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FIRST FEDERAL BANCSHARES, INC.
CORPORATE GOVERNANCE GUIDELINES
1. DUTIES AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND EACH DIRECTOR
The Board of Directors (the "Board") of First Federal Bancshares, Inc. (the
"Company") is responsible for promoting and acting in the best interests of all
stockholders of the Company. The Board is the ultimate decision-making body of
the Company except with respect to those matters reserved to stockholders. The
business and affairs of the Company are managed by its officers under the
direction of the Board.
Each director owes fiduciary duties of loyalty and care to the Company. The duty
of loyalty requires directors to exercise their powers in the interests of the
Company and not in the directors' own interest or in the interest of another
person (including a family member) or organization. The duty of care requires
that directors exercise the care that a person in a like position would exercise
under the circumstances. In discharging that duty, directors may rely on the
honesty and integrity of the Company's senior executives and its outside
advisors and auditors.
2. COMPOSITION OF THE BOARD; BOARD OPERATION
SIZE AND SELECTION. The Board has the authority under the Bylaws to set the
number of directors, which the Board believes should be in the range of seven to
nine, with the flexibility to increase the number of members in order to
accommodate the availability of an outstanding candidate or the Board's changing
needs and circumstances. Candidates for nomination to the Board shall be
selected by the Nomination and Corporate Governance Committee and recommended to
the Board for approval in accordance with the qualification requirements set
forth in the Bylaws and guidelines recommended by such Committee.
BOARD MEMBERSHIP CRITERIA. Membership criteria shall be developed by the
Nomination and Corporate Governance Committee and approved by the Board. The
criteria should take into consideration business experience, familiarity with
the Company's market area, personal and professional integrity, skills and other
relevant factors.
MIX OF INDEPENDENT AND NON-INDEPENDENT DIRECTORS. The Board believes that there
should be a substantial majority of independent directors, and in no event will
the Board consist of less than a majority of independent directors. The
definition of "independent director" shall conform to the definition contained
in the qualitative listing requirements for Nasdaq Stock Market, Inc. issuers
and in any applicable Securities and Exchange Commission rules and regulations.
FORMER CHIEF EXECUTIVE OFFICER. When the Chief Executive Officer resigns or
retires, he or she should tender his or her resignation from the Board to the
Chairman of the Board at that time. Whether the individual continues to serve on
the Board is a matter for discussion at that time with the new Chief Executive
Officer and the Board.
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CHANGE OF RESPONSIBILITY OF DIRECTOR. The Board believes that an individual
director who retires from his or her employment should volunteer to resign from
the Board. It is not the intention of the Board to mandate the resignation of a
director whose responsibility has changed, but rather to provide an opportunity
for the Board to review the continued appropriateness of Board membership under
the changed circumstance.
TERM LIMITS. The Board does not believe it should establish term limits. The
Company and its stockholders both benefit from Board continuity and stability
and by allowing directors to focus on long-term business strategies and results.
RETIREMENT AGE. A director shall retire from the Board at the first meeting of
stockholders to elect directors after he or she reaches 70 years of age. In
order to provide for continuity and stability of the Board, an exception is made
for the initial directors of the Company.
BOARD AGENDA. The Chief Executive Officer sets the agenda for Board meetings
with the understanding that certain items necessary for appropriate Board
oversight, such as annual budgets and long range plans, must appear periodically
on the agenda. Board members may suggest that particular items be placed on the
agenda.
FREQUENCY OF MEETINGS. The Board has twelve regularly scheduled meetings per
year. In addition, special meetings may be called from time to time as
determined by the needs of the business. It is the responsibility of the
directors to attend meetings.
CORPORATE STRATEGY. From time to time, the Board devotes an extended meeting to
a review of the Company's long-term strategic and business plans.
3. SELECTION OF CHAIRMAN AND CEO
The Board is free to make the selection in the manner and upon the criteria that
the Board deems appropriate at the time of the selection. The Board has no
policy with respect to the separation of the role of Chairman of the Board and
Chief Executive Officer.
4. LEAD DIRECTOR CONCEPT
The Board believes that designating a lead independent director may or may not
serve the best interests of the Company and its stockholders at any give time,
depending upon circumstances at that time. The Board believes that it would not
be necessary to appoint a lead director at times when the Chairman of the Board
is an independent director. In the event that a lead director is designated, his
or her duties would include: assisting the Board in assuring compliance with and
implementation of the Company's Corporate Governance Guidelines; coordinating
the agenda for and moderating sessions of the Board's independent directors; and
acting as principal liaison between the independent directors and the Chairman
of the Board on sensitive issues.
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5. COMMITTEES
NUMBER AND STRUCTURE. The Board has four standing committees: Audit,
Compensation, Executive, and Nomination and Corporate Governance. The Audit,
Compensation, and Nomination and Corporate Governance Committees shall consist
solely of independent directors. The Board may designate other committees as the
circumstances require. Each committee shall have its own written charter.
ASSIGNMENT OF COMMITTEE MEMBERS. Committee members shall be appointed by the
Board upon recommendation (after consultation with the Chairman of the Board) of
the Nomination and Corporate Governance Committee. The Board does not have a
firm policy mandating rotation of committee assignments since special knowledge
or experience may mitigate in favor of a particular director serving for an
extended period on one committee.
FREQUENCY AND LENGTH OF COMMITTEE MEETINGS. The Chairman of each committee, in
consultation with committee members, will determine the frequency and length of
committee meetings.
COMMITTEE AGENDA. The Chairman of the committee, in consultation with
appropriate members of management, will develop the committee's agenda. Each
Board member may recommend agenda items for any committee meeting.
6. EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS
The independent directors will meet in executive session at least twice a year.
Issues to be discussed in executive session may include the evaluation of the
Chief Executive Officer, management succession planning and such other matters
as the independent directors may deem appropriate.
7. SUCCESSION PLANNING
The Board plans for the succession to the position of Chief Executive Officer.
To assist the Board, the Chief Executive Officer annually provides the Board
with an assessment of senior managers and their potential to succeed him or her.
He or she also provides the Board with an assessment of persons considered
potential successors to certain senior management positions, including a review
of any development plans recommended for such individuals. The results of these
reviews are reported to and discussed with the Board.
8. BOARD ACCESS TO MANAGEMENT
GENERAL. Board members have complete access to management. Board members will
use judgment to assure that this contact is not distracting to the business
operation of the Company, and that such contact, if in writing, be copied to the
Chief Executive Officer.
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ATTENDANCE OF NON-DIRECTORS AT BOARD MEETINGS. The Board encourages the Chief
Executive Officer to bring members of management from time to time into Board
meetings to:
(a) provide management insight into items being discussed by the Board that
involve the manager;
(b) make presentations to the Board on matters that involve the manager; and
(c) bring managers with high potential into contact with the Board. Should the
Chief Executive Officer desire to add additional members of management as
attendees on a regular basis, this should be suggested to the Board for
its concurrence.
9. BOARD MATERIALS DISTRIBUTED IN ADVANCE
Information and data are important to the Board's understanding of the business
and are essential to prepare Board members for productive meetings. Presentation
materials relevant to each meeting will be distributed in writing to the Board
in advance of the meeting in order to provide ample time for review beforehand,
unless doing so would compromise the confidentiality of competitive information.
In the event of a pressing need for the Board to meet on short notice, it is
recognized that written materials may not be available in advance of the
meeting. Management will make every effort to provide presentation materials
that are brief and to the point, yet communicate the essential information.
10. EVALUATION
ANNUAL SELF-ASSESSMENT. The Nomination and Corporate Governance Committee will
sponsor an annual self-assessment of the Board's performance, the results of
which will be discussed with the full Board. The assessment should include a
review of any areas in which the Board or management believes the Board can make
a better contribution to the governance of the Company. The purpose of the
review will be to improve the performance of the Board as a unit, and not to
target the performance of an individual Board member. The Nomination and
Corporate Governance Committee will utilize the results of the Board evaluation
process in assessing and determining the characteristics and critical skills
required of prospective candidates for election to the Board.
ANNUAL EVALUATION OF CEO. The independent directors should perform an annual
evaluation of the Chief Executive Officer. The evaluation should be based on
objective criteria, including performance of the business, accomplishment of
long-term strategic objectives and development of management succession.
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11. SHARE OWNERSHIP OF DIRECTORS
The Board believes that directors should be stockholders and have a financial
stake in the Company.
12. DIRECTOR COMPENSATION REVIEW
Directors' fees shall be in the form of cash, company stock (including options
and restricted stock), or a combination thereof. The exact amount and form of
director compensation shall be determined and reviewed annually by the Board and
be consistent with the compensation practices of the Company's competition.
13. BOARD INTERACTION WITH THIRD PERSONS
The Board believes management speaks for the Company. Individual Board members
may from time to time communicate with various constituencies that are involved
with the Company, such as the press, investors and customers. However, it is
expected that this communication would be made with the concurrence of
management.
14. PERIODIC REVIEW
The Board is responsible for periodically reviewing these principles, as well as
considering other corporate governance principles that may, from time to time,
merit consideration by the Board.
15. ORIENTATION OF NEW DIRECTORS AND CONTINUING EDUCATION
New directors, upon election to the Board, will be provided with a comprehensive
set of materials on the operations, finances and business plan of the Company
and meet informally with as many members of senior management as practical. All
directors will receive periodic education in subjects relevant to the duties of
a director and the business of the Company. This education may be in the form of
a program planned by the Company or by the director attending a pre-approved
seminar, with all expenses paid by the Company.
Adopted October 15, 2003.
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