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Misuse of Position or Information



Category: Corporate Governance

To avoid even the appearance of improper use of position, members of Supervisory Council should regard all information received as strictly confidential, regardless of its apparent materiality, and decline to discuss any matter related to the corporation except for the purpose of advancing its business.

This duty extends beyond refraining from taking advantage of the bank: loyalty also commands that members of Council not take advantage of their position even though no demonstrable harm may result to the bank from their actions.

Members of Council are not permitted to use information gained in their capacity for personal gain or to extract a personal benefit from a third party by promising to grant or threatening to withhold corporate business.

Compensation

Excessive compensation violates the duty of loyalty. As a practical matter, the most troublesome questions in this area are likely to involve allegations of excessive consumption of perquisites or other forms of implicit compensation.

Conflicts of Interest

Loyalty issues are also involved whenever a member of Supervisory Council has a personal interest in a transaction to which the bank is also a party.

The most prudent course of action for all members of Supervisory Council is to confine their relations with the bank to service on the Council.

Members of Supervisory Council have a legal conflict of interest whenever they, a family member, or any entity in which they have a significant financial interest or role enter into a material transaction with the bank. In conflict situations, the conflicted member and the Council should be concerned about the substantive fairness of the transaction and the manner in which it is effected. The price and terms of the transaction must be at least as favorable to the bank as it would have been in an arm’s-length transaction with a stranger. The conflict of interest matter should be sufficiently documented in the minutes, the conflicted member should withdraw from the meeting and not vote as well as should not pressure other members of Council to vote in his favor.

All members of Supervisory Council should take an especially hard look at any conflict situation, treat their colleague as though he or she were a stranger, and resolve all doubts against the conflicted member.


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