Board of Directors Farm Credit East, ACA Board Charter
Primary Oversight Responsibilities
- Disclosure of Accurate Information to Stockholders – the stockholders depend on us to get them the right information.
- Approval of Strategy, Annual Business Plan, and Major Policy Decisions – we must understand and approve where the ACA is going, be kept current on its progress towards those objectives, and plan for the future.
- Evaluation, Compensation, and Succession of the CEO – we must monitor and evaluate our association’s leader and ensure that he/she is appropriately compensated to encourage the ACA's long-term success and customer value. We must ensure that we are developing potential internal CEO candidates such that when the time comes, we have good internal choices as well as external candidates to replace the current CEO.
- Oversight of the Management of Risks and the Review of Internal Controls – we must be satisfied that the assets of the ACA are protected and that there are sufficient internal checks and balances, including a robust risk management function.
- Effective Board Governance – to excel in our duties, we need to be functioning properly as a Board with strong members possessing the right skills and the right information to thoroughly discuss issues and come to the best decision as a board of directors.
- Compliance with the Farm Credit Act and FCA Regulations - the ACA is a federal instrumentality regulated by the Farm Credit Administration. The Board must provide oversight to assure that the ACA is in compliance with applicable regulations. This includes meeting with FCA as part of the examination process.
- Adherence to Cooperative Principles - the ACA must continue to operate on a cooperative basis, including a patronage dividend program in compliance with applicable IRS regulations.
Tone at the Top
Board members will lead by example by conducting ourselves with the highest level of integrity, ethics, and professional conduct. We will strive to avoid all actual, potential, or perceived conflicts of interest. We expect the highest level of personal and professional integrity from the Chief Executive Officer and the other executive officers of Farm Credit East.
Board members are expected to be fully prepared and actively engaged at all meetings, including special assignments.
As directed by the Chairperson, directors will work on and attend special assignments including training and Farm Credit System events and functions. In this role, board members will act as representatives of Farm Credit East to enhance its public image, reputation and credibility. Also, directors are expected to cultivate networking contacts to enhance the ACA’s position in the Northeast farm and business community as well as within the Farm Credit System.
As a Board of Directors, it is vital that we remain independent of ACA management. To enhance our independence, we have implemented the following:
- Two Board members are outside appointed directors having no stockholder-borrower relationship or ties to management. At least one is designated as a financial expert. The others broaden the skill sets and diversity of the Board.
- The Board and its committees may meet independently of management at any time. The Board routinely spends part of its meeting in executive session without management present. Each director can request such a meeting or reserved agenda item by contacting the Board Chairperson.
- The Board and each committee have the authority to retain and terminate independent professionals, and each has the authority to approve all fees payable to an independent professional. Directors may retain and terminate an independent professional with the prior approval of the Board Chairperson.
- The Board elects a strong Chairperson and Vice Chairperson with a clear mandate to provide leadership for the directors.
- The provision of high-quality information for directors—orientation for new directors, meaningful presentations, access to management, and sufficient time to review material.
- The Board will actively train directors and ask them to pursue a director certification under the Premier Governance Series.
- The ACA supports a robust and independent grass roots nomination process to surface quality director candidates to run for election, including best attempts to surface two qualified candidates for each open position.
Meeting these objectives requires thorough preparation for meetings, a deep understanding of the issues, strength of character, integrity, an inquiring mind and a solid understanding of the fiduciary role of a director.
Our Board size is in accordance with ACA bylaws and the January 2014 Merger agreement: 13 elected directors, and no fewer than two and no more than four appointed directors. The current Board consists of 16 directors: 13 elected, two appointed outside directors and one appointed customer director. Each director should possess the qualities set out in the Policy on Director Qualifications. It shall be the goal of the Nominating Committee to provide for diversity in types of agriculture, geography, business experiences, gender, race and age from within the pool of prospective qualified candidates. We shall elect a chairperson and a vice chairperson.
We will create committees from time to time and delegate certain functions to them, as set out in their respective charters. The committee charters are reviewed on a regular basis and are updated and amended as often as needed to respond to the evolving regulatory and market environments in which the ACA operates.
The Board shall meet at least six times per year as scheduled by the Chairperson of the Board in conjunction with the Chief Executive Officer. For regularly scheduled Board meetings, an agenda and other documents for consideration shall be provided to all directors about one week in advance. For special meetings of the Board, best efforts shall be made to distribute materials as far in advance as practicable. A supplemental Board package, containing any additional or revised documents, is provided to each director at the commencement of each meeting.
Committees may invite any director, member of ACA management, or such other persons as it deems appropriate in order to carry out its responsibilities at a meeting. A committee may also exclude from its meetings any persons it deems appropriate to carry out its responsibilities.
Relationship to the Nominating Committee
Farm Credit East has an independent Nominating Committee elected annually from eligible stockholders, as established by the bylaws to surface, evaluate, and recommend candidates to run for director in annual Board elections. No sitting director, director candidate, employee or agent of the Association may be elected to the Nominating Committee. This Board is committed to respecting the independence of the Nominating Committee while providing appropriate information/responses to that committee as to needed skill sets and other questions. Also, management is directed to assist the Nominating Committee in fulfilling its duties by supplying member lists, arranging meetings and like duties, while refraining from participation in the deliberations of the Nominating Committee. The chairperson shall normally sit with the Committee as a resource. In a year in which the chairperson is seeking reelection, he/she shall designate another veteran director who is not seeking reelection to serve as a resource to the Nominating Committee.
Specific Duties and Responsibilities
The Board has the following specific duties and responsibilities, which may be delegated to committees of the Board with ongoing committee reporting to the full Board:
Evaluation, Compensation and Succession Planning
The Board is responsible for overseeing the effective operation of the ACA by appointing, assessing performance, compensating, disciplining, and succession planning for the CEO. The Board must satisfy itself that the ACA’s senior management team and other responsible persons have the appropriate qualities and competencies to meet the expectations set by the Board and within relevant regulatory guidelines. The Board is responsible for overseeing the compensation structure of the senior management team and the compensation policies of the ACA. The Board is responsible for developing a position description for the Chief Executive Officer. The Board is responsible for approving the objectives of the ACA to be met by the Chief Executive Officer, monitoring progress against those objectives, and the compensation of the Chief Executive Officer.
The Board is responsible for oversight of strategy and fundamental goals of the ACA. This responsibility includes the adoption of a strategic and annual business plan. This process includes assessment of the major opportunities and risk impact of decisions being contemplated, including considering whether any strategic decision is within the ACA’s approved risk appetite established for the ACA. It also includes oversight of the implementation of strategic plans and monitoring performance against such plans.
The Board is responsible for ensuring that the appropriate policies and procedures are in place to protect the assets of the ACA and to assure its future viability. The Board is also responsible for identifying and monitoring the principal risks of the ACA’s business activities and satisfying itself that appropriate policies, procedures, and practices are in place for the effective management of these risks under the ACA risk framework. This responsibility includes reviewing and approving the ACA capital levels and also involves monitoring the approval and application of the ACA’s risk appetite statement, including any exceptions to its key metrics. The Board functions as the Risk Committee and interacts with the Management Risk Committee.
The Board is responsible for establishing the policies under which Farm Credit East, ACA operates. This includes updating policies based on new/changed regulations promulgated by FCA and in accordance with emerging/changing business needs.
Internal Controls and Management Information Systems
The Board is responsible for overseeing and monitoring the integrity of the ACA’s internal controls, management information systems and audit procedures, and overseeing the appropriate operations of the ACA including compliance with all applicable regulatory requirements. The Board must satisfy itself that the financial reporting and financial control systems are operating well and in accordance with GAAP.
Director Orientation, Assessment and Training
The Board is responsible for ensuring that there is an appropriate, formal orientation program for new directors and for assessing the contribution of the Board, committees, and all directors annually. The Board and its members will strive to update and augment their skills by seeking out and taking advantage of learning opportunities such as the Premier Governance series and committee-specific training such as audit topics.
The Board annually reviews and approves the adequacy and form of compensation for directors. The Board is responsible for maintaining minutes and other records of meetings and activities of the ACA.
Approved by the Board of Directors
July 17, 2018