Corporate Governance Guidelines
In addition to the By-laws, various resolutions and the Charters of its various committees, the Board of Directors (the “Board”) of the Company has adopted guidelines on significant corporate governance matters. Following is a description of those various elements that together create the corporate governance standards for the Company.
I. The Board of Directors and Executive Officers
- The By-laws of the Company provide that the Board shall consist of twelve persons except that the Board may increase or decrease the number from time to time, but may never have less than three persons. The directors are classified into three classes of as equal size as possible, with the classes to serve staggered three-year terms. There are currently twelve directors.
- The majority of the Board must be independent using the definitions provided by law or regulation. The Committee on Governance/Directors reviews the independence of directors no less than annually. Nine of the current twelve directors are independent.
- Each director shall be deemed to have submitted a resignation effective on the day that the director attains the age of 72 years, with the exception that a director who also is an officer of the Company or any of its subsidiaries may continue as a director until such time as he retires or resigns as an officer of such entities.
- The Committee on Governance/Directors is responsible for the establishment of membership criteria after consultation with the Board. The invitation to join the Board shall be extended by the Chairman of the Board.
- The Board believes that Directors should volunteer to resign from the Board upon a change in position from the position held when they were elected to the Board. It is not the intention of the Board to mandate resignation, but rather to provide an opportunity for the Board to review the appropriateness of membership under the changed circumstances.
- The Board believes that Directors should volunteer to resign from the Board upon a change in position from the position held when they were elected to the Board. It is not the intention of the Board to mandate resignation, but rather to provide an opportunity for the Board to review the appropriateness of membership under the changed circumstances.
- The Board believes that Directors should volunteer to resign at such time as any loan to the Director, or any related interest of the Director, by any subsidiary of the Company shall be classified as sub-standard, by either Company management or by bank examiners.
- The Board believes that directors should be stockholders and have a financial interest in the Company. While the Board does not believe it appropriate to specify the level of ownership, it is expected that each director will develop a meaningful ownership position during their tenure. The Board feels that ownership of 7,500 shares is meaningful and should be strived for over a period of time. The Company has adopted a Stock Purchase Plan for Non-Employee Directors that encourages such ownership.
- The Board believes that executive officers should be stockholder and have a financial interest in the Company. The Board has approved a policy that requires stock ownership as follows:
- Senior Vice Presidents equal to salary
- Executive Vice President equal to twice salary
- Vice Chairman equal to four times salary
- President and Chief Executive Officer equal to six times salary
- The Board has approved Codes of Ethics for all employees of the Company and additional items for ethical conduct for other areas, including senior financial officers and investment professionals. Regular training on the Code of Ethics is mandatory for all officers. The Company has retained a third party provider to enable employees to make complaints anonymously. Provisions of the Corporate Code of Ethics apply to Directors. The Code of Ethics shall be posted on the Company‘s website.
II. Board Meetings-
- The Board has four regularly scheduled meetings per year. In addition, special meetings may be called from time to time as determined by business necessity. It is the responsibility of Directors to attend meetings.
- The Chairman of the Board, in consultation with the Committee on Governance/Directors, sets the agenda for Board meetings. Certain items necessary for appropriate Board oversight must appear regularly on the agenda. Board members may request that particular matters be placed on the agenda.
- From time to time, usually in January of each year, there is an extended meeting to review the Company‘s long-term strategic and business plans.
- The Board encourages the attendance of members of management at Board meetings to (i) provide management insight into items being discussed or considered by the Board; (ii) make presentations to the Board on matters which involve the manager‘s area; and (iii) bring managers with high potential into contacts with the Board. In addition, Board members have access to Company management.
- At any meeting of the Board, the independent members of the Board have the opportunity to meet in executive session, without any member of management present. The Chairman of the Committee on Governance/Directors or such other person as the independent directors may select shall assume the responsibility of chairing such meetings. The Board meeting in executive session may request the attendance of members of management for the purpose of providing information or delivering reports. The Board currently has executive sessions during three of the four meetings.
- Management shall make every effort to provide presentation materials to the Board in advance of the meeting unless doing so would compromise the confidentiality of competitive or sensitive information. Under normal circumstances presentation materials should be delivered to the Board at least five days in advance of the meeting. Management should make every effort to provide materials that are concise and to the point, yet contain all essential information.
- The Committees of the Board consist of the Executive Committee, Audit Committee, Compensation and Human Resources Committee, and Committee on Governance/Directors.
- The By-Laws specify the adoption of an Executive Committee that consists of the Chairman of the Board, the President, and such other directors as the Board shall determine. The Executive Committee consists currently of three independent directors and two non-independent directors. The purpose of the Executive Committee is to function with the powers of the Board between regular meetings and in instances where special meetings of the Board are not warranted under the circumstances.
- The Audit Committee consists of at least three independent directors or such other number of independent directors as the Board may determine. There are currently five independent directors on the Audit Committee. The Audit Committee assists the Board in its oversight of the integrity of the Company‘s financial statements and its financial reporting and disclosure practices, the soundness of its internal financial and accounting controls, the independence and performance of its internal and independent auditors and the soundness of its ethical and compliance programs. The Audit Committee is also charged with the retention of independent auditors. The Audit Committee has adopted its own Charter. The Audit Committee meets quarterly.
- The Compensation and Human Resources Committee has responsibility for the Company‘s compensation-related policies and programs for executive management and the level of compensation and benefits of officers and key employees. The Committee shall also consider the Company‘s management succession planning and shall review the succession plans for executive officers no less than annually. The Chairman of the Committee shall report on its meetings to the Board of Directors. The Committee consists of independent directors only. The Committee has adopted its own Charter.
- The Committee on Governance/ Directors is comprised of not less than three independent directors. The Chairpersons of the Audit Committee and the Compensation and Benefits Committee shall be members of the Committee. Those Chairpersons together with two other independent directors currently comprise the Committee. The purpose of this Committee is, in part, to help ensure that the Board receives sufficient information to meet its traditional duties and its governance obligations. The Committee on Governance/Directors has adopted its own Charter. The Committee is responsible for:
- The review of director independence.
- The recruitment of directors.
- The establishment of the agenda for the annual stockholder’s meeting.
- In conjunction with the Chairman of the Board, the determination of agenda items and management presentations to the Board.
- The annual assessment of the Board’s performance.
IV. Publication of Corporate Guidelines
The Board believes that these Guidelines should be made available to the Company’s shareholders and investors. Management is authorized to make these Guidelines and the Committee charters available on the Company website and in other published material.
COMMERCE BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the Board in monitoring:
(1) the internal control over financial reporting of Commerce Bancshares, Inc. (the “Company”) and the audits of its financial statements;
(2) the independent auditor’s qualifications and independence;
(3) the performance of the Company’s internal audit function and independent auditors;
(4) the performance of the Company’s internal loan review function;
(5) compliance by the Company with legal and regulatory requirements;
(6) the performance of the Company’s enterprise risk management function.
The Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the “Commission”) to be included in the Company’s annual proxy statements.
The Audit Committee shall consist of no fewer than three members. The members of the Audit Committee shall meet the independence and experience requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), Nasdaq and the rules and regulations of the Commission. Audit Committee members must be able to read and understand financial statements at the time of their appointment. At least one member of the Audit Committee shall be an “audit committee financial expert” as defined by the Commission. The members of the Audit Committee shall be appointed by the Board on the recommendation of the Committee on Governance/Directors. Audit Committee members may be replaced by the Board.
The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Audit Committee shall meet periodically with management, the internal auditors and the independent auditor in separate executive sessions. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace the independent auditor. The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and permitted non-audit services, as outlined in its established policy, (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit.
The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
- Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management’s discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K.
- Discuss with management and the independent auditor the Company’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor’s review of the quarterly financial statements.
- Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies.
- Review and discuss annually reports from the independent auditors on:
- All critical accounting policies and practices to be used.
- All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
- Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
- Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.
- Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 114 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
- Review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal control over financial reporting or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal control over financial reporting.
- Review and approve all related party transactions.
Oversight of the Company’s Relationship with the Independent Auditor
- Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.
- Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
- The independent auditor shall submit to the audit committee annually a formal written statement delineating all relationships between the independent auditor and the Company in accordance with PCAOB rules.
Oversight of the Company's Internal Audit Function
- Review the appointment and replacement of the internal audit director.
- Review the significant reports to management prepared by the internal audit department together with management’s responses and follow-up to these reports.
- Discuss with the independent auditor and management internal audit department responsibilities, budget, qualifications and staffing and any recommended changes in the planned scope of the internal audit department.
- Review for completion of annual regulatory requirements such as FDICIA , 12 CFR 9 (trust audits), corporate insurance coverage, and business continuity.
Compliance Oversight Responsibilities
- Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act (communication of illegal acts) has not been implicated.
- Obtain reports from management, the Company’s internal audit director and the independent auditor that the Company is in conformity with applicable legal requirements and the Company’s Code of Ethics. Review reports and disclosures of insider and affiliated party transactions. Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Ethics.
- Obtain reports from management relating to issues resulting from procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
- Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports, which raise material issues regarding the Company’s financial statements or accounting policies.
- Discuss with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies.
Oversight of the Company’s Internal Loan Review Function
- Review the appointment and replacement of the loan review manager.
- Review the significant reports to management prepared by the loan review department together with management’s responses and follow-up to these reports.
- Discuss with management the loan review department’s responsibilities, budget, qualifications and staffing and any recommended changes in the planned scope of the loan review department.
Oversight of the Company’s Internal Risk Management Process
- Review the appointment and replacement of the chief risk officer.
- Oversee executive management’s establishment of policies and guidelines with respect to risk tolerance.
- Oversee the performance of the Company’s risk management process.
- Discuss with executive management the Company’s risk management strategies, policies and procedures.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s internal control over financial reporting is effective or that its financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.
Committee on Governance / Directors Charter
1.0 Committee's Purpose
The Committee on Governance/Directors (“Committee”) is appointed by the Board of Directors of the Company (“Board”), in consultation with the Chairman/CEO, to (i) assist the Board in meetings its duties and responsibilities to the stockholders; (ii) make recommendations to the Board on governance matters; (iii) review and recommend the re-nomination of incumbent directors; (iv) identify and make recommendations to the Board on individuals qualified to serve as Board members of the Company; (v) review and recommend committee appointments; (vi) consult on agenda items for Board meetings and make recommendations for agenda items for the Annual Meeting of Shareholders; (v) lead the Board in its annual review of the Board's performance; (vi) monitor the activities and performance of the Company on its relations with the public, its shareholders and government bodies; (vii) monitor the Company's performance and practices with respect to diversity in employment and products; and (viii) perform other related tasks as the Committee or Board shall, from time to time, determine.
2.0 Committee Membership
The membership of the Committee shall consist of the Chairman of the Audit Committee and Chairman of the Compensation and Benefit Committee and such other members as the Board shall determine. All members shall meet the “independence” requirements imposed by law, rule or regulation.
The Board shall appoint a Chairman of the Committee. The Chairman shall (i) chair all meetings of the Committee; (ii) consult with the Chairman of the Board on agenda matters for Committee meetings; and (iii) perform such other activities as requested by the Committee, the Board or as circumstances indicate.
3.0 Committee Responsibilities
The Committee shall establish the Board's criteria for director service and shall be responsible for the recommendation on new or incumbent directors. The Committee shall provide oversight on the evaluation of the Board and management and provide to the Board an annual evaluation of the Committee's performance. In order to meet this responsibility, the Committee may solicit comments form all directors and make recommendations for improvement in Board activities.
The Committee shall periodically review and make recommendations on the Corporate Governance Guidelines established by the Board.
In order to assist the Board with its obligation to be informed on Company matters, the Committee, conjunction with the Chairman of the Board/CEO, shall consider the subjects that the Board or Committee would like to address. The Committee shall evaluate the quality of information and analysis presented to the Board or any Committee and the effectiveness of Board or Committee discussions. The Committee shall make its recommendations to the Board.
The Committee shall consider the matters to be presented at the Annual Meeting of Shareholders and make its agenda recommendations to the Board.
The Committee shall lead the Board in its annual review of Board performance. Such review may include the skills and characteristics of individual Board members as well as the composition of the Board as a whole. The Committee shall assess the independence of non-management directors. The Committee shall develop a procedure to survey the Board members that may include a self-evaluation on the role, participation and contribution of key directors.
The Committee shall consider the Company's relationship with its shareholders and, if appropriate, recommend enhancements to improve communications.
4.0 Meetings and Structure
The Committee shall meet at such times and places as the Committee may choose. The Chairman of the Committee may also call for meetings at such times as the Chairman shall determine. Meetings may be held in person, by video-conference, or by teleconference.
The Committee may delegate its authority to a subcommittee.
It is anticipated that members of management will be in attendance at meetings of the Committee. In addition, the Committee may request the attendance of specific members of the Company's management. The Committee may meet in executive session without the attendance of any management personnel present.
The Committee shall report to the Board on its meetings and actions no later than the next Board meeting.
5.0 Advisors and Resources
The Committee shall have the exclusive authority, at the expense of the Company, to retain independent consulting, legal and other advisors that it deems appropriate.
The Committee shall have access to the resources of the Company and may also request the assistance, counsel or advice of any management official of the Company.
6.0 Disclosure of Charter
This Charter will be made available to all interested persons. It may be published in the reports of the Company or on the official website of the Company.
Purpose of Committee
The Compensation and Human Resources Committee (the “Committee”) of the Board of Directors of Commerce Bancshares, Inc. is charged with oversight responsibility for executive and senior management performance and pay, adequacy and effectiveness of compensation plans, benefit plans, stock option plans and succession planning. The Committee is also responsible for producing the annual Compensation Discussion and Analysis report on executive compensation for inclusion in the Company's proxy statement, in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The Committee shall consist solely of three or more members of the Board each of whom the Board has determined has no material relationship with the Company and each of whom is otherwise “independent” under the rules of the New York Stock Exchange and/or NASDAQ.
Members shall be appointed by the Board and shall serve at the pleasure of the Board and for such term or terms as the Board may determine.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson. In the event of a tie vote on any issue, the chairperson's vote shall decide the issue. The Committee shall meet in person or telephonically at least once a year at a time and place determined by the Committee chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its chairperson.
The Committee may invite such members of management to its meetings, as it may deem desirable or appropriate. The Company's Chief Executive Officer (“CEO”) should not attend any portion of any meeting where the CEO's performance or compensation is discussed, unless specifically invited by the Committee.
Committee Duties and Responsibilities
1.) In consultation with senior management, establish the Company's general compensation philosophy, and oversee the development and implementation of executive and senior management compensation programs.
2.) Review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate the performance of the CEO in light of those goals and objectives, and set the CEO's compensation level based on this evaluation. The Committee will review and approve compensation changes for members of the Executive Management Committee. The Committee will provide a thorough annual review of such matters with the full Board.
3.) Review and approve compensation programs applicable to the Executive Management Committee of the Company.
4.) Make recommendations to the Board with respect to the Company's incentive compensation plans and equity-based plans, including all stock based plans. Oversee the activities of the individuals and committees responsible for administering these plans, including the Corporate Director of Human Resources and the Retirement Committee, and discharge any responsibilities imposed on the Committee by any of these plans.
5.) In consultation with senior management, oversee regulatory compliance with respect to compensation matters, including overseeing the Company's policies on structuring compensation programs to preserve tax deductibility. When required, establishing performance goals and certifying those performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code.
6.) May select and retain independent compensation and benefits consultants and other outside counsel, as needed, to provide independent advice to the Compensation and Human Resources Committee with respect to the Company's current and prospective executive compensation and employee benefit programs.
7.) In conjunction with the full Board, advise and consult with management on succession planning and other significant human resources matters, as appropriate.
8.) Any other duties or responsibilities expressly delegated to the Committee by the Board from time to time relating to the Company's compensation programs.
The Committee Chairperson, or designee, shall make reports to the Board at each quarterly meeting. The Committee shall provide an annual report for inclusion in the Company's annual proxy statement in accordance with applicable SEC rules and regulations. The Committee shall confer with CBI management and employees to the extent it may deem necessary or appropriate to fulfill its duties.
Commerce Bancshares and its affiliates are judged by the performance and conduct of their directors, officers, and employees. We recognize that our first duty to our customers, to our stockholders, and to the public in general, is to conduct all matters in a manner that merits public trust and confidence.
The following Code of Ethics (the “Code”) represents policies long followed by Commerce and is a restatement with amendments of the Code initially adopted in 1977. This Code is not all-inclusive and is not intended to be a substitute for good judgment concerning the basic principles of banking. The Code was revised in 1987, 2001, 2004 and has been again revised and approved by the Board of Directors of Commerce Bancshares, Inc. in April 2006. This Code of Ethics applies to all officers, employees and directors of Commerce Bancshares, Inc. and all its subsidiaries. An Ethics Committee, appointed by the Chief Executive Officer of Commerce Bancshares, Inc. is responsible for enforcement of the Code of Ethics.
Advisory Directors are neither employees, officers nor elected directors of Commerce but advise, consult and meet periodically with local Commerce market managers on economic and business matters of interest to Commerce and provide business contacts within their respective communities to enhance the local presence of Commerce. Advisory Directors are expected to be familiar with this Code and to comply with the spirit and intent of all provisions that affect their activities related to Commerce to support the objective that public trusts and confidence in Commerce is maintained.
Any individual violating this Code of Ethics is subject to appropriate disciplinary action, up to and including dismissal from employment with Commerce and, if appropriate, prosecution by Commerce.
The Ethics Committee promptly reports all violations of the Code and any significant events to the Auditor and General Counsel for presentation to the Audit Committee of the Commerce Board of Directors.
Code of Ethics:
I. Confidential/Sensitive and Insider Information
- Information obtained with respect to the customers of Commerce from any source other than public documents is considered privileged and must be held in strict confidence. Information received from or about customers is to be used solely for corporate purposes and should be disclosed to employees of Commerce only as needed to discharge their assigned duties. Confidential information is not to be transmitted to persons outside of Commerce, except to public accountants, legal counsel for Commerce or other service providers in accordance with Commerce policies unless the customer has consented or in response to proper legal process. Such information is never to be used as a basis for personal gain by employees, officers or directors.
- Material inside information held in other departments of the bank is not to be sought by, nor disclosed to, fiduciary officers and employees in the Commerce Trust Company; nor are such fiduciary officers and employees to use any material inside information in connection with any decision or recommendation to purchase or sell any security.
- Financial information regarding Commerce is not to be released to any person unless it has been published in a report to shareholders or otherwise made generally available to the public in accordance with applicable disclosure rules.
- Commerce internal financial data, management reports, business plans, marketing strategies, contracts, intellectual property, customer lists and all other proprietary information of Commerce is confidential and may not be disclosed, discussed or made available to anyone outside of Commerce. Such information and materials, including those maintained in an electronic format, are trade secrets of Commerce and may not be retained for use nor removed from Commerce at the time employment ends. Maintaining the confidentiality of such proprietary information and trade secrets is a condition of continuing employment with Commerce.
B. Insider Information
- Confidential information may, in some instances, be considered "insider information" which if used or disclosed could subject the employees, officers or directors, Commerce, or persons outside to whom the information is communicated, to liability under federal and/or state securities law.
- "Insider information" is material non-public information about Commerce or any customer. The test of materiality is whether the information was of such importance that it could be expected to affect the judgment of investors as to buying, selling, or holding securities and which, if generally known, could be expected to affect the market price of the stock. The following types of non-public information have been found by the Securities and Exchange Commission and by the courts to affect investment decisions, thereby becoming "insider information":
- Change in dividend rate.
- Preliminary indication of a major development or new product.
- Sales, earnings, and cash flow projections showing a rapid rise in earnings.
- A sharp drop or increase in earnings.
- A sharply downward revised projection of earnings.
- Significant unexpected losses or gains.
- Negotiations as to possible mergers, acquisitions or "spin-offs" of business units.
- The matters listed above are not meant to include all situations that may involve "insider information." Obviously, the rule is difficult to apply in every circumstance; however, all employees, officers or directors must be extremely cautious in discussing non-public corporate affairs, ours and our customers', with outsiders.
- Employees, officers, and directors may not use "insider information" for securities trading purposes either for themselves or for others directly or by making recommendations to buy or sell a security based on such information.
II. Conflicts of Interest
A conflict of interest may be defined as any situation in which someone’s private interests conflict or are otherwise incompatible with the official responsibilities of that person to Commerce or any of its subsidiaries. Therefore, a conflict of interest would arise where any employee, officer or director or a relative has a personal interest, financial or other, in a customer, borrower, supplier, or other person or company dealing with Commerce. Expectations regarding managing personal finances and banking matters are provided in the Financial Responsibility policy adopted by Commerce. Each employee, officer or director must manage his or her personal and business affairs so as to avoid situations that might lead to a conflict, or even the appearance of a conflict, between the employee's, officer's or director's self-interest and his or her duty to Commerce, its customers and its shareholders. In any such situation, the person must disqualify himself from any activities concerning the conflicting interests.
A. Commitment of Corporate Funds
No employee, officer or director will commit funds of Commerce to a borrower or other entity when any part of those funds will be to the personal benefit, directly or indirectly, of the employee, officer or director committing the funds.
Investing by an officer or employee in securities of a publicly traded corporation is permissible without prior disclosure provided that the total ownership will not exceed 5% of any class or type of issued and outstanding stock or debt obligation of any corporation.
If any officer or employee or member of his or her immediate family invests, directly or indirectly, in a business in excess of 5% of any class of issued or outstanding securities of a corporation or any percentage of ownership in a partnership, limited liability company or operates a sole proprietorship doing business with Commerce, that investment must be reported to the Ethics Committee. Further, any Commerce officer or employee is not to service the account of such corporation or business as a loan officer or relationship manager or be in a purchasing position if it is a supplier to Commerce.
It should be noted that the rules relative to investment for certain Commerce Trust Company personnel are more restrictive than the rules set forth in this policy.
C. Purchase of Assets
Directors, officers and employees or members of their immediate family shall not purchase any real or personal property which Commerce owns or in which it has a security interest without prior approval obtained through the Ethics Committee, with full value being paid and the transaction properly documented on the books of Commerce. The property must also have been available to the general public.
No director, officer or employee or member of such person's immediate family shall purchase or sell any assets from or to or borrow funds from any fiduciary account being administered by Commerce, unless the purchase has been approved by appropriate court order.
D. Business Activities
No director, officer or employee shall engage in any self-dealing or otherwise trade on his/her position with Commerce. Neither can a director, officer or employee accept a business opportunity not generally available to the public from anyone doing, or seeking to do, business with Commerce.
III. Outside Activities
No Commerce officer or Commerce employee is to have an outside interest or employment that encroaches on the time or attention which should be devoted to the employee's corporate duties; adversely affects the quality of work performed; competes with the activities of Commerce; involves any use of the equipment, supplies or facilities of Commerce; infers sponsorship or support of Commerce on behalf of the outside employment or organization; or adversely affects the good name of Commerce. A Commerce officer or employee interested in outside employment must comply with established policies regarding notification of his/her manager.
A. Fiduciary Appointments
Except for a member of the officer's or employee's immediate family, prior approval obtained through the Ethics Committee is required before acceptance by an officer or employee of an appointment as a fiduciary or co-fiduciary (executor, administrator, guardian, trustee or conservator) either with any of the Commerce Banks or with another person, firm, or corporation. In accordance with industry standards, no officer or employee of a commercial bank may receive a fee for acting as co-fiduciary with the bank unless specific approval is made by its Board of Directors.
B. Outside Directorship, Partnerships, Sole Proprietorships or Other Business Entities
Prior approval obtained through the Ethics Committee is required before an officer or employee may accept a position as officer or director of a corporation or become a member of a partnership, limited liability company, sole proprietorship or other business entity doing business with Commerce.
C. Interlocking Affiliates
While there may be exceptions under certain circumstances, directors, officers, or employees of a commercial bank are prohibited by statute from dual service in the following areas:
- 1) Service in an organization primarily engaged in the issue, flotation, underwriting, public sale or distribution of stocks, bonds or other securities.
- 2) Service as a director, officer, or employee of any other non-affiliated financial institution (which includes banks, savings and loans, credit unions, bank or savings and loan holding companies) as prohibited by 12 C.F.R. Part 26.
- 3) Service as an officer or director of a public utility holding company or subsidiary.
D. Professional Organizations, Church, Charitable, Educational, Fraternal, or Other Civic Affairs
Officers and employees are encouraged to take part in professional organizations, church, charitable, educational, fraternal or other civic activities so long as such activities do not impair the performance of or conflict with company duties. It is also expected that such activity will reflect favorably upon Commerce.
E. Political Activities
No corporate funds are to be used for political contributions without the prior approval of the Chairman of the Board or the President of Commerce Bancshares, Inc. Any officer, employee or director participating in political activities does so as an individual and not as a representative of Commerce. To avoid any possible inference of corporate or affiliate company sponsorship or endorsement, the corporate name or address should not be used in mailed material or fund collection, nor should Commerce be identified in any advertisement or literature.
No director, officer, or employee is to engage in providing special favors or unusual gifts to elected officials or act in any manner that could be construed as a "pay-off" upon behalf of Commerce.
Any officer or employee desiring to become a candidate for an elective political office or to accept appointment to a national, state or local government office, board, commission committee, or similar entity must have such activity approved through the Ethics Committee. If such approval is granted and the officer or employee is subsequently elected or accepts an appointment, he or she must abstain from participating in discussions or voting on matters in which the interests of Commerce are affected.
IV. Relations with Customers
A. Borrowing from Customers
Officers or employees may not borrow either directly or indirectly, from a customer of the bank or any trust, corporation, partnership, limited liability company, or other entity owned or controlled by a customer or suppliers of Commerce, other than recognized lending institutions. Any borrowings from other lending institutions should be made on the same terms and conditions, including rates of interest and security, as such institution would charge or require from its regular borrowing customers. The term "borrow" does not include a purchase from a customer or supplier resulting in an extension of credit in the normal course of business, nor does this preclude borrowing from a relative who is a customer.
B. Signature/Transaction Authority
No officer, employee or director shall sign on customer's accounts, have access to customer's safe deposit boxes or otherwise represent or act for a customer whether at Commerce or another financial institution. This includes being designated as “payable on death” or having power of attorney for a customer as well as being a signer on an account for a charitable organization, church or professional organization with which associated. However, these restrictions do not apply to a director who is a licensed attorney and who is acting in such capacity with respect to a client who is a Commerce customer. In addition, these restrictions do not prohibit such acts where there is an ownership capacity or a close family relationship. Exceptions may be made, after review by the Ethics Committee, when a Commerce officer, employee or director is designated as treasurer (or similar position) for a professional, church, charitable, educational, fraternal organization or other civic affairs with accounts at Commerce.
V. Fidelity Coverage
Every officer and employee is covered by corporate fidelity bond. Commerce cannot continue to employ anyone who ceases to be eligible for this coverage.
- A.Coverage under the terms of our bond ceases as to anyone who has been found to have committed any dishonest or fraudulent act.
- B.All officers and employees must report to the Ethics Committee, or the Chief Executive Officer or any member of the Audit Committee any violation or suspected violation of the criminal laws as soon as it is discovered. Failure to make any such report constitutes a violation of this Code.
VI. Bank Bribery Law and Criminal Law Summary
A. Consistent with the provisions of the Bank Bribery Law, no Commerce official (any employee, officer, director, agent or attorney of Commerce) shall:
- Solicit for themselves or for a third party (other than Commerce itself) anything of value from anyone in return for any business, service or confidential information of Commerce, or
- Accept and retain anything of value including notary fees or other fees or payments (other than normal, authorized compensation) from anyone in connection with the business of Commerce either before or after a transaction is discussed or consummated.
Exceptions to the foregoing general prohibitions are:
- Acceptance of unsolicited gifts, amenities or favors based on obvious family or personal relationships (such as those between the parents, children, or spouse of a Commerce official) when the circumstances make it clear that it is those relationships, rather than the business of Commerce, which are the motivating factors;
- Acceptance of unsolicited meals, refreshments, travel arrangements or accommodations or entertainment of reasonable value in the course of a meeting or other occasion, the purpose of which is to hold bona fide business discussions;
- Acceptance of loans from other banks or financial institutions on customary terms to finance proper and usual activities of a Commerce official, such as home mortgage loans, except where prohibited by law;
- Acceptance of advertising or promotional material of nominal value such as pens, pencils, note pads, key chains, calendars and similar items;
- Acceptance of discounts or rebates on merchandise or services that do not exceed those available to other customers;
- Acceptance of unsolicited gifts of modest value (related to commonly recognized events or occasions, such as a promotion, new job, wedding, retirement, Christmas, or bar or bat mitzvah, but no gift from a single source should exceed $100.00. Acceptance of unsolicited occasional tickets to sporting events, concerts and the like of a reasonable value are permitted; however, this exception does not extend to season tickets, unreasonably numerous events, or extravagant events such as super bowls, out of town golf tournaments, or conventions and seminars where the business reason is merely incidental to the entertainment purpose.
- Acceptance of civic, charitable, educational, or religious organizational awards for recognition of service and accomplishment;
- Acceptance of a door prize, drawing or gift having a present value of $250 or less provided at an event sponsored by a professional organization or customer, vendor, supplier or consultant of Commerce; awards exceeding a present value of $250 may, at the suggestion of the officer or employee and with the concurrence of the event sponsor, be donated by the sponsor directly to a qualified charitable organization;
- Acceptance of an honorarium, travel, lodging or meal expenses for a speech or presentation at an event sponsored by a professional organization or customer, vendor, supplier or consultant of Commerce provided the employee or officer receives prior approval by the Ethics Committee.
In the event any employee, officer or director is offered, receives or anticipates receiving anything of value from a customer, vendor, supplier or consultant of Commerce beyond what is expressly authorized in the Code of Ethics, written disclosure of that fact shall be made promptly to the Ethics Committee. Likewise, if an employee, officer or director learns that another employee, officer or director will or may receive anything of value from a customer, vendor, supplier or consultant beyond what is expressly authorized herein, that information must be provided to the Ethics Committee for its investigation and review. In such instances, the disclosure will be reported by the Ethics Committee for review by senior management of Commerce Bancshares, Inc. For example, an employee cannot allow a customer to provide for that employee in his/her will or estate. If an employee becomes aware that a customer intends to do so, the employee must contact his/her manager immediately. Should such a bequest occur, the employee is obligated to refuse it.
B. The federal statutes contain laws prohibiting certain actions by officers and employees of financial institutions. Several of the more important activities prohibited are as follows:
- Theft, embezzlement or misapplication of funds or assets.
- Making extortionate extensions of credit.
- Unauthorized issuance of obligations or making or causing false entries to be made.
- Certifying a check drawn on an account in which there are not sufficient collected funds.
- Making any false statement or report to any federal bank examiner.
- The criminal laws also provide:
"Whoever knowing that an offense (breach of federal criminal law) has been committed receives, relieves, comforts or assists the offender in order to hinder or prevent his apprehension, trial or punishment is an accessory after the fact." An accessory after the fact is subject to fine and imprisonment as provided in the law.
VII. Accounting, Auditing and Recordkeeping
- A. Commerce has developed internal controls, standards and procedures to ensure that all Commerce assets are identified, protected and properly used, and that all business records, financial records and other reports are reliable, accurate and timely prepared and maintained. All directors, officers and employees are responsible for complying with all internal controls and recordkeeping standards and procedures.
- B. All of Commerce’s financial reports, accounting records, auditing records, expense records, research reports and all supporting documentation must accurately and clearly present the facts and true nature of each reported transaction. False or misleading entries, improper, incomplete or inaccurate documentation or financial reporting is against Commerce policy.
- C. All records of Commerce must be retained or destroyed according to Commerce’s record retention policies.
- D. The Commerce “Financial Complaints Policy" provides Commerce employees an avenue for anonymous reporting of any audit or financial concerns.
- E. The “Financial Responsibility Policy” clarifies expectations with regard to how Commerce employees manage their own financial affairs and banking transactions. Among its provisions, it prohibits processing transactions on one’s own account and requires that employees use established banking channels.
VIII. General Business Conduct
- A. Directors, officers and employees shall not make any false entries in Commerce’s records, create false transactions, alter documents or sign documents if such person lacks the authority to do so; shall not direct an employee to make an entry or process a transaction that violates or ignores any Commerce policy nor make such an entry or process a transaction themselves.
- B. Directors, officers and employees having supervisory authority shall not direct, improperly influence or coerce any other employee to take any action that violates or ignores this Code, any law, regulation or bond, for example, directing an employee holding a notary commission or signature guaranty authority to execute a notary certificate or document if such employee believes to do so would be improper or inappropriate.
IX. Enforcement Mechanism, Incident Reporting and Investigations
- A. The Ethics Committee has the responsibility to administer and enforce the provisions of this Code of Ethics. The Ethics Committee may investigate matters upon its own initiative or as requested from any employee, officer or director. The Ethics Committee has the authority to collect statements, reports and documentation to aid in its investigation as well as to interview individuals, including the person whose conduct is at issue. Upon consideration of the factual information available to the Ethics Committee, it will determine whether a violation of the Code of Ethics has occurred and, whether a waiver should be granted. Waivers will not be granted by the Ethics Committee for executive officers or directors; corporate governance policies require that any waivers or exceptions for directors and executive officers be obtained only through the board of directors of Commerce Bancshares or the Commerce Bancshares audit committee. If a violation has occurred, the Senior Human Resources Executive will be notified. The Ethics Committee may, from time-to-time, adopt such rules of procedure to govern its internal functioning, as it deems appropriate.
- B. All directors, officers and employees are expected and encouraged to report any suspected violations of the Commerce Code of Ethics or any of its policies or of any statute or regulation to the Ethics Committee or a representative of the Human Resources, Security or Legal departments. Reports may be made anonymously. Cooperation by all directors, officers and employees in the investigation and resolution of any suspected violation is essential to the successful enforcement of Commerce’s Code of Ethics and its corporate policies.
- C. No employee, officer or director will be penalized or be made subject to any corrective action as the result of good faith reporting of suspected violations of the Code of Ethics. Further, as required by the Sarbanes-Oxley Act of 2002, Commerce has adopted a Financial Matters Complaint Policy and its associated reporting process that provides an anonymous means to report concerns about accounting, auditing, and other financial matters.
A waiver of any provision of the Code of Ethics for an executive officer or director may only be granted by the Board of Directors. Any such waiver and the reasons for the waiver must be promptly reported by the Board of Directors to the shareholders in the format and within the timeframe required by regulatory authority.
All directors, officers and employees are expected to read and understand this statement of policy and to review it periodically in order to be alert to situations that might involve, appear to involve, or have the potential to result in a violation of this Code. Any questions regarding the guidelines should be directed to the Ethics Committee, or the Chief Executive Officer. This Code will be provided as a supplement to the Employee Handbook as well as the Human Resources Policy Manual, and is expected to be understood and complied with by all Commerce employees.
XII. Annual Officer Statement
As part of this policy, each officer will be expected to annually certify to the Auditor of Commerce Bancshares, Inc. that he or she is familiar with and in compliance with this Code.
XIII. Posting of Policy
- The following policy statement applies to all employees and is to be posted on all Commerce bulletin boards and placed in all human resources policy manuals:
"All directors, officers, and employees in the banking industry automatically assume responsibility for seeking the confidence and trust of their customers and stockholders. It is the goal of Commerce Bancshares to assure the community that all corporation transactions are handled with propriety, confidentiality, and the honesty required to further gain and retain public trust. We in Commerce Bancshares seek your support of this goal. You must constantly analyze your duties as a bank employee in order to avoid any actions that could be interpreted as a conflict of interest or breach of public faith. It is also your duty to report to your superiors or to the management of Commerce Bancshares or to any member of its Audit Committee any known or suspected activities of others which conflict with this policy. Any employee acting in any manner which discredits the corporation through a dishonest or fraudulent act will be subject to termination. With your understanding and support of this and our other goals, Commerce Bancshares will continue to be a leader in the banking community by maintaining the highest standards of ethics."
Commerce Bancshares, Inc. (“Commerce”) requires compliance with its Code of Ethics (“Commerce Code of Ethics”) by all its officers, employees and directors and the officers, employees and directors of all of its subsidiaries. In addition to that Code of Ethics, the Board of Directors has adopted the following Code of Ethics (“Code”) relating to conduct in the financial and accounting areas of the company. The Code shall apply to:
- President and Chief Executive Officer
- Chief Financial Officer
- Chief Accounting Officer and Controller
- Assistant Controllers
- Vice President, Finance, and
- Other Designated Finance Employees
Those individuals (referred to herein as Senior Financial Officers or “you”) because of their roles and positions with the Company have the responsibility for financial management and reporting to the Board of Directors, regulators and stockholders. This Code provides the principles by which they conduct their duties.
Code of Ethics
Compliance with Laws and Regulations
You will conduct your duties in accordance with all applicable laws and regulations. You will encourage all those responsible to you to also comply with those laws and regulations. You will stay informed on those laws and regulations applicable to the Company and your duties and ensure that those reporting to you are also informed.
Conflicts of Interest
You must avoid any personal activity or association that could appear to influence your judgment or affect the best interests of the Company. You will refer to the Commerce Code of Ethics for guidance on those activities that create or give the impression of creating a conflict of interest. You will seek the guidance of the company's Ethics Committee on any questions you may have on conflicts of interest.
Financial Reporting and Disclosure
You recognize that Senior Financial Officers have the primary responsibility for the accurate and timely reporting of the financial condition and performance of the Company. You will work, and encourage those who are responsible to you, to provide full, fair, accurate, complete, objective and timely financial disclosures to the Board of directors, stockholders, the Securities and Exchange Commission and all banking regulators. You will maintain all books and records and reflect all transactions accurately and completely.
You will respect the confidentiality of information acquired in the course of my work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of your work is not to be used for personal advantage.
You will promptly report any violations of this Code or the Commerce Code of Ethics observed by you to such persons as appropriate. Those persons might include your immediate supervisor, the Chief Executive Officer, the Auditor, the General Counsel or the Chairman of the Ethics Committee. You may also use the Complaint Procedures that have been established by the Audit Committee of the Board of Directors. You understand that any such reporting is confidential and that you are fully protected from retaliation.
Waivers, Amendments and Violations
No waivers of any provision of this Code may be made except by the Ethics Committee or the Board of Directors. Only the Board of Directors may amend this Code. Any waiver or amendment shall be reported as required by law or regulation. You understand that any violation of this Code can lead to disciplinary action including termination.
The purpose of the Related Party Transaction Policy (“Policy”) is to establish a procedure for the identification and approval of transactions by Commerce Bancshares, Inc. (“Company”) with those persons deemed “related parties,” as defined herein, that are material or not in the ordinary course of business.
- As used herein, the term “Related Party” shall mean:
- a. Any person who is or was an executive officer, director or nominee for election as a director since the beginning of the last fiscal year; or
- b. Any person or group of persons that beneficially owns more than 5% of the Company’s voting securities; or
- c. Any family member of any of the foregoing, which shall include any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and anyone, other than an employee or tenant, residing in such person’s home; or
- d. Any firm, corporation or other entity in which any of the foregoing or employed or have a material interest within the meaning of Item 404 of Regulation S-K (12 CFR 229.10 et seq.).
- The General Counsel of the Company shall annually provide a questionnaire to all directors and executive officers requesting information on Related Parties. It is the obligation of directors and executive officers to complete or update the form upon request. The General Counsel shall develop a master list of all Related Parties from the information on the questionnaires and provide it to the Controller of the Company.
- The Controller of the Company shall:
The General Counsel or other designated member of the Company’s legal staff shall:
- a. Maintain the list in the records of the Company;
- b. Distribute the list to the appropriate officers and employees of the Company so that transactions with Related Parties may be identified;
- c. Compare the list against payments made by the Company on a quarterly basis; and
- d. Report the results of the comparison to the General Counsel.
The following shall be considered, but not necessarily controlling, in any determination of materiality:
- a. Review all reported or proposed transactions and the results of the quarterly comparison for a determination as to whether any transaction is material and falls within this Policy;
- b. Refer any questions of materiality to the Disclosure Committee with an opinion if appropriate;
- c. Refer any material transactions or proposed transactions to the Board of Directors or Audit Committee for approval where appropriate; and
- d. Where appropriate, provide for the disclosure of any material Related Party transaction in the Company’s Proxy Statement.
The following transactions are exempt from any determination as a Related Party Transaction and shall be deemed pre-approved:
- a. Whether the amount involved in any transaction or series of transactions is greater than $120,000;
- b. Whether the transaction falls within an exemption provided by Item 404(a) of Regulation S-K;
- c. Whether the transaction is within the normal course of business for the Company or its subsidiaries on terms and conditions that are no less favorable to the Company than similar transactions with unrelated persons;
- d. Whether, based on principles of corporate transparency, the transaction would be material to investors; and
- e. Whether the transaction falls within any provision of the Company’s Code of Ethics.
The Board of Directors or Audit Committee shall review the material facts of any Related Party Transaction submitted for approval. If advance approval is not feasible, then the Board of Directors or Audit Committee shall consider the Related Party Transaction at its next regularly scheduled meeting for ratification, or the transaction, if legally possible, must be rescinded. In making its determination to approve or ratify, the Board of Directors or Audit Committee shall consider:
- a. Compensation paid to a person for service as a director or executive officer;
- b. Transactions with a Related Party for trust, funds depositary or similar payment services with fees based on those for the same or similar transactions with non-related persons;
- c. Transactions with Related Parties that are the result of a competitive bidding process or involving the rendering of services as a common carrier, or public utility at rates or charges fixed in conformity with law or governmental authority;
- d. Any transaction in which the Related Party’s interest arises solely from the ownership of the Company’s equity securities and all holders of the Company’s equity securities receive the same benefit on a pro rata basis, such as dividends; and
- e. Transactions available to employees in general.
No director of the Company may engage in any Board or Committee discussion or approval of any Related Party Transaction in which he or she is a Related Party; provided however, that such director must provide to the Board or Committee all material information reasonably requested concerning the Related Party Transaction.
- a. The extent of the Related Party’s interest;
- b. The availability of other sources of comparable products or services;
- c. Whether the terms of the Related Party Transaction are no less favorable than terms generally available in non-related transactions under like circumstances;
- d. The benefit to the Company; and
- e. The aggregate value of the Related Party Transaction.