1 Governance 1. Board Size and Composition 2. Board Committee Structure 3. Board Membership and Recruitment 4. Director Compensation and Ownership 5. Senior Management team Succession 6. Other Governance Matters

2 1. Board Size and Board composition Board size: 3-25 members in 10 th district states Board composition: outsiders bring diversity of knowledge, skills and experience to the board table, which is invaluable in advising management and making business decisions.

3 2. Board Committee Structure Bank boards use loan committee, ALM committee and investments committee to monitor and manage their credit, liquidity and market risk exposure.

4 4. Director Compensation and Ownership Should director compensation take the form of long-term equity Good governance recommends for significant stock ownership by directors. In US community bank survey indicate that CEOs, on average, own or control about 25% of the outstanding stock in their banks or BHC.

5 Pledge for the Loan and ROA: Quadratic Relation Source: thesis

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8 Pledge for the Loan and Stock Returns: Little Related (Insignificant)

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10 Pledge for the Loan and Stock Returns: Little Related (Insignificant)

11 Governance Practice Has majority of independent directors Business expertise is major recruiting criteria Outside directors have equity ownership that represents 25% or more of their personal assets Inside directors have equity ownership that represents 25% or more of their personal assets Board paid for attendance Had directors participating training in 2003 Under $150M in assets Family Non-family Over $150M in assets Family Non-family

12 Performed director assessments Has mandatory director retirement Has equity ownership by CEO Has written succession plan Has a code of ethics Has a loan committee Has an ALM committee Has an investment committee Under $150M in assets Family Non-family Over $150M in assets Family Non-family

13 Has a operations risk committee Has an audit committee CEO does not serve on audit committee Outside directors are a majority of the audit committee Has a nominating committee CEO does not serve on nominating committee Under $150M in assets Family Non-family Over $150M in assets Family Non-family 3 ** ** ** **

14 Under $150M in assets Family Non-family Over $150M in assets Family Non-family ** ** 4 ** 1 ** 3 ** Outside directors are a majority of the nominating committee Has a compensation committee CEO does not serve on compensation committee Outside directors are a majority of the compensation committee

15 We might also use the similar criteria to do the first evaluation. However, Bank Governance in different countries have different check marks In US, the CEO may not have many shares In Taiwan, it should have some minimum requirement.

16 Furthermore, US Bank Stresses CSR, in Taiwan, banks also do but talk less