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Corporate Governance

The Board, as a whole, is responsible for the oversight of management on behalf of the Corporation's shareholders.

The principle functions of the Board are to oversee processes evaluating the adequacy of internal controls, risk management, financial reporting compliance with the law and the Corporation’s Code of Conduct; to evaluate and determine the compensation of the Chief Executive Officer; to review the Corporation's compensation and benefits programs and its succession planning and diversity programs; to review the major strategic, financial and other objectives of the Corporation; and to nominate Directors and evaluate the structure and practices of the Board to provide for sound Corporate Governance. The Board accomplishes these functions acting directly and through its committees.

Members of the Board

Principle Board Committees

Executive Committee

Committee Charter

Compensation & Management Development Committee

Committee Charter

Nominating & Governance Committee

Committee Charter

Audit Committee

Committee Charter

Risk Policy Committee

Committee Charter

Audit Committee Charter

The Committee assists the Board in fulfilling its statutory and fiduciary responsibilities with respect to internal controls, accounting policies, and auditing and financial reporting practices. The Committee assists the Board in its oversight of (i) the integrity of the Company's financial statements and the financial reporting process (ii) compliance with legal and regulatory requirements, (iii) the independent public accountant's qualification and independence, (iv) the performance of the independent public accountants and (v) the Company’s internal audit activities.

The Committee will report its activities to the Board on a regular basis and make such recommendations, as the Committee deems necessary or appropriate.

The Committee is entitled to place reasonable reliance on (i) the integrity of those persons and organizations within and outside the Company from whom and from which it receives information and (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations, absent actual knowledge to the contrary which, will be promptly reported to the Board of Directors.

The function of the Committee is oversight. The management of the Company is responsible for the preparation, presentation and integrity of the Company’s consolidated financial statements. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies, as well as, internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent public accountants are responsible for planning and performing proper audits, including an audit of the Company's annual consolidated financial statements. Internal audit is responsible for planning and performing internal audits, including the determination that internal controls are adequate to ensure the safety and soundness of on-going operations within PEFCO.

(a) Membership

The Committee shall consist of at least five members. The Committee members and Chairman shall be recommended by the Chairman of the Board and appointed annually by the Board for terms of one year, or until their successors are duly elected and qualified. The Board, upon the recommendation of the Committee or otherwise, may remove any Committee member at any time.

(b) Qualifications

Each member of the Committee shall, in the judgment of the Board, be financially literate, have the ability to read and understand PEFCO’s financial statements and be independent, to the extent possible.

The Committee shall meet as frequently as it deems necessary, but not less frequently than quarterly. The Committee shall review unaudited quarterly financial statements and the audited financial results statement and it shall consider any financial or accounting matters, as the Committee deems appropriate. Meetings may be called by the Chairman of the Committee or by the Chairman of the Board and may be held in person or by telephone. All meetings and other actions of the Committee shall be held or otherwise taken pursuant to PEFCO's bylaws, including bylaw provisions governing notices of meetings, waivers, the number of Committee members required to take actions at meetings or by written consent, and other related matters. As part of its meetings, the Committee, in its discretion, may meet separately, with or without senior management, or in executive session with the full Board or the independent auditors. The Committee, in its discretion, may meet separately with senior management.

Reports of meetings and actions taken at meetings or by consent by the Committee since the most recent Board meeting (except to the extent covered in an interim report circulated to the Board) shall be made by the Committee Chairman or his/her designee to the Board at the Board’s next regularly scheduled meeting following the Committee meeting or action and shall be accompanied by any recommendations from the Committee to the Board. In addition, the Committee Chairman or his/her designee shall be available to answer any questions the other Board members may have regarding the matters considered and actions taken by the Committee.

In carrying out its mission, the Committee's policies and procedures should remain flexible, so that it may be in a position to react or respond appropriately to changing circumstances or conditions and to ensure that the corporate accounting and financial reporting practices, as well as the auditing process, are in accordance with all applicable requirements and appropriately tailored for PEFCO's specific business and financial risks. In carrying out this mission, the Committee shall have the following responsibilities and authorities. Unless otherwise authorized by an amendment to its Charter, the Committee shall not delegate any of its authority to any subcommittee or to any other person.

(a) Internal Controls

At least annually, the Committee shall evaluate, in conjunction with senior management and PEFCO's independent and internal auditors, the adequacy of PEFCO's financial reporting systems and business process controls and discuss significant risks and the actions senior management has taken to monitor and control these risks. In addition, the Committee shall review significant findings noted by the independent and internal auditors in the course of their audit functions, as well as management's responses.

(b) Financial Reporting Oversight

In connection with its general oversight of PEFCO's financial reporting, the Committee shall:

  • Evaluate significant accounting and reporting issues identified in any analyses prepared by senior management or the independent auditors or otherwise identified in the course of the Committee's review of PEFCO's financial statements and discussions with its auditors, including recent professional and regulatory pronouncements provided to the Committee by PEFCO or its independent auditors as being particularly relevant, with due consideration of their impact on PEFCO's financial statements;
  • Review with senior management and the independent auditors senior management's proposals regarding: new accounting pronouncements; the adoption of, and changes of choice regarding, material accounting and regulatory principles and practices to be followed when preparing PEFCO's financial statements; alternative principles and practices that could have been followed; the reasons for selecting the principles and practices to be followed; the financial impacts of the principles and practices selected as compared to those of the other alternatives available; and the provision of any "pro forma" or "adjusted" non-GAAP information; and
  • Inquire as to whether the independent auditors have any concerns regarding: the possibility of significant accounting or reporting risks or exposures; the appropriateness and quality of significant accounting treatments and whether there has been any aggressive creativity in any such treatments; and business transactions that may affect the fair presentation of financial condition or results of operations; or any weaknesses in internal control systems.
  • Review and make recommendations regarding procedures for:
    • The receipt, retention and treatment of any complaints received by PEFCO regarding accounting, internal accounting controls or auditing matters; and
    • The confidential, anonymous submission, by employees of PEFCO, of any concerns regarding questionable accounting or auditing matters.
    • Affirm in connection with the Committee’s review of PEFCO’s annual financial statements that the independent auditors communicate certain matters to the Committee as required by professional standards related to their audit of the annual financial statements.

(c) Annual Financial Statements

In connection with the preparation and audit of the annual financial statements, the Committee shall:

  • Review with the independent auditors their proposed audit scope and approach, including staffing
  • Review in private discussion whether there have been (and if so the nature of) any audit problems or difficulties and any related responses by management. This review shall include:
    • Confirmation that management is not placing any restrictions on the scope of the independent auditors' work or their access to information;
    • Inquiry as to any accounting adjustments noted or proposed by the independent auditors, but "passed" (as immaterial or otherwise) and any communications between the audit team and the audit firm's national office regarding auditing or accounting issues raised in connection with the audit; and
    • Discussion of any "management" or "internal control" letters issued or proposed to be issued by the independent auditors.
  • Review any complex and/or unusual transactions and any matters requiring significant estimates of asset valuation allowances or liability reserves, and evaluate management's handling of proposed audit adjustments identified by the independent auditors.
  • Review the independent auditor's judgments about the quality of the accounting principles applied to the financial statements.
  • Review, with the President and CEO and management, legal matters that could have a significant impact on the financial statements.
  • Approve the annual audited financial statements for inclusion in the Company’s Annual Report

(d) Quarterly Unaudited Financial Statements

In connection with the quarterly unaudited financial statements, the committee shall:

  • Review the unaudited financial statements and the various analyses accompanying the unaudited financial statements prepared by management; and
  • Approve the unaudited financial statements for distribution to shareowners.

(e) Compliance with Laws and Regulations Relating to Financial Reporting and Tax Matters

The Committee shall oversee PEFCO’s compliance with laws and regulations, as related to the preparation of the financial statements and tax filings, and shall:

  • Periodically review the procedures for monitoring compliance with laws and regulations; and
  • Discuss the significant findings, if any, of reviews or examinations by regulatory agencies

(f) Compliance with PEFCO's Policies, Standards of Conduct, Code of Ethics and Approval of Related Party Transactions

The Audit Committee shall oversee compliance with PEFCO’s policies, Standard of Conduct and Code of Ethics, as related to the preparation of the financial statements and tax filings, and shall:

  • Confirm that the policies, Standards of Conduct and Code of Ethics are formalized in writing and that procedures are in place to communicate these policies, Standards and Code to all employees;
  • Periodically review the policies, Standards of Conduct and Code of Ethics, with particular focus on related party transactions and conflicts of interest involving, directly or indirectly, any director or employee, and consider whether any changes are needed;
  • Review the program for monitoring compliance with the policies, Standards of Conduct and Code of Ethics and periodically obtain updates from senior management regarding compliance;
  • e responsible for evaluating, making decisions whether to approve, and monitoring on an ongoing basis any related party transactions covered by the policies, Standards of Conduct and Code of Ethics and for making decisions whether to grant any waivers of or approve any other deviations from the policies Standard of Conduct and Code of Ethics governing related party transactions and conflicts of interest, in each case if any director, employee or any entity for or in which any such person serves as a director or employee or has any other significant interest is involved, and also for documenting and monitoring any such approval or waiver; and
  • Review and coordinate response to any complaints received under the Whistle Blower policy.

(g) Independent Auditors

In its oversight of PEFCO’s independent auditors, the Committee shall:

  • Have direct responsibility to select and appoint the independent public accountants. Annually, the Committee will recommend that the Board request ratification of the appointment of the independent public accountants. The independent public accountants are to report to the Committee.
  • The Committee is responsible for setting the compensation of the independent public accountants, and the Committee shall periodically review the fees charged by the independent public accountants for all audit services and permitted audit-related, tax and other services.
  • Meet with the independent auditors at least once a year in private sessions without any members of senior management being present to discuss matters that the Committee or the independent auditors believe should be discussed, including without limitation discussion items contemplated elsewhere in this Charter.
  • Pre-approve allowable non-audit services to be provided by the independent auditors to PEFCO and take appropriate steps to ensure that the independent auditors are not providing prohibited non-audit services, including the receipt of a written certification from the independent auditor to that effect.
  • Evaluate annually the experience, qualifications and performance of independent auditors, the partner in charge of performing or reviewing the audit, and other audit team personnel as appropriate. The evaluation should be based on all relevant circumstances known to the Committee, including, without limitation, the following:
    • Qualifications of and quality of services performed by the independent auditing firm, the primary audit partner and other audit team personnel as appropriate;
    • Opinions of PEFCO’s senior management regarding the independent auditors;
    • Length of tenure;
    • Factors having the potential to impact independence and objectivity;
    • The securities laws requirement to rotate at least every five years the primary audit partner in charge of performing (or overseeing the performance) of the audit;
    • Any reported issues regarding the independent accountant’s internal controls or audits of other companies; and
    • The Committee should present to the Board a summary of the Committee’s evaluation and recommendations.
  • Evaluate and make a recommendation to the Board regarding any desire by PEFCO to hire employees or former employees of the independent auditor who have served within the preceding year as a member of the independent auditors’ team assigned to the audit.

(h) Internal Audit

In its oversight of PEFCO’s internal auditors, the Committee shall:

  • Have direct responsibility to select and appoint the internal auditors. The internal auditors are to report to the Committee.
  • Review activities, organizational structure, and qualifications of the internal audit function.
  • Review with the internal audit function the proposed audit plan for the coming year, staffing, audit procedures to be utilized and the coordination of the plan with the independent auditors. During this review the independence, objectivity, and authority of the internal audit function will be assessed.
  • Periodically review with the internal audit director any significance difficulties, disagreements with management, or scope restrictions encountered in the course of the function’s work.
  • Periodically review and recommend changes (if any) to the audit program.

(i) Litigation and Investigations and Other Matters

The Committee shall:

  • Monitor major litigation and significant internal or external special investigations and review with the President and CEO, at least annually, any other legal matters that could have a material impact on PEFCO's financial statements or compliance with law;
  • If deemed appropriate, initiate special investigations into matters within the Committee's scope of responsibilities or as delegated by the Board; and
  • Perform such other duties and responsibilities as may be assigned to the Committee, from time to time, by the Board

(j) Self Evaluation

Perform an annual self-evaluation of the Committee’s performance and annually reassess the adequacy of and, if appropriate, propose to the Board any desired changes in, the Charter of, the Committee.

(k) Reporting Responsibilities

The Committee shall regularly update the Board about the Committee’s activities and make appropriate recommendations.

The Committee shall have the right to use reasonable amounts of time of PEFCO’s independent auditors, internal auditors, outside lawyers and the internal staff and also shall have the right to hire independent accounting experts, lawyers and other consultants to assist and advise the Committee in connection with its responsibilities.

To contact any member of the Audit Committee regarding a particular concern regarding accounting, internal controls or auditing matters that you wish to bring to the attention of the Audit Committee of the Board of Directors, please contact:

Chairperson
Audit Committee of the Board of Directors
1-800-673-0145

This information is also listed in our Employee Compliance Handbook under Tab A. "Employee Relations Policies"- Annex C: Whistle Blower Policy and on our Website at www.pefco.com

Compensation and Management Development Committee Charter

The Compensation and Management Development Committee reviews and approves the Corporation's Compensation and Benefits programs, ensures the competitiveness of these programs and advises the Board on the development of and succession for key executives. The Committee is also responsible for making recommendations to the Board of Directors with respect to the compensation of Directors. The Committee shall keep minutes of its proceedings and shall report its actions at the next succeeding meeting of the Board of Directors.

The Committee shall consist of at least four members. The Committee members and Chairperson shall be recommended by the President and CEO and appointed annually by the Board for the term of one year, or until their successors are duly elected and qualified. The Board, upon the recommendation of the Committee or otherwise, may remove any Committee member at anytime. The Chairman, President and CEO is an ex-officio member of the Committee.

The Committee will:

  • Review and approve, for recommendation to the Board, the goals and objectives of the Corporation relevant to the Chief Executive Officer's compensation; evaluate the Chief Executive Officer in light of those goals and objectives and determine the Chief Executive Officer's compensation level based on this evaluation; and with the concurrence of the Board;
  • Evaluate the performance of key executives, review the succession plan for key executives, make recommendations to the Board regarding key executives and periodically review diversity programs;
  • Make recommendations to the Board of Directors for their approval of the salary and bonus awards for the CEO and the compensation of Directors and approve the compensation of the other executives of the Corporation;
  • Review and approve changes in the Corporation's qualified benefit plans such as: health; disability; severance and other benefit plans for employees as may be necessary and desirable to attract and retain experienced management and staff. Additionally, the Committee administers the Corporation's retirement plan; and
  • Review, at least annually, the Compensation and Management Development Committee Charter and recommend any proposed changes to the Board for approval.

Executive Committee Charter

The Committee shall have the power to direct and transact all business of the Corporation, which properly might come before the Board of Directors when the Board of Directors is not in session subject to certain limitations enumerated in the By-laws. The Committee shall keep minutes of its proceedings and shall report its actions at the next succeeding meeting of the Board of Directors.

The Committee shall consist of such number of members, not less than four or more than eight, as shall be determined by a majority of the Directors then in office at a meeting at which a quorum is present. The Committee members and Chairperson shall be recommended by the President and CEO and appointed annually by the Board for the term of one year, or until their successors are duly elected and qualified. The Chairman, President and CEO shall be a member of the Executive Committee.

  • Approves the terms of the Corporation’s secured note issues.
  • Acts for the full board when it is not in session as specified by the By-laws of the Corporation.
  • Review, at least annually, the Executive Committee Charter and recommend any proposed changes to the Board for approval.
  • Review at least annually, various "risk factors" associated with the Corporation that is not taken into account in the other committees such as market risk, credit risk and operational risk. These other risk factors are referred to as "Business Risk". Some factors associated with "Business Risk" are:
    • Reputational Risk
    • Competitive Market Risk or Market Share Risk
    • Product Obsolescence Risk
    • Regulatory Risk
    • Non Specific Business Risk
  • The Executive Committee has the power to:
    • Authorize the issuance of stock and other securities of the Corporation,
    • Fix the designations and any of the preferences of rights of shares of preferred stock relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class of preferred stock of the Corporation,
    • Fix the number of shares of any series of preferred stock or authorize the increase or decrease of the shares of any series of preferred stock,
    • Declare dividends,
    • Authorize the seal of the Corporation to be affixed to all papers which may require it, and
    • Take all action provided in the By-laws to be taken by the Board.
  • The Executive Committee also has the power to:
    • Determine whether a prospective shareholder is a "Qualified Investor" (as defined in Section 3 of Article VI),
    • Determine, in the event the Corporation issues its common stock to any person, the maximum number of shares which such person may own,
    • Make the determinations authorized by Section 3(v) of Article VI, and
    • Authorize the registration on the books of the Corporation of the transfer of any shares of such common stock in order to give the effect to the restrictions contained in Article VI.
  • The Executive Committee shall not have such power or authority with respect to:
    • Amending the Certificate of Incorporation;
    • Adopting an agreement of merger or consolidation;
    • Recommending to the shareowners the sale, lease or exchange of all or substantially all the Corporation’s property and assets;
    • Recommending to the shareowners a dissolution of the Corporation or a revocation of a dissolution;
    • Requiring payment for the partly paid for shares of the Corporation’s capital stock;
    • Filling vacancies on the Board;
    • Amending the By-laws or;
    • Taking any action which is required to be taken by vote of a specified portion of the directors then in office.

At every meeting of the Executive Committee, one half of the members of the Executive Committee shall constitute a quorum.

Nominating and Governance Committee Charter

The Committee will identify and consider individuals qualified to become members of the Board, for consideration by the Board and for interpreting Article III – Section 13 of the By-laws (eligibility for re-nomination of Directors). The Committee will recommend to the Board the Corporate Governance Guidelines of the Corporation and will also monitor the process to assess Board effectiveness. The Committee shall keep minutes of its proceedings and shall report its actions at the next succeeding meeting of the Board of Directors.

The Committee shall consist of at least five members. The Committee members and Chairperson shall be recommended by the President and CEO and appointed annually by the Board for terms of one year, or until the successors are duly elected and qualified. The Board, upon the recommendation of the Committee or otherwise, may remove any Committee member at anytime. The President and CEO will be a member of the Committee

The Committee will:

  • Develop, recommend and review annually the Board of Directors Corporate Governance Guidelines;
  • Review with the Board of Directors, on an annual basis, the composition of the Board as a whole and its committees, and whether the Corporation is being well served by the directors taking into account the director’s independence, age, skills, experience and availability for service to the Corporation;
  • Lead the search for qualified Directors, review qualifications and identify nominees who are best qualified. The criteria for selecting nominees for election as Directors of the Corporation shall include, but not be limited to, experience, accomplishments, education, skills and personal and professional integrity;
  • Recommend to the Board of Directors, the nominees to be proposed by the Corporation for election as Directors of the Corporation at the Annual Meeting of Shareholders, or to fill vacancies on the Board of Directors;
  • Annually, oversee the self evaluation of the Board;
  • Have the resources and authority appropriate to discharge its responsibilities, including authority to retain and terminate search firms used to identify Director and Management candidates and to approve such search firms fees and other retention terms;
  • Will annually review, with the Chairman of the Board, committee assignments and will consider the rotation of committee chairs and members with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors; and
  • Review at least annually, all Committee Charters and recommend any proposed changes to the Board for approval.

Risk Policy Committee Charter

The Risk Policy Committee, reporting directly to the Board, is responsible for oversight of management’s responsibilities to assess and manage the Corporation's credit risk, market risk, interest rate risk, investment risk, liquidity risk and reputational risk. The Committee shall keep minutes of its proceedings and shall report its actions at the next succeeding meeting of the Board of Directors.

The Risk Policy Committee shall be composed of both non-management directors and the Chief Executive Officer. It will also have the Treasurer as an ex-officio member. The Committee members and Chairperson shall be recommended by the President and CEO and appointed annually by the Board for terms of one year, or until the successors are duly elected and qualified. The Board, upon the recommendation of the Committee or otherwise, may remove any Committee member at anytime.

The Risk Policy Committee is responsible for oversight of management’s responsibilities to assess and manage the Corporation’s credit risk, market risk, interest rate risk, investment risk, liquidity risk and reputational risk. In performing this oversight, the Risk Policy Committee shall:

  • Review with management guidelines, procedures, controls and policies governing the process for assessing and managing such risks;
  • Review benchmarks for and major financial risk exposures from such risk;
  • Review management’s compliance to limits and procedures against these policies and benchmarks;
  • Receive and review reports on selected risk topics as the committee deems appropriate from time to time;
  • Ensure appropriate delegation and authority to take and manage such risks;
  • Review and approve the terms of the Corporation’s secured note issues; and commercial paper
  • Meet as often as it deems necessary, but not less frequently than semi-annually, with at least one meeting in person.
  • Review at least annually, in vestment and borrowing guidelines including D&O Insurance.
  • Treasury and Risk Management activities are to be reported to the board at all quarterly board meetings.
  • Review, at least annually, the Risk Policy Committee Charter and recommend any proposed changes to the Board for approval.