Title: FINAL RULE--Organization; Disclosure to Shareholders; FCS Board Compensation Limits--12 CFR Parts 611 and 620
Issue Date: 04/06/1999
Federal Register Cite: 64 FR 16617
FARM CREDIT ADMINISTRATION
12 CFR Parts 611 and 620
Organization; Disclosure to Shareholders; FCS Board Compensation Limits
ACTION: Final rule.
SUMMARY: This final rule amends Farm Credit Administration (FCA) regulations on Farm Credit System (System or FCS) bank director compensation. The amendment removes the requirement for FCS banks to obtain our prior [*16618] approval before paying their directors more than the generally applicable limit.
EFFECTIVE DATE: This regulation will become effective 30 days after publication in the Federal Register during which either or both houses of Congress are in session. We will publish a notice of the effective date in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Alan Markowitz, Senior Policy Analyst, Office of Policy and Analysis, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4479; or Rebecca S. Orlich, Senior Attorney, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: We adopt these amendments without change from the proposed rule (63 FR 49305, September 15, 1998), as part of our continuing efforts to reduce the burden of regulatory compliance. We amend § 611.400 to remove the requirement for System banks to obtain our prior approval before paying director compensation in excess of the generally applicable limit. Section 4.21(a) of the Farm Credit Act of 1971, as amended (Act), provides for the maximum amount of annual compensation that System banks may ordinarily pay to directors. Section 4.21(b) authorizes us to waive this limitation under exceptional circumstances. The amended rule provides that:
. Banks may pay a director more than the maximum amount when a director has spent extraordinary time and effort on bank business in exceptional circumstances.
. The additional compensation may not exceed 30 percent of the annual limit.
. Each bank must have a written policy describing any exceptional circumstances under which the board will pay additional compensation.
. Banks must document the exceptional circumstances for each case in which additional amounts are paid.
We also make a conforming amendment to § 620.5(i)(1), regarding disclosure of additional compensation in the annual report to shareholders.
We received comments on the proposed rule from the Farm Credit Council on behalf of its member banks; Western Farm Credit Bank; AgAmerica, FCB; and CoBank, ACB (CoBank). All commentors agreed with us that elimination of our prior approval reduces regulatory burden while preserving the requirement that banks pay additional compensation only in exceptional circumstances. The following excerpt from CoBank's comment was typical of the comments we received. "Since FCA can and will effectively monitor the payment of director compensation through the examination process, CoBank believes it is both fair and achievable to allow the Banks to make additional compensation determinations based on exceptional circumstances and the documentation to support such compensation."
List of Subjects
12 CFR Part 611
Agriculture, Banks, banking, Rural areas.
12 CFR Part 620
Accounting, Agriculture, Banks, banking, Reporting and recordkeeping requirements, Rural areas.
For the reasons stated above, parts 611 and 620 of chapter VI, title 12 of the Code of Federal Regulations are amended to read as follows:
1. The authority citation for part 611 continues to read as follows:
Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 4.20, 4.21, 5.9, 5.10, 5.17, 7.0-7.13, 8.5(e) of the Farm Credit Act (12 U.S.C. 2011, 2021, 2071, 2091, 2121, 2142, 2183, 2203, 2208, 2209, 2243, 2244, 2252, 2279a-2279f-1, 2279aa-5(e)); secs. 411 and 412 of Pub. L. 100-233, 101 Stat. 1568, 1638; secs. 409 and 414 of Pub. L. 100-399, 102 Stat. 989, 1003, and 1004.
Subpart D--Rules for Compensation of Board Members
2. Section 611.400 is amended by revising paragraphs (c) and (d)(3) to read as follows:
§ 611.400 -- Compensation of bank board members.
* * * * *
(c)(1) A Farm Credit bank is authorized to pay a director up to 30 percent more than the statutory compensation limit in exceptional circumstances where the director contributes extraordinary time and effort in the service of the bank and its shareholders.
(2) Banks must document the exceptional circumstances justifying additional director compensation. The documentation must describe:
(i) The exceptional circumstances justifying the additional director compensation, including the extraordinary time and effort the director devoted to bank business; and
(ii) The amount and the terms and conditions of the additional director compensation.
(d) * * *
(3) The exceptional circumstances under which the board would pay additional compensation for any of its directors as authorized by paragraph (c) of this section.
* * * * *
PART 620--DISCLOSURE TO SHAREHOLDERS
3. The authority citation for part 620 continues to read as follows:
Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act (12 U.S.C. 2252, 2254, 2279aa-11); sec. 424 of Pub. L. 100-233, 101 Stat. 1568, 1656.
Subpart B--Annual Report to Shareholders
§ 620.5 -- [Amended]
4. Section 620.5(i)(1) is amended by removing the words "under which a waiver of section 4.21 of the Act was granted by the FCA" and adding in their place the words "justifying the additional director compensation as authorized by § 611.400(c)(1) of this chapter" in the second sentence.
Dated: March 30, 1999.
Vivian L. Portis,
Secretary, Farm Credit Administration Board.
[FR Doc. 99-8310 Filed 4-5-99; 8:45 am]