Directors are entrusted to carry out the business affairs of AgWest in a manner that is in the best interests of all stockholders. This fiduciary duty imposes a significant legal obligation to comply with standards of conduct and other rules of professional conduct, maintain independence, avoid conflicts of interest, and otherwise comply with all laws and regulations applicable to directors.
Director independence and standards of conduct
Directors must exercise independent judgment in deciding matters in AgWest’s best interest. The Board will vigilantly ensure independence by maintaining appropriate codes of ethics and standards of conduct and ensuring director compliance.
AgWest is a financial service cooperative and the Farm Credit Act and FCA Regulations require elected directors to have a borrowing relationship with AgWest. In some situations, this relationship may compromise (or may be viewed as compromising) a director’s independence. Accordingly, the Board establishes criteria to ensure the borrowing relationship does not compromise a director’s independence.
Further, the FCA has established standards of conduct for all Farm Credit directors as set forth in AgWest policies and procedures and summarized below. These identify prohibited transactions/relationships as well as transactions/relationships not prohibited but that must be reported.
- The director’s loans do not exceed 5% of AgWest’s total loan volume.
- The director’s loan is not adversely classified.
- The director, or the spouse of the director, is not an officer or employee of any non-Farm Credit System financial institution which is authorized to make the same type of loans available through AgWest.
- The director does not directly or indirectly accept any consulting, advisory or other non-director compensatory fees from AgWest.
- The director has no outside business relationship or family relationship with any member of AgWest’s senior management.
- With some exceptions, the director does not borrow from, lend to, or become financially obligated to/with other directors, employees, or agents of AgWest.
- The Director does not acquire any interest in property acquired by AgWest through loan collection action.
Each director must meet all established criteria to be considered an independent director. Annually, an analysis will be completed to assist the Board in determining each director’s independence. Further, directors are required to make regular disclosures and ongoing reports and disclosure updates during Board service to ensure continued compliance.
This process will assist the Board determining a director’s continued Board eligibility, Board committee assignments, and in year-end disclosures. AgWest will notify the director, and the director will notify AgWest, as soon as reasonably possible, of any information that would cause the director to not meet any test for director independence. In that instance, when the director resolves any issues and then meets all independence criteria, the Board can reconsider the director’s eligibility as an independent director and their continued service on the Board.
AgWest’s General Counsel is the Standards of Conduct Official and is always available to answer questions and assist directors in compliance efforts.