The following Corporate Governance Guidelines (“Guidelines”) have been adopted by the Board of Directors (“Board”) of First Interstate BancSystem, Inc. (“Company”) to assist the Board in the exercise of its responsibilities. These Guidelines reflect the Board’s commitment to monitor the effectiveness of policy and decision-making both at the Board and Executive Officer level, and to enhance shareholder value over the long term.
These Guidelines are a statement of policy and are not intended to change or interpret any federal or state law or regulation, including the Montana Business Corporation Act, or the Articles of Incorporation or Bylaws of the Company. The Guidelines are subject to review by the Governance and Nominating Committee of the Board not less than annually and to modification from time to time by the Board. Executive Officers shall include the Chief Executive Officer (“CEO”) and any additional personnel as determined by the CEO.
Mission Statement - The Board has overall responsibility for the Company. The Board is accountable to the shareholders to build long-term financial performance and value in the Company and to assure that the Company operates consistently with shareholder values. Even though the primary constituents of the Board are the shareholders of the Company, the Company has a long and distinguished history in its region. The Board believes it is important to maintain the Company’s reputation and to consider other constituencies, including the Company’s:
Corporate Authority - All corporate authority resides in the Board as the representative of the shareholders. The Board may delegate authority to Board committees (“Committees”) and the CEO or his designate to pursue the Company’s mission.
The Board is responsible to evaluate regularly the effectiveness of Management in the execution of the Company’s mission and business strategies. The Board is responsible for the operation of the Company in compliance with applicable laws and regulations.
The Board’s responsibilities include:
The Board and its Committees will perform their duties in accordance with the Personal Values and Strategic Vision of the Company and with various policies, which will be set forth in writing and reviewed regularly by the Board. The Board is responsible for the administration of each of these policies and has the sole authority to amend the policies or to grant waivers of their provisions.
The Board also has the responsibility of overall risk management of the Company. Four additional policies critical to risk management have been delegated to the Board of Directors of First Interstate Bank, a wholly owned subsidiary of the Company.
Individual Director’s Responsibilities - The basic responsibility of a Director is to exercise his or her business judgment and to act in a manner that he or she believes to be in the best interest of the Company and its shareholders. The responsibilities of each Director include:
Directors are expected to ask incisive, probing questions and require accurate, honest answers. Directors are expected to act with integrity and demonstrate a commitment to the Company, its values and its business plan and long-term shareholder value.
The Company will provide each Director certain financial and other information on a regular basis, including quarterly and annual reports, proxy statements and press releases. Each Director should review this information carefully, note any questions and ask them at the appropriate Board or Committee meeting.
A Director should not hesitate to ask questions, to request additional information (including from Management and from the Company’s auditors) and, in particular, to ask for the facts and any assumptions underlying conclusions and opinions presented to the Board. If a Director feels, after considering all of the pros and cons and asking questions, that a particular matter presented to the Board or a Committee is not in the best interest of the Company, he or she should speak and vote against the matter. In this regard, the Montana Business Corporation Act provides that unless a Director who is present at a meeting announces his or her dissent at a meeting or files such dissent with the presiding officer immediately after adjournment of the meeting, he or she is presumed to have assented to the action. If a Director does not agree with an action proposed to the Board or a Committee, it is important that he or she make certain his or her dissent is properly recorded in the minutes.
Each Director is expected to review and fully comply with the rules and guidelines set forth in the Company’s Code of Ethics and Conduct Guide for Legal Directors (First Interstate BancSystem, Inc. and Subsidiaries) and Advisory Directors.
Number of Directors - According to the Company’s Bylaws, the Board must consist of at least 5 but not more than 18 members. The Board believes this range permits diversity of experience without hindering effective discussion or diminishing individual accountability.
Board Composition – Independent Directors shall constitute a majority of the Board. An Independent Director is one who, in the opinion of the Board, is free from any relationship that would interfere with the exercise of independent judgment as a Director in carrying out the responsibilities of a Director. For purposes of Board composition, a director will not be considered “Independent” if the director or any Family Member, within the prior three years:
A “Family Member” is defined as a parent or a lineal descendant of an executive officer of the Company. A sibling of an executive officer of the Company is not considered a Family Member.
Committees - The standing Committees of the Board shall be the Executive Committee, Governance and Nominating Committee, Audit Committee, Compensation Committee and Credit Committee.
Each Committee shall follow and satisfy the provisions and guidelines set forth in its respective Charter.
Audit Committee - The members of the Audit Committee must be Independent Directors. In addition, each member of the Audit Committee must not be:
For purposes of determining whether a member of the Audit Committee satisfies the first qualification above, indirect receipt by a member of the Audit Committee of any consulting, advisory or other compensatory fee includes acceptance of such a fee by a spouse, minor child or stepchild or a child or stepchild sharing a home with the member or by an entity in which such member is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position and which provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any of its subsidiaries.
Subsidiary Boards – The boards of directors of the Company’s subsidiaries have the responsibilities and duties afforded to a board of directors under state law. Additionally, the Board has charged the boards of directors of the Company’s subsidiaries with responsibilities as set forth in the board charter of the respective subsidiary. To assist the Board in satisfying its oversight of the Company’s subsidiaries, it is the Company’s policy that the chairman of each subsidiary board reports to either the CEO of the Company or an executive officer of the Company who then reports to the CEO. The CEO is responsible for reporting on the Company’s subsidiary activities to the Board.
Advisory Boards - The Company has Advisory Boards that are responsible for providing advice and community contact to each of the Company’s branch banks.
Nominees for Election to the Board - The entire Board shall be responsible for nominating candidates for election to the Board at the Company’s annual meeting of shareholders and for filling vacancies on the Board that may occur between annual meetings of shareholders. The Governance and Nominating Committee is responsible for identifying, screening and recommending candidates to the entire Board for Board membership. When formulating its Board membership recommendations, the Governance and Nominating Committee may also consider any advice and recommendations offered by the CEO, the shareholders of the Company or any outside advisors the Governance and Nominating Committee may retain.
Historically, the Company has been majority owned and controlled by the lineal descendants of Homer A. and Mildred S. Scott and their families. The Scott family, through its Family Council, makes recommendations to the Governance and Nominating Committee with respect to nominees to the Board from the Scott family. The Governance and Nominating Committee gives due and significant consideration to the recommendations made by the Family Council with respect to such seats on the Board.
Subject to the foregoing, nominees for director positions shall be selected on the basis of broad experience, wisdom, integrity, ability to make independent analytical inquiries, understanding of the Company’s business environment, and willingness to devote adequate time to Board duties. Board members are expected to rigorously prepare for, attend, and participate in all Board and applicable committee meetings. Board members are expected to ensure that other existing and planned future commitments do not materially interfere with their service as a Director.
Retirement - No Director may stand for re-election to the Board after he or she has reached the age of 72.
Term and Term Limits - Each Director holds a three-year term. There are no term limits for Directors. The Governance and Nominating Committee is responsible for developing and overseeing policies with respect to Committee terms and rotations.
Changes in Professional Responsibility - If a Director’s principal position, status or employment should substantially change, the Director must submit his or her resignation to the Governance and Nominating Committee. The Governance and Nominating Committee shall make a recommendation to the Board regarding acceptance of such resignation by the Board.
Director Compensation - From time to time, the Compensation Committee will review Director compensation and make recommendations to the entire Board for its consideration and approval. The Compensation Committee will evaluate whether the Directors’ fees and incidental benefits exceed what is customary. When setting Director compensation, the Board will evaluate the level of Director compensation so as to not cause lack of independence of the Independent Directors. The Executive Officers shall not receive additional compensation for their services as Directors.
Outside Board Memberships - Directors are expected to notify the Chairman of the Board or the Chairman of the Governance and Nominating Committee before accepting a seat on the board or a similar position of another business corporation or other entity, in order to avoid potential conflicts. The CEO and other management members of the Board must seek approval of the Chairman of the Board or the Chairman of the Governance and Nominating Committee before accepting outside board memberships.
Review of Orientation Information - Each Director, upon election to the Board, will be provided the Company’s orientation materials and attend the Company’s orientation program for new Directors.
Continuing Education - A Director should keep informed not only about the Company and its activities, but also about the community and the industry conditions affecting banking and financial services companies generally, as well as the principal businesses in which the Company is involved. Each Director is encouraged to participate in continuing education programs pertinent to service on the Board. To facilitate this participation, the Company will endeavor to make the Directors aware of available director education programs and will pay the reasonable expenses of any Director attending accredited director education programs that are approved by the Governance and Nominating Committee.
External Relations - Directors are not expected and are generally not requested to speak for the Company or otherwise communicate with the various constituencies of the Company. The Chairman of the Board shall speak for the Board of Directors when necessary. The Board believes that Management generally should speak for the Company consistent with all regulations governing such communications and with common sense. The Chief Executive Officer shall speak for the Company when necessary.
Meetings - Meetings of the Board are held bi-monthly, unless otherwise decided by the Board.
Meeting Attendance - Except in extenuating circumstances, each Director is expected to attend all meetings of the Board and of any Committee to which he or she is appointed.
Director Voting – Directors shall not be entitled to vote by proxy. Directors must be present at a meeting, must participate in a means of communication by which all directors participating may simultaneously hear each other during the meeting, or must sign a written consent signed by all members of the Board in order to vote.
Board Agenda - The Chairman, in consultation with the Governance and Nominating Committee and the CEO, will set the agenda for each Board meeting, taking into account input and suggestions from the other Directors.
Strategic and Capital Planning - The Board will annually review the Company’s strategic and capital plans. The Board will evaluate and monitor the Company’s strategic and capital plans.
Independent Advice - The Board and any of its Committees may hire independent advisors, including lawyers, accountants and financial experts, in order to assist in carrying out the duties of the Board or Committees and the Company will pay the reasonable fees and expenses of those advisors.
Access to Top Management - Directors shall have reasonable access to and are free to contact members of management. Directors may, at their discretion, discuss corporate issues or matters directly with members of management.
Attendance of Guests at Board Meetings - Corporate officers, consultants, outside counsel or representatives of the Company’s outside auditors who are to make presentations to the Board or Committees, or who are available to respond to inquiries, may be invited to attend the portion of the Board meeting or Committee meeting that relates to their participation, at the discretion of the Chairman of the Board. Members of Management, other employees of the Company, and Scott family members may be invited to attend all or portions of a Board meeting, at the discretion of the Chairman of the Board.
Executive Meetings of Non-Management Directors - The Board’s policy is to have a separate regularly scheduled meeting time for the Non-Management Directors during the regularly scheduled Board meetings at least twice a year.
Mailing Board Meeting Materials in Advance of Meeting - The preliminary agenda for each Board meeting and each Committee meeting and supporting materials of matters to be acted upon by the Board or Committee will generally be sent to each Director sufficiently in advance of such meeting. Directors should carefully review Board and committee meeting agendas and related materials in advance of meetings to enable them to participate in an informed manner.
Board Evaluation - The Governance and Nominating Committee will conduct an annual review of the performance of the Board, each Director and each Committee and review each Committee’s objectives, as stated at the beginning of each fiscal year, and compare those stated objectives to the results and time expended to achieve such results at the end of that year. The Governance and Nominating Committee will be responsible for establishing the evaluation criteria and implementing the evaluation process. Such assessment will be discussed with and presented to the full Board.
Selection of Chairman of the Board and CEO - The Board shall be responsible for electing Board officers and the CEO and Chief Operating Officer (“COO”). The Governance and Nominating Committee shall be responsible for recommending candidates for Board positions to the Board and the Executive Committee shall be responsible for recommending candidates for the positions of CEO and COO to the Board. It is the Company’s policy that the positions of Chairman of the Board and CEO or COO be held by separate people, except in special circumstances approved by the Board.
CEO Evaluation - The Board shall conduct an ongoing evaluation of the CEO. The evaluation of the CEO is to be accomplished through the following process:
Management Succession and Planning - The Board will coordinate with the CEO to ensure that a plan of succession is in place for the CEO and other Executive Officer positions at all times and that a formalized process governs long-term management development and succession. The CEO will report to the Board annually about development of Executive Officers and a plan for succession for the Executive Officers. The CEO will review Executive Officer succession with the Board without the presence of the employee Directors and any other corporate officers, with the exception of the Vice President of Human Resources.
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