Know the risks - Zurich

• Copies of regulators’ examination reports should be provided to directors andreviewed carefully. Insist on prompt follow-up action to correct deficiencies.• Investigate warning signs. Important decisions should be thoroughly investigatedand approved by knowledgeable, informed and truly independent persons basedon the advice of qualified outside advisors.• Review periodic reports filed with the institution’s regulators.• Insist on regular reports from officers, including financial summaries, key financialratios and details of problem loans and other weaknesses.• Establish appropriate committees composed of independent directors. Thequalification of committee members will vary depending on the nature of thecommittee. For instance, audit committees should be composed of independent,financially literate members who can fully understand and critique the company’sfinancial statements.• Conduct periodic self-evaluations to analyze the board’s overall performance andthe performance of individual directors.• Establish and monitor key performance criteria reflecting the company’s financialstability and fulfillment of strategic goals.Protection against liability under federal securities laws• Periodic reminders should be given to directors and officers regarding the legalconsiderations involved in buying or selling the company’s stock and reportingrequirements under the 1934 Act or other applicable laws.• Establish proper “due diligence” procedures for review of registration statements,proxy statements, and periodic statements filed with the SEC or other agencies.• Establish corporate procedures for handling disclosures of corporate informationto security analysts and others.• Circulate a policy statement on insider trading so that all directors and officers areaware of the applicable rules.Protection against liability in the sale of the company• In major transaction such as a sale or takeover of the institution or the acquisitionof another entity has been proposed, directors should be well informed about thetransaction and the benefits to the institution and its shareholders.• If appropriate, the board should appoint a special, disinterested committee toreview any proposed transaction.• The board or committee should retain competent independent advisers, includinglegal counsel and investment bankers. The advisers should be given completeaccess to management and relevant documents.• When the transaction is presented to the full board, interested directors shouldabstain from discussing and voting on the transaction.22Financial institutions guide