Ensure strong corporate governance oversight including an effective risk management framework to support a growing organization.
Corporate Governance Practices to Support a Growing Organization
Bridgewater continues to build-out and enhance its corporate governance practices following the initial public offering in 2018 and strong growth trajectory over the past few years. By making incremental investments in our enterprise risk management program, preparing for our first say-on-pay proposal in 2024, and implementing board oversight of our ESG program, we are creating a scalable corporate governance framework to support our organization for years to come.
Board of Directors
As of December 31, 2022, we had 10 directors on our Board, including eight independent directors. The Board provides oversight of our business and monitors the performance of our management teams through three standing committees: 1) Audit Committee, 2) Compensation Committee, and 3) Nominating and ESG Committee, all of which include only independent directors.
Because of our joint Chairman/Chief Executive Officer role, the Board felt it was prudent to appoint a lead independent director. In 2020, David B. Juran was appointed to serve in this role and fulfill the duties outlined in our Corporate Governance Guidelines. With a strong lead independent director, Board committees composed only of independent directors, and the efficiencies achieved in having the roles of Chairman and Chief Executive Officer combined, the Board feels the appropriate structure is in place to ensure we meet the expectations of our shareholders.
More information on our Board of Directors and committees can be found here.
The Nominating and ESG Committee regularly assesses the diversity of the board, including tenure, gender, ethnicity, skills and perspective. The Board is composed of directors with a mix of tenure, with longer serving directors providing important experience and institutional knowledge and newer directors providing fresh perspective to deliberations. The average tenure of our non-employee directors is 9.6 years with 50% having been on the Board fewer than six years.
The Board recognizes the importance of director diversity by gender and ethnicity and the positive impact this can have in terms of the perspectives and counsel the Board provides to management. As of December 31, 2022, 20% of the directors self-identified as women or ethnic minorities.
We compensate our executives through a combination of base salary, annual bonus, equity awards, earnings credited under our Deferred Incentive Plan, and other benefits including perquisites. We do not have a required holding period and we do not feel it is necessary given the overall holdings of our executive team. Notable attributes of our executive compensation program include the following:
What We Do
What We Don't Do
Independent compensation consultant retained by and reports to the Compensation Committee
No hedging of stock
Actively developing new performance-based incentive program
No excessive perquisites
Minimum restricted stock vesting period of one year for employee participants
No “single trigger” severance upon a change-in-control
Peer group benchmarking
No tax gross-ups in employment agreements
Use balanced mix of cash and equity compensation and annual and long-term incentives
No guaranteed annual bonus for NEOs
In November 2020, the Board developed and adopted stock ownership and retention guidelines for non-employee directors as another way to align the long-term interests of directors with those of our shareholders. Within five years of the effective date of the policy or their election to the Board, directors are expected to own shares of common stock equal to or greater than four times the annual cash retainer of each director.
As an “emerging growth company” under the JOBS Act of 2012, Bridgewater is not required to include a Say-on-Pay proposal for shareholder vote until 2024. In preparation, we are in the process of working with our compensation consultant, Pearl Meyer, to review and evaluate our current executive compensation practices.
Corporate Governance Guidelines
The Board adopted Corporate Governance Guidelines that govern all aspects of the Board including membership, leadership, nominations and criteria, term limits, expectations, board meetings, committees and independence.
Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics provides the ethical expectations we have for all officers, directors and employees every day. This policy covers the following:
- Honest and Ethical Conduct
- Conflicts of Interest
- Employees with Disabilities
- Harassment- and Violence-Free Workplace
- Privacy of Employee Information
Other Corporate Governance Policies
- Insider Trading Policy – prevents illegal insider trading of Bridgewater securities during certain blackout periods or while in possession of material, non-public information.
- Related Party Transaction Policy – provides oversight of potential transactions between Bridgewater and related persons, including directors and executive officers.
- Whistleblower Policy – ensures a channel of communication exists to report concerns about the conduct of Bridgewater Bancshares or any of its people and to provide assurances that any such report will not result in retaliation
As we continue to build out our ESG program, it is important to have input from key stakeholders on the aspects of ESG that are most important for small-cap banks like Bridgewater. During 2022, we began more formally engaging with investors to understand their views and expectations regarding ESG. This included raising the topic of ESG during one-on-one investor meetings and proactively reaching out to certain investors to offer dedicated time to discuss ESG-related topics.
As a result, in 2022 we engaged with investors owning over 9 million shares, representing over 50% of our total institutional ownership as of December 31, 2022. The feedback we received from the outreach has provided insight that is being used as we continue to prioritize and expand our ESG program. We look forward to maintaining ongoing dialogue to ensure we understand the evolving ESG views of our investors.
Enterprise Risk Management (ERM)
Philosophy and Framework
Our risk management philosophy is to manage and mitigate dynamic risks while enhancing shareholder value, being responsive to clients, and delivering simple solutions in unconventional ways. We continue to make key investments in the scalability of our enterprise risk framework to support our strong growth trajectory and to help identify, quantify and manage emerging and evolving risks.
Our ERM framework has benefited significantly from a bank-wide approach to risk management led by our Chief Risk Officer and owned by leaders across all functions. The ERM program has continued to advance in preparation for continued growth and evolving risk landscapes. This includes the following:
- Proactively addressing emerging risks across all risk categories
- Continuing to scale a risk framework aligned with growth
- Leveraging technology to enhance processes and controls while driving responsiveness
- Reinforcing operational and financial resilience through all three lines of defense
- Making investments to bolster organizational resiliency and vendor/third-party risk management
- Proactively making enhancements to ESG and DE&I programs as well as committing to recruitment and retention strategies
We are also focused on being well-positioned to proactively identify and mitigate emerging risks. With an enhanced enterprise-wide Risk Appetite Statement and the recruitment of highly skilled risk professionals, we are actively identifying, monitoring, measuring and managing risk across the organization. Additionally, Bridgewater is well positioned for regulatory and market changes through proactive capital management and implementation of Current Expected Credit Losses (CECL) and Sarbanes-Oxley (SOX). Additionally, our strong and consistent credit underwriting, along with segment expertise, are hallmarks of how we proactively manage credit risk. We take great pride in our risk management culture driven by robust team member engagement throughout the organization.
Bridgewater’s full Board of Directors oversees enterprise risk management with each Board committee assuming a different and important role in overseeing the management of the risks we face. The management-level Enterprise Risk Management Committee (ERMC), which consists of our Strategic Leadership Team and other select functional leaders, is responsible for implementing and reporting to the Board regarding critical and emerging risks, the effectiveness of our control environment, our enterprise risk profile and risk management processes. The ERMC reports to both the full Board of Directors and the Audit Committee at least quarterly. We believe this division of risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks.
We provide ongoing, robust training programs to ensure team members across all three lines of defense know how to identify and mitigate potential issues. In 2022, training on various topics including bank security; Bank Bribery Act; Community Reinvestment Act; harassment; Fair Lending; cyber security; data privacy; and identity theft was completed by all team members, including management. In addition, Bridgewater hosts an annual Training Day in which all team members receive annual regulatory compliance, Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) training, as well as other training specific to their role.
Bridgewater has a robust BSA/AML program in place to monitor and report suspicious activity while following customer identification and other regulatory guidelines. Annually, the BSA/AML program is independently audited to ensure we are adhering to legal and regulatory requirements as well as seeking continuous improvement of our program and systems.
Information and Data Security
We recognize that one of the most impactful emerging risks in our industry is cybersecurity. As a result, we have developed a proactive approach to identifying and addressing information and data security risks. Key attributes of this approach include the following:
- Investment in enhanced infrastructure and security protocols
- Partnership with industry-leading service providers to aid in monitoring
- Effective risk culture and awareness model with ongoing training initiatives
Bridgewater maintains a roadmap to ensure ongoing investment and enhancements to our cybersecurity program. In 2022, we continued to enhance our cybersecurity-related SOX Control framework, began making improvements to identify access management processes, and further enhanced our critical vendor due diligence processes with an eye toward cyber and information security.
All team members are required to complete an annual information security training course. In addition, social engineering training and education is conducted throughout the year.
The ERMC provides an update on information and data security to the Board at least quarterly, with emerging issues being addressed more frequently as needed. Our Information Security program undergoes external audits on an annual basis and maintains cybersecurity insurance coverage.