EXECUTIVE COMPENSATION AND EXCESSIVE OR LUXURY EXPENDITURES POLICY
FIRST SOUTHWEST BANCORPORATION, INC. AND ITS SUBSIDIARIES
November 18, 2009(amended January 19, 2011)
This Policy is designed to satisfy the requirements of the Interim Final Rules as announced on June 15, 2009 by the Department of Treasury and shall govern expenditures by the Company, its subsidiaries and its officers, and directors and employees. This Policy affirms the Company’s obligation that any excessive or luxury expenditures (as defined below) must comply with the requirements of the Emergency Economic Stabilization Act of 2008 and Interim Rule, and sets forth procedures to ensure compliance.
1. For the Purposes of this Policy, executive compensation shall mean all compensation to the 5 highest paid executives(or employees) of the Company which includes 1) base salary; 2) bonuses or incentives or commissions; 3) stock or stock options; and 4) any deferred compensation plans including severance pay plans.
a. It is the policy of the Company that no executive shall be compensated more than $500,000 per year or as otherwise set forth in the Interim Final Rule.
b. The Compensation Committee shall be comprised executive officers, and officers (as appointed) and members of the Board of Directors (as appointed) to administer this policy.
c. If the compensation of any employee exceeds $500,000 per year, then every six months, the Compensation Committee shall discuss, evaluate, and review with senior risk officers of the Company the compensation plans to ensure that 1) such compensation plans do not encourage officers to take unnecessary and excessive risks that threaten the value of the Company; 2) such plans do not encourage the manipulation of reported earnings to enhance the compensation of any employee; and 3) such plans do not encourage behavior focused on short-term results rather than long-term value creation.
2. For the Purposes of this Policy, “excessive or luxury expenditures” means excessive expenditures on any of the following:
a. Entertainment or events;
b. Office and facility renovations;
c. Aviation or other transportation services; or
d. All other activities or events that are not reasonable expenditures for staff development, reasonable performance incentives, or other similar measures conducted in the normal course of business operations.
e. Prior to incurring expenses in an amount exceeding $100,000 that would fall into any of the categories described above; a written request for prior approval of such expenditure including documentation of the business purpose for the proposed expenses shall be submitted to the Board of Directors. The Board shall determine if such expenditure constitutes an “excessive or luxury expenditure.” If it is determined to be an “excessive or luxury expenditure”, then such request shall be denied. If it is determined not to be an “excessive or luxury expenditure” then the request shall be approved.
f. The Compliance Committee Chairperson shall keep the records of all such expenditures.
3. The Company and its subsidiaries shall not be responsible for spouse (or companion) expenses incurred in connection with travel to conferences or sponsored events.
4. Any violation of this policy shall be promptly reported to the Treasury and to the Board of Directors. Corrective action will be taken as appropriate.
a. An employee that violates this policy shall reimburse the Company and that employee shall be issued a written warning.
5. Annually, this policy shall be reviewed for adherence by the designated Compliance Committee.
6. Upon approval by the Board of Directors, a copy of this policy shall be promptly submitted to the Treasury and shall be posted on the Company’s website. In event of any amendments to this Policy, a copy of the revised Board-approved Policy shall be promptly submitted to the Treasury and the Company’s website shall be updated to reflect such amendments.
7. This Policy shall remain outstanding so long as the Treasury maintains an investment in the Company. In event that the Company repays in full all funds then this Policy shall terminate and will no longer be in force.