assistant Secretary. A Board member may, with respect to any matter, request that his or her dissent be recorded in the minutes and upon such request the Secretary shall do so.
Meetings of Non-Management Directors. The non-management directors will meet in executive session at least quarterly. The director who presides at these meetings, or a method by which the presiding director of each session will be selected, will be determined by the non-management directors upon the recommendation of the Nominating and Corporate Governance Committee, and his/her name or such method will be disclosed in the annual proxy statement.
Communications. The Board believes 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. In general, 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. However, the Board will maintain and publicly disclose a method for interested parties to communicate directly with the presiding director or with the non-management directors as a group.
3. Board Committees
Committees and Members. The Board will have at all times an Audit and Compliance Committee, a Human Resources and Compensation 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 and, in the case of the Audit and Compliance Committee, the Securities Exchange Act of 1934. The Board may, from time to time, establish or maintain additional committees as necessary or appropriate. In general, committee members will be appointed by the Board upon recommendation of the Nominating and Corporate Governance Committee with consideration of the expertise, qualifications, and preferences 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.
Committee Charters. Each committee will have its own charter. The charters will set forth the purposes, goals, responsibilities and authority (consistent with any applicable bylaws or resolutions of the Board) of the committees as well as specific qualifications for membership on that committee, procedures for committee member appointment and removal, committee structure and operations, and periodic reports to the Board on committee activities. The charters will also provide that each committee will annually evaluate its own performance and report the results of this evaluation to the Board.
Committee Meetings. 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. At the beginning of each 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.
Independent Advisors. The Board and each committee will have the power to hire, at the expense of the Company, 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.
4. Director Access to Officers and Employees
Full Access. 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 Chief Executive Officer 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 operations of the Company and will, to the extent not inappropriate, copy the Chief Executive Officer on any written communications between a director and an officer or employee of the Company.
Non-Director Attendance at Board Meetings. The Board welcomes regular attendance, at each Board meeting, of appropriate representatives of senior management of the Company, subject to the Board's right in all instances to meet in executive session with the Chief Executive Officer or with a more limited number of management representatives. If the Chief Executive Officer wishes to have additional Company personnel attendees on a regular basis, this suggestion should be brought to the Board for consideration.
5. Director Compensation
The form and amount of director compensation will be determined by the Board upon the recommendation of the Human Resources and Compensation Committee in accordance with any New York Stock Exchange rules and any other applicable rules. The Human Resources and Compensation Committee will conduct an annual review of director compensation, which should take into consideration the amount and form of director compensation at comparable companies and such features as will enable the Company to attract and retain individuals with demonstrated achievements helpful to the Company's success. The Human Resources and 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.
6. Director Orientation and Continuing Education
All new directors must participate in new director orientation, which should be conducted as soon as practicable following the director's appointment or election to the Board. The 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 ethics, its principal officers, and its internal and independent auditors. In addition, directors will have ongoing continuing education during the year.
7. CEO Evaluation and Management Succession
CEO Review. The Human Resources and Compensation Committee will conduct an annual review of the Chief Executive Officer's performance, as set forth in its charter. The Board of Directors will review the Human Resources and Compensation Committee's report in order to ensure that the Chief Executive Officer is providing the best leadership for the Company in the long- and short-term.
Succession Planning. The Human Resources and Compensation Committee should make an annual report to the Board on succession planning and senior management development. The entire Board will work with the Nominating and Corporate Governance Committee to nominate and evaluate potential successors to the Chief Executive Officer. The Chief Executive Officer should at all times make available his or her recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals.
8. Annual Performance Evaluation
The Board of Directors will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating and Corporate Governance Committee will establish criteria for Board evaluation, receive input 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.