EWBC PROXY DEC 31 2005
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o Preliminary
Proxy
Statement
o Confidential,
for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive
Proxy
Statement
o Definitive
Additional Material
o Soliciting Material Pursuant
to
Section 240.14a-12
East
West Bancorp, Inc.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No
fee required.
o Fee
computed on table
below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)
Title
of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total
fee paid:
o Fee
paid
previously with preliminary materials.
o Check
box if any part of
the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the
filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the
date of
its filing.
(1)
Amount Previously Paid:
(2)
Form,
Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date
Filed:
Persons
who are to respond to the collection of information contained in this form
are
not required to respond unless the form displays a currently valid OMB control
number.
East
West Bancorp, Inc.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD MAY 25, 2006
Notice
is
hereby given that the annual meeting (the "Meeting") of the stockholders of
East
West Bancorp, Inc. (the “Company”) will be held at East West Bancorp, Inc., 135
N. Los Robles Avenue, 6th
Floor,
Pasadena, California on May 25, 2006, beginning at 2:00 p.m. for the
following
purposes:
1. |
Election
of Directors.
The election of three persons as directors for terms expiring in
2009 and
to serve until his or her successors are elected and qualified, as
more
fully described in the accompanying Proxy Statement;
|
2. |
Ratification
of Auditors.
Ratify
the appointment of Deloitte
& Touche LLP
as
the Company's independent auditors.
|
3. |
Other
Business. The
transaction of such other business as may properly come before the
Meeting
or any postponement or adjournment of the
Meeting.
|
Properly
signed proxy cards permit the proxy holder named therein to vote on such other
business as may properly come before the Meeting and at any and all adjournments
thereof, in their discretion. As of the date of mailing, the Board of Directors
of the Company is not aware of any other matters that may come before the
Meeting.
Only
those stockholders of record at the close of business on March 27, 2006 shall
be
entitled to notice of and to vote at the Meeting.
YOUR
VOTE
IS VERY IMPORTANT. STOCKHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY
IN THE POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT THEY
PLAN TO ATTEND THE MEETING IN PERSON. STOCKHOLDERS WHO ATTEND THE MEETING
MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON IF THEY WISH TO DO
SO.
|
By
order of the Board of Directors
|
|
|
|
DOUGLAS
P. KRAUSE
Executive
Vice President, General Counsel
and
Corporate Secretary
|
Pasadena,
California
March
27, 2006
|
|
East
West Bancorp, Inc.
135
N. Los Robles Avenue, 6th
Floor
Pasadena,
California 91101
(626)
768-6000
PROXY
STATEMENT
For
ANNUAL
MEETING OF STOCKHOLDERS
To
be held May 25, 2006
GENERAL
INFORMATION
This
Proxy Statement is furnished in connection with the solicitation of proxies
by
the Board of Directors ("Board of Directors" or “Board”) of East West Bancorp,
Inc. (the “Company”) for use at its annual meeting ("Meeting") of stockholders
to be held on May 25, 2006 at East West Bancorp, Inc., 135 N. Los Robles Avenue,
6th
Floor,
Pasadena, California, at 2:00 p.m. and at any adjournment thereof. This Proxy
Statement and the enclosed proxy card ("Proxy") and other enclosures are first
being mailed to Stockholders on or about April 10, 2006. Only stockholders
of
record on March 27, 2006 ("Record Date") are entitled to vote in person or
by
proxy at the Meeting or any adjournment thereof. The mailing address of the
Company’s principal executive office is 135 N. Los Robles Avenue, 7th
Floor,
Pasadena, California 91101.
Matters
to be Considered
The
matters to be considered and voted upon at the Meeting will be:
1. |
Election
of Directors.
The election of three persons as directors for terms expiring in
2009 and
to serve until his or her successors are elected and qualified. The
Board
of Directors' nominees are:
|
|
John
Kooken
Jack
C. Liu
Keith
W. Renken
|
2. |
Ratification
of Auditors.
Ratify
the appointment of Deloitte
& Touche LLP
as
the Company's independent auditors.
|
3. |
Other
Business.
The transaction of such other business as may properly come before
the
Meeting or any postponement or adjournment of the
Meeting.
|
Costs
of Solicitation of Proxies
This
solicitation of Proxies is made on behalf of the Board of Directors of the
Company and the Company will bear the costs of solicitation. The expense of
preparing, assembling, printing and mailing this Proxy Statement and the
materials used in this solicitation of Proxies also will be borne by the
Company. It is contemplated that Proxies will be solicited principally through
the mail, but directors, officers and employees of the Company may solicit
Proxies personally or by telephone. Although there is no formal agreement to
do
so, the Company may reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in forwarding these
proxy
materials to their principals. The Company does not intend to utilize the
services of other individuals or entities not employed by or affiliated with
it
in connection with the solicitation of Proxies.
Outstanding
Securities and Voting Rights; Revocability of Proxies
The
authorized capital stock of the Company consists of 200,000,000 shares of common
stock, par value $0.001 per share (“Common Stock”), of which 60,604,602 shares
were issued and outstanding on the Record Date, and 5,000,000 shares of serial
preferred stock, par value $0.001 per share, of which no shares were issued
and
outstanding on the Record Date. A majority of the outstanding shares of Common
Stock constitutes a quorum for the conduct of business at the Meeting.
Abstentions and broker non-votes will be treated as shares present and entitled
to vote for purposes of determining the presence of a quorum. Each stockholder
is entitled to one vote, in person or by proxy, for each share of Common Stock
standing in his or her name on the books of the Company as of the Record Date
on
any matter submitted to the stockholders.
The
Company's Certificate of Incorporation does not authorize cumulative voting.
For
the election of directors, the persons receiving the highest number of votes
“FOR” will be elected. Accordingly, abstentions, broker non-votes and votes
“WITHHELD” in the election of directors have no legal effect.
Unless
otherwise required by law, the Certificate of Incorporation, or Bylaws, the
ratification of auditors and other proposals that may properly come before
the
Meeting require the affirmative vote of the majority of shares present in person
or by proxy at the Meeting and entitled to vote.
A
Proxy
for use at the Meeting is enclosed. The Proxy must be signed and dated by you
or
your authorized representative or agent. You may revoke a Proxy at any time
before it is exercised at the Meeting by submitting a written revocation to
the
Secretary of the Company or a duly executed Proxy bearing a later date or by
voting in person at the Meeting. Attendance at the Meeting will not in and
of
itself constitute revocation of a proxy.
Brokers
who hold shares of Common Stock for the accounts of their clients (who hold
their shares in “street name”) may vote such shares either as directed by their
clients or in their own discretion if permitted by the stock exchange or other
organization of which they are members. Members of the New York Stock
Exchange (“NYSE”) are permitted to vote their clients’ proxies in their own
discretion as to the election of directors if the clients have not furnished
voting instructions within ten days of the meeting. Certain proposals other
than
the election of directors are “non-discretionary” and brokers who have received
no instructions from their clients do not have discretion to vote on those
items. When a broker votes a client’s shares on some but not all of the
proposals at a meeting, the missing votes are referred to as “broker non-votes”.
There are no broker non-votes on the election of directors (Proposal No. 1)
and
the ratification of auditors (Proposal No. 2) and abstentions will have no
effect on either proposal.
Unless
revoked, the shares of Common Stock represented by properly executed Proxies
will be voted in accordance with the instructions given thereon. In the absence
of any instruction in a properly executed Proxy, your shares of Common Stock
will be voted “FOR” the election of the nominee for director set forth
herein.
The
enclosed Proxy confers discretionary authority with respect to matters incident
to the Meeting and any other proposals which management did not have notice
of
at least 45 days prior to the date on which the Company mailed its proxy
material for last year’s annual meeting of stockholders. As of the date hereof,
management is not aware of any other matters to be presented for action at
the
Meeting. However, if any other matters properly come before the Meeting, the
Proxies solicited hereby will be voted by the Proxyholders in accordance with
the recommendations of the Board of Directors.
BENEFICIAL
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The
following table sets forth the beneficial ownership of Common Stock as of the
Record Date by (i) each person known to the Company to own more than 5% of
the outstanding Common Stock, (ii) the directors and nominees for director
of the Company, (iii) the Chief Executive Officer and the other four most
highly compensated executive officers of the Company and its subsidiaries (the
“Named Executives”), and (iv) all executive officers and directors of the
Company and its subsidiaries, as a group:
|
|
Common
Stock
|
|
|
Number
of Shares
|
|
|
Percent
|
|
|
Beneficially
|
|
|
of
|
Name
and Address of Beneficial Owner
|
|
Owned(1)(2)
|
|
|
Class(2)
|
|
|
|
|
|
|
FMR
Corporation (3)
|
|
5,380,981
|
|
|
8.88%
|
82
Devonshire Street
|
|
|
|
|
|
Boston,
MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
Neuberger
Berman Inc. (4)
|
|
3,992,816
|
|
|
6.59%
|
605
Third Ave.
|
|
|
|
|
|
New
York, NY 10158
|
|
|
|
|
|
|
|
|
|
|
|
T.
Rowe Price Associates, Inc. (5)
|
|
3,037,000
|
|
|
5.01%
|
100
E. Pratt Street
|
|
|
|
|
|
Baltimore,
MD 21202
|
|
|
|
|
|
|
|
|
|
|
|
Tseng
Yun Tsai (6)
|
|
3,138,701
|
|
|
5.18%
|
|
|
|
|
|
|
Dominic
Ng
|
|
1,598,706
|
|
|
2.64%
|
Wellington
Chen
|
|
16,294
|
|
|
*
|
Peggy
Cherng
|
|
140,881
|
|
|
*
|
Rudolph
I. Estrada
|
|
2,414
|
|
|
*
|
Julia
S. Gouw
|
|
379,591
|
(7)
|
|
*
|
John
Lee
|
|
326,932
|
(8)
|
|
*
|
William
J. Lewis
|
|
52,767
|
|
|
*
|
Herman
Y. Li
|
|
36,325
|
|
|
*
|
Jack
C. Liu
|
|
34,539
|
|
|
*
|
John
Kooken
|
|
19,843
|
|
|
*
|
Douglas
P. Krause
|
|
89,336
|
|
|
*
|
Keith
W. Renken
|
|
52,533
|
|
|
*
|
All
Directors and Executives Officers, as a group (12
persons)
|
|
2,750,161
|
|
|
4.54%
|
_______________
* Less
than
1%.
(1)
|
Except
as otherwise noted and except as required by applicable community
property
laws, each person has sole voting and disposition powers with respect
to
the shares.
|
(2)
|
Shares
which the person (or group) has the right to acquire within 60 days
after
the Record Date are deemed to be outstanding in calculating the ownership
and percentage ownership of the person (or group). Specifically,
the
following individuals have the right to acquire the shares indicated
after
their names upon the exercise of such stock options: Mr. Ng, 1,322,550;
Ms. Gouw, 216,050; Ms. Cherng, 15,000; Mr. Lewis, 46,400; Mr. Li,
17,500;
Mr. Liu, 29,500; Mr. Kooken, 15,000; Mr. Krause, 18,450; and Mr.
Renken,
37,500. The aggregate number of shares issuable upon the exercise
of
options currently exercisable held by the directors and officers
as a
group, is 1,717,950.
|
(3)
|
Based
on Schedule 13(G) filed with the Securities and Exchange Commission
on
February 14, 2006.
|
(4)
|
Based
on Schedule 13(G) filed with the Securities and Exchange Commission
on
February 17, 2006.
|
(5)
|
Based
on Schedule 13(G) filed with the Securities and Exchange Commission
on
February 13, 2006. These securities are owned by various individuals
and
institutional investors, representing 5.01% of the shares outstanding,
which T. Rowe Price Associates, Inc. (Price Associates) serves as
investment adviser with power to direct investments and/or sole power
to
vote the securities. For purposes of the reporting requirements of
the
Securities Exchange Act of 1934, Price Associates is deemed to be
a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such
securities.
|
(6)
|
Based
on Schedule 13(G) filed with the Securities and Exchange Commission
on
September 15, 2005.
|
(7)
|
1,400
of these shares are owned by family members for whom Ms. Gouw has
voting
and investment power; Ms. Gouw disclaims any beneficial interest
in such
shares.
|
(8)
|
296,830
of these shares are held in the John M. Lee Trust for which Mr. Lee
has
voting and investment power.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”),
requires that the Company’s directors, executive officers and persons who own
more than ten percent of a registered class of the Company’s equity securities
file with the Securities and Exchange Commission (the “SEC”), and with each
exchange on which the Common Stock trades, initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of
the Company. Directors, officers and greater than ten percent stockholders
are
required by the SEC’s regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely upon a review of copies of reports
provided during the fiscal year ended December 31, 2005, the Company believes
that all persons subject to the reporting requirements of Section 16(a) filed
all required reports on a timely basis.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Board of Directors Recommends a Vote “For” All Nominees
Board
of Directors and Nominees
The
Company's Certificate of Incorporation and Bylaws provide that the number of
directors shall be determined from time to time by the Board of Directors but
may not be less than five. The Board of Directors is currently composed of
nine
members. The Bylaws further provide for the division of the directors into
three
classes of approximately equal size. Three members shall be elected to a
three-year term at the Meeting of Stockholders in 2006, three members shall
be
elected to a three-year term at the annual meeting of stockholders in 2007,
and
three members shall be elected to a three-year term at the annual meeting of
stockholders in 2008.
The
directors proposed for election at the Meeting, John Kooken, Jack C. Liu and
Keith W. Renken, were appointed to the Board of Directors in 2002, 1998, and
2000, respectively. Messrs. Kooken, Liu, and Renken have indicated their
willingness to serve and unless otherwise instructed, Proxies will be voted
in
such a way as to effect, if possible, the election of Messrs. Kooken, Liu,
and
Renken. In the event that Mr. Kooken, Mr. Liu or Mr. Renken should be unable
to
serve as a director, it is intended that the Proxies will be voted for the
election of such substitute nominee, if any, as shall be designated by the
Board
of Directors. Management has no reason to believe that Mr. Kooken, Mr. Liu
or
Mr. Renken will be unavailable to serve on the Board of Directors.
None
of
the directors, nominees for director or executive officers were selected
pursuant to any arrangement or understanding, other than with the directors
and
executive officers of the Company acting within their capacity as such. There
are no family relationships among directors or executive officers of the
Company. As of the date hereof, no directorships are held by any director with
a
company which has a class of securities registered pursuant to Section 12 of
the
Exchange Act or subject to the requirements of Section 15(d) of the Exchange
Act, or any company registered as an investment company under the Investment
Company Act of 1940 except that Mr. Ng is a director of Mattel, Inc. and Mr.
Renken is a director of 21st
Century
Insurance Group.
The
following table sets forth certain information with respect to the Board's
nominees for director and the current continuing directors of the Company.
All
directors of the Company are also directors of East West Bank (the “Bank”), the
Company’s principal subsidiary. Executive officers serve at the pleasure of the
Board of Directors, subject to restrictions set forth in their employment
agreements. See“ELECTION
OF DIRECTORS -- Compensation of Executive Officers -- Employment
and Change of Control Agreements”.
Name
of Director
|
Age
(1)
|
Year
First Elected orAppointed
(2)
|
Current
Term
to
Expire
|
Nominees
for term expiring 2009:
John
Kooken
Jack
C. Liu
Keith
W. Renken
|
74
47
71
|
2002
1998
2000
|
2006
2006
2006
|
Continuing
Directors:
Peggy
Cherng
Julia
S. Gouw
John
Lee
Dominic
Ng
Rudolph
I. Estrada
Herman
Y. Li
|
58
46
74
47
58
53
|
2002
1997
2006
1991
2005
1998
|
2007
2007
2007
2008
2008
2008
|
__________
(1) |
As
of March 27, 2006.
|
(2) |
Refers
to the earlier of the year the individual first became a director
of the
Company and the Bank.
|
The
principal occupation during the past five years of each director and nominee
is
set forth below. All directors have held their present positions for at least
five years, unless otherwise stated.
Dominic
Ng
is
Chairman, President and Chief Executive Officer of East West Bancorp, Inc.
and
East West Bank. Prior to taking the helm of East West in 1992, Mr. Ng was
President of Seyen Investment, Inc. and spent over a decade as a CPA with
Deloitte & Touche LLP. Mr. Ng serves on the boards of directors of the
Federal Reserve Bank of San Francisco, Los Angeles Branch and Mattel,
Inc.
Peggy
Cherng
is
Co-Chair of Panda Restaurant Group, which includes more than 850 restaurants
in
the U.S., Puerto Rico and Japan. Dr. Cherng holds a PhD in Electrical
Engineering and serves on the boards of the National Restaurant Association,
Methodist Hospital of Southern California, Children’s Hospital Los Angeles and
the Peter F. Drucker Graduate School of Management at Claremont Graduate
University.
Rudolph
I. Estrada
is a
former Presidential appointee serving as Commissioner on the White House
Commission on Small Business as well as the White House Fellows Commission.
Mr.
Estrada also served as the Los Angeles District Director for the U. S. Small
Business Administration and serves on the board of directors of several
corporate, private and non-profit organizations. Mr. Estrada is President and
CEO of Estradagy Business Advisors, a business advisory group. In addition,
he
serves as a business professor in the California State University system and
heads the Small Business Institute. He has over 25 years of banking
experience.
Julia
S. Gouw
serves
as Executive Vice President and Chief Financial Officer of East West Bancorp,
Inc. and East West Bank. Ms. Gouw joined the Bank in 1989 as Vice
President and Controller and was promoted to her current position in 1994.
She was ranked among the top ten bank CFOs in the nation by U.S.
Banker
in
January 2006. Prior to joining East West, Ms. Gouw spent over five years as
a
CPA with KPMG LLP. She serves on the Board of Visitors of the UCLA School of
Medicine and chairs the Executive Advisory Board of the Iris Cantor-UCLA Women’s
Health Center. Ms. Gouw is also on the Board of Directors of Huntington Memorial
Hospital.
John
Kooken
has
garnered a broad banking experience, having retired as Chief Financial Officer
and Vice Chairman of Security Pacific Corp., the parent of former Security
Pacific National Bank. He served as a director of Golden State Bancorp until
its
acquisition in 2002. Among his community activities, he is a member of the
boards of Huntington Memorial Hospital and of the Children's Bureau of Southern
California.
John
Lee
has over
33 years banking experience, having co-founded Standard Bank in 1980 - a
$923 million asset federal savings bank recently acquired by East West. As
Standard Bank's long-time chairman and president, Mr. Lee has an in-depth
understanding of Chinese-American financial markets. Mr. Lee was also
the original general manager of East West Bank and helped open the bank in
the
Chinatown District of Los Angeles in 1973.
Herman
Y. Li
is
Chairman of the C&L Restaurant Group Inc., a franchisee of Burger King and
Denny’s in multiple states. Mr. Li is President of the Southern California
Burger King Franchisee Association and a member of the Burger King Corporation’s
Diversity Action Council. He also serves on the Board of Directors of the
National Franchisee Association representing over 8,000 Burger King restaurants
worldwide. Mr. Li is Vice-Chair of the Committee of 100.
Jack
C. Liu,
Esq. is
Senior Advisor for Morgan Stanley International Real Estate Fund ("MSREF")
and
is President of MSREF's affiliates MSUB Asset Management Corp. and New Recovery
Asset Management Corp. in Taiwan. Previously, during the period from 2000 to
2001, he was President of the Asia region of Global Gateway, L.P. Prior to
that,
Mr. Liu practiced with the law firm of Morgan Lewis & Bockius LLP, Los
Angeles office. Mr. Liu is admitted to practice law in the jurisdictions of
California, Washington, D.C. and the Republic of China. His legal expertise
is
in international corporate, real estate and banking.
Keith
W. Renken
is
Managing Partner of the consulting company Renken Enterprises and a professor
in
the University of Southern California Executive in Residence Program. Mr. Renken
is a former senior partner of Deloitte & Touche LLP, from which he retired
in 1992 after 33 years with the firm. He serves on the Board of Directors of
21st Century Insurance Group. Mr. Renken's many honors include the Distinguished
Business Leader Award from the Los Angeles Area Chamber of
Commerce.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE
ELECTION OF THE BOARD OF DIRECTORS' NOMINEES.
CORPORATE
GOVERNANCE PRINCIPLES AND BOARD MATTERS
The
Company is committed to having sound corporate governance principles. These
principles are essential to running the Company’s business efficiently and to
maintaining the Company’s integrity in the marketplace. The Company has adopted
formal Corporate Governance Guidelines to explain our corporate governance
principles to investors. In addition, the Company has also adopted a Code of
Ethical Conduct. These guidelines, as well as our Code of Ethical Conduct and
other governance matters of interest to investors, are available through our
website at www.eastwestbank.com by clicking on Investor Relations then
Shareholder Information and then Corporate Governance.
DIRECTOR
INDEPENDENCE /FINANCIAL EXPERTS
The
Company’s Board of Directors has conducted a review regarding the “independence”
of each of its members under the standards of Rule 4200(a) (15) of the National
Association of Securities Dealers listing standards. The Board has determined
that 7 of its 9 members, all of whom are non-employee directors, satisfy
NASDAQ’s “independence” requirements. These independent directors are: Peggy
Cherng, Rudolph I. Estrada, John Kooken, John Lee, Herman Y. Li, Jack C. Liu
and
Keith W. Renken. Accordingly, a majority of the Board of Directors, and each
member of its Audit, Compensation, Credit and Finance and Nominating/Corporate
Governance Committees, satisfy the independence requirements of NASDAQ.
In
addition, the Board of Directors has conducted a review regarding the
qualifications of each member of the Audit Committee under the standards of
Rule
4350(d) (2) of the National Association of Securities Dealers listing standards
and Section 10A(m) of the Exchange Act and determined that all members meet
these standards.
The
Company’s Board of Directors has also conducted a review regarding whether any
members of the Audit Committee meet the criteria to be considered a “financial
expert” as that term is defined by the SEC. Based on its review, the Board
determined that at least two of the three members of the Audit Committee, John
Kooken, its chairman, and Keith W. Renken, qualify as “financial experts” by
reason of their prior job experience as the chief financial officer of a
publicly traded company and a certified public accountant, respectively.
COMMITTEES
OF THE BOARD OF DIRECTORS
The
business of the Company’s Board of Directors is conducted through its meetings,
as well as through meetings of its committees. Set forth below is a description
of the committees of the Board.
The
Audit
Committee reviews and reports to the Board on various auditing and accounting
matters. The Audit Committee also engages the independent public accountants,
reviews the scope and results of the procedures for internal auditing, reviews
the Company’s financial statements, reviews the independence of the Company’s
independent auditors, and approves all auditing and non-auditing services
performed by its independent auditors. The Audit Committee currently consists
of
Keith W. Renken, Herman Y. Li, and John Kooken as its chairman. All members
of
the Audit Committee have been determined by the Board to be independent under
the standards of Rule 4200(a)(15) of the National Association of Securities
Dealers listing standards. The Bank also has an Audit Committee, which consists
of the same directors who comprise the Company’s Audit Committee and which
generally meets jointly with the Company’s Audit Committee. The Audit Committees
met eight times in 2005. The charter of the Audit Committee is available through
the Company’s website at www.eastwestbank.com by
clicking on Investor Relations then Shareholder Information and then Corporate
Governance.
The
Compensation Committee establishes executive compensation policies as well
as
the actual compensation of the Chief Executive Officer. The Compensation
Committee currently consists of Peggy Cherng, Keith W. Renken, and Jack C.
Liu
as chairman. All members of the Compensation Committee have been determined
by
the Board to be independent under the standards of Rule 4200(a)(15) of the
National Association of Securities Dealers listing standards. The Bank also
has
a Compensation Committee, which consists of the same directors who comprise
the
Company’s Compensation Committee and which generally meets jointly with the
Company’s Compensation Committee. The Compensation Committees met four times in
2005. The charter of the Compensation Committee is available through the
Company’s website at www.eastwestbank.com
by
clicking on Investor Relations then Shareholder Information and then Corporate
Governance.
The
Credit
and Finance Committee reviews credit matters, including credit administration,
loan policy and the loan portfolio, and also reviews finance matters, including
asset-liability policy, capital requirements and ratios, and interest rate
risk.
The Credit and Finance Committee currently consists of John Kooken, Rudolph
I.
Estrada, and Keith W. Renken as chairman. All members of the Credit and Finance
Committee have been determined by the Board to be independent under the
standards of Rule 4200(a)(15) of the National Association of Securities Dealers
listing standards. The Bank also has a Credit and Finance Committee, which
consists of the same directors who comprise the Company’s Credit and Finance
Committee and which generally meets jointly with the Company’s Credit and
Finance Committee. The Credit and Finance Committees met three times in 2005.
The charter of the Credit and Finance Committee is available through the
Company’s website at www.eastwestbank.com
by
clicking on Investor Relations then Shareholder Information and then Corporate
Governance.
The
Nominating/Corporate Governance Committee nominates persons for election as
directors and reviews corporate governance matters. The Nominating/Corporate
Governance Committee currently consists of Jack C. Liu, John Kooken, and Herman
Y. Li as chairman. All members of the Nominating/ Corporate Governance Committee
have been determined by the Board to be independent under the standards of
Rule
4200(a)(15) of the National Association of Securities Dealers listing standards.
The Bank also has a Nominating/Corporate Governance Committee, which consists
of
the same directors who comprise the Company’s Nominating/Corporate Governance
Committee and which generally meets jointly with the Company’s
Nominating/Corporate Governance Committee. The joint Nominating/Corporate
Governance Committees met three
times
in
2005. The charter of the Nominating/Corporate Governance Committee is available
through the Company’s website at www.eastwestbank.com by
clicking on Investor Relations
then Shareholder Information and
then
Corporate Governance.
The
Executive Committee is authorized to exercise certain powers of the Board of
Directors during intervals between the meetings of the Board of Directors.
The
Executive Committee currently consists of Dominic Ng and Julia S. Gouw. The
Bank
also has an Executive Committee, which consists of the same directors who
comprise the Company’s Executive Committee. The Company’s Executive Committee
met five times in 2005 and the Bank’s Executive Committee met 24 times in 2005.
The charter of the Executive Committee is available through the Company’s
website at www.eastwestbank.com
by
clicking on Investor Relations then Shareholder Information and then Corporate
Governance.
The
Company’s Board of Directors met seven times during 2005. All of the directors
attended 100% of the meetings of the Board of Directors on which he or she
served in 2005.
The
policy of the Company is to encourage all directors who are being elected and
all directors who are also employees of the Company to attend the annual meeting
of stockholders. All of these directors attended the 2005 annual meeting of
stockholders.
Consideration
of Director Nominees
Stockholder
Nominees
Corporate
Secretary
East
West
Bancorp, Inc.
135
N.
Los Robles Ave., 7th
Floor
Pasadena,
CA 91101
Director
Qualifications
The
Company’s Corporate Governance Guidelines contain Board membership criteria that
apply to Nominating/Corporate Governance Committee-recommended nominees for
a
position on the Board. Under these criteria, members of the Board should have
the highest professional and personal ethics and values. They should have broad
experience at the policy-making level in business, government, education,
finance, accounting, law or public interest. They should be committed to
enhancing stockholder value and should have sufficient time to carry out their
duties and to provide insight and practical wisdom based on experience. Their
service on other boards of public companies should be limited to a number that
permits them, given their individual circumstances, to perform responsibly
all
director duties.
Identifying
and Evaluating Nominees for Directors
The
Nominating/Corporate Governance Committee utilizes a variety of methods for
identifying and evaluating nominees for director. The Nominating/Corporate
Governance regularly assesses the appropriate size of the Board, and whether
any
vacancies on the Board are expected due to retirement or otherwise. In the
event
that vacancies are anticipated, or otherwise arise, the Nominating/Corporate
Governance Committee considers various potential candidates for director.
Candidates may come to the attention of the Nominating/Corporate Governance
Committee through current Board members, professional search firms, stockholders
or other persons. These candidates are evaluated at regular or special meetings
of the Nominating/Corporate Governance Committee, and may be considered at
any
point during the year. As described above, the Nominating/Corporate Governance
Committee considers properly submitted stockholder nominations for candidates
for the Board. Following verification of the stockholder status of persons
proposing candidates, recommendations are aggregated and considered by the
Nominating/Corporate Governance Committee at a regularly scheduled meeting,
which is generally the first or second meeting prior to the issuance of the
proxy statement for the Company’s annual meeting. If any materials are provided
by a stockholder in connection with the nomination of a director candidate,
such
materials are forwarded to the Nominating/Corporate Governance Committee.
In
evaluating such nominations, the Nominating/Corporate Governance Committee
seeks
to achieve a balance of knowledge, experience and capability on the
Board.
COMMUNICATIONS
WITH THE BOARD
The
Company’s Board of Directors welcomes suggestions and comments from
stockholders. All stockholders are encouraged to attend the annual meeting
of
stockholders where senior management and outside auditors, as well as members
of
the Board, will be available to answer questions. Stockholders may also send
written communications to the Board by writing to the Secretary of the Board
of
Directors at East West Bancorp, Inc., 135 N. Los Robles Avenue, 7th
Floor,
Pasadena, California 91101. All communications (other than commercial
communications soliciting the sale of goods or services to, or employment with,
the Company or directors of the Company) will be directed to the appropriate
committee or to the Chairman of the Board or to any individual director
specified in the communication, as applicable.
EXECUTIVE
SESSIONS
Executive
sessions of non-management directors are generally held after every regularly
scheduled Board meeting, at least six times a year. The sessions are scheduled
and chaired by a presiding director on a rotating basis by the Chair of the
Audit Committee, the Compensation Committee, the Credit and Finance Committee
and the Nominating/Corporate Governance Committee. Any non-management director
can request that an additional executive session be scheduled.
STOCK
OWNERSHIP GUIDELINES
Directors
and executive officers are encouraged to own the Company’s Common Stock to
further align management’s financial interests with stockholders’ interests.
Under the Company’s stock ownership guidelines for directors, all directors who
have served at least one three-year term should accumulate at least $50,000
of
Common Stock. Guidelines for senior officers are also in place and constitute
share ownership in an amount having a market value equivalent to a multiple
of
the individual’s annual base salary, depending upon that individual’s management
level, to be achieved within three years of becoming subject to the guideline.
Stock ownership guidelines for directors and senior officers can be found
through the Company’s website at www.eastwestbank.com
by
clicking on Investor Relations then Shareholder Information and then Corporate
Governance.
COMPENSATION
OF DIRECTORS
Employees
of the Company and its subsidiaries are not compensated for service as directors
of the Company or its subsidiaries. Nonemployee directors receive an annual
retainer of $20,000 of cash and of $20,000 of restricted stock; the restricted
stock has 3-year cliff vesting. The committee chairs each receive an additional
annual cash retainer as follows: Audit - $10,000; Compensation - $7,000; Credit
and Finance - $5,000; Nominating /Corporate Governance - $5,000. Nonemployee
directors also receive a meeting fee of $1,000 for each Board and committee
meeting attended. Nonemployee directors may elect to receive their annual
$20,000 cash retainer in the form of Common Stock, at a 25% risk premium (i.e.,
$25,000 of common stock) if they agree to hold the stock for at least one year.
COMPENSATION
OF EXECUTIVE OFFICERS
Summary
Compensation Table
It
is
expected that until the executive officers of the Company begin to devote
significant time to the separate management of the Company and the Bank, which
is not expected to occur until such time as the Company becomes actively
involved in additional businesses, the executive officers will only receive
compensation for services as executive officers and employees of the Bank,
and
no separate compensation will be paid for their services to the Company. The
following table sets forth the name and compensation of the Named Executive
Officers for the fiscal years ended December 31, 2005, 2004, and
2003:
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
|
|
|
|
|
|
|
(2)
|
|
Restricted
|
|
Shares
|
|
(3)
|
|
|
|
|
|
(1)
|
|
(1)
|
|
Other
Annual
|
|
Stock
|
|
Underlying
|
|
All
Other
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
Awards
|
|
Options
(#)
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominic
Ng
|
|
|
2005
|
|
$
|
690,000
|
|
$
|
1,500,000
|
|
$
|
-
|
|
$
|
943,230
|
|
|
25,000
|
|
$
|
76,677
|
|
Chairman,
President, and
|
|
|
2004
|
|
|
680,000
|
|
|
1,475,000
|
|
|
-
|
|
|
2,994
|
|
|
1,000
|
|
|
48,492
|
|
Chief
Executive Officer
|
|
|
2003
|
|
|
625,000
|
|
|
1,475,706
|
|
|
74,204
|
|
|
2,554
|
|
|
1,000
|
|
|
85,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julia
S. Gouw
|
|
|
2005
|
|
$
|
258,338
|
|
$
|
200,000
|
|
$
|
-
|
|
$
|
102,462
|
|
|
10,630
|
|
$
|
25,868
|
|
Executive
Vice President,
|
|
|
2004
|
|
|
247,736
|
|
|
230,000
|
|
|
-
|
|
|
2,994
|
|
|
1,000
|
|
|
27,693
|
|
Chief
Financial Officer,
|
|
|
2003
|
|
|
235,231
|
|
|
260,000
|
|
|
32,326
|
|
|
55,394
|
|
|
1,000
|
|
|
35,240
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington
Chen
|
|
|
2005
|
|
$
|
196,670
|
|
$
|
120,000
|
|
$
|
-
|
|
$
|
102,462
|
|
|
10,630
|
|
$
|
22,026
|
|
Executive
Vice President and
|
|
|
2004
|
|
|
180,000
|
|
|
180,000
|
|
|
-
|
|
|
2,994
|
|
|
-
|
|
|
12,402
|
|
Director
of Corporate Banking
|
|
|
2003
|
|
|
15,033
|
|
|
-
|
|
|
-
|
|
|
209,967
|
|
|
-
|
|
|
140,000
|
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
P. Krause
|
|
|
2005
|
|
$
|
198,338
|
|
$
|
150,000
|
|
$
|
-
|
|
$
|
62,462
|
|
|
6,378
|
|
$
|
12,067
|
|
Executive
Vice President
|
|
|
2004
|
|
|
186,403
|
|
|
120,000
|
|
|
-
|
|
|
2,994
|
|
|
1,000
|
|
|
19,600
|
|
General
Counsel, and
|
|
|
2003
|
|
|
167,040
|
|
|
120,000
|
|
|
2,216
|
|
|
55,394
|
|
|
1,000
|
|
|
11,539
|
|
Corporate
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
J. Lewis
|
|
|
2005
|
|
$
|
197,504
|
|
$
|
150,000
|
|
$
|
-
|
|
$
|
52,490
|
|
|
5,315
|
|
$
|
22,400
|
|
Executive
Vice President
|
|
|
2004
|
|
|
181,637
|
|
|
125,000
|
|
|
-
|
|
|
2,994
|
|
|
21,000
|
|
|
21,400
|
|
Chief
Credit Officer
|
|
|
2003
|
|
|
164,000
|
|
|
90,000
|
|
|
-
|
|
|
87,098
|
|
|
21,000
|
|
|
20,140
|
|
_________________
(1) |
Includes
compensation deferred at election of the executive and the year upon
which
such compensation was earned.
|
(2) |
Represents
interest paid on deferred compensation that, under applicable SEC
guidelines, is deemed above-market
interest.
|
(3) |
Represents
employer contributions to the 401(k) Plan, unused vacation pay, automobile
allowances, and financial planning services, and employer matching
contributions to a separate officers’ excess plan to compensate for salary
and bonus limitations of permitted 401(k) contributions. The excess
plan
was terminated in 2003. The named executive officers are also provided
with certain group life, health, and medical and other non-cash benefits
generally available to all salaried employees and not included in
this
column pursuant to SEC rules.
|
(4) |
Represents
signing bonus paid in 2003.
|
Option
Grants
The
following stock options were granted during 2005 to the Named Executive Officers
pursuant to the Company’s Stock Incentive Plan.
Option/SAR
Grants in the Last Fiscal Year
|
|
Number
of
|
|
Percent
of
|
|
|
|
|
|
|
|
|
Securities
|
|
Total
Options
|
|
|
|
|
|
|
|
|
Underlying
|
|
Granted
to
|
|
Exercise
|
|
|
|
Grant
Date
|
|
|
Options
|
|
Employees
in
|
|
Price
|
|
Expiration
|
|
Present
|
Name
|
|
Granted
(1)
|
|
FY
2005
|
|
($/Share)
|
|
Date
|
|
Value
(2)
|
Dominic
Ng
|
|
25,000
|
|
13.90%
|
|
$
37.63
|
|
03/10/12
|
|
$
237,140
|
Julia
S. Gouw
|
|
10,630
|
|
5.91%
|
|
37.63
|
|
03/10/12
|
|
100,832
|
Wellington
Chen
|
|
10,630
|
|
5.91%
|
|
37.63
|
|
03/10/12
|
|
100,832
|
Douglas
P. Krause
|
|
6,378
|
|
3.55%
|
|
37.63
|
|
03/10/12
|
|
60,499
|
William
J. Lewis
|
|
5,315
|
|
2.96%
|
|
37.63
|
|
03/10/12
|
|
50,416
|
_________________
(1) |
The
options were granted pursuant to the Stock Incentive Plan. The options
become exercisable in annual installments of 25% on each of the first,
second, third and fourth anniversary dates of the grant. The options
may
be exercised at any time prior to their expiration by tendering the
exercise price in cash, check or in shares of stock valued at fair
market
value on the date of exercise. In the event of a change in control
(as
defined), the options will become exercisable in full. The options
may be
amended by mutual agreement of the optionee and East West
Bancorp.
|
(2) |
The
estimated present value at grant date of options granted during fiscal
year 2005 has been calculated using the Black-Scholes option pricing
model, based upon the following assumptions: estimated time until
exercise
of 3.5 years; risk-free interest rate of 4.00%, representing the
interest
rate on U.S. government zero-coupon bonds with maturities corresponding
to
the estimated time until exercise; a volatility rate of 28.20%; and
a
dividend yield of 0.50%, representing the current $0.20 per share
annualized dividends divided by the fair market value of the common
stock
on the date of grant. The approach used in developing the assumptions
upon
which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
“Accounting
for Stock-Based Compensation.”
|
Option
Exercises and Holdings
The
following table sets forth certain information concerning options held by the
Named Executives under the Company’s Stock Incentive Plan:
Aggregated
Option Exercises During Fiscal Year 2005
Option
Values on December 31, 2005
|
|
|
|
|
|
Number
of
|
|
Value
of Unexercised
|
|
|
Shares
|
|
|
|
Unexercised
Options
|
|
In-the-Money
Options
|
|
|
Acquired
|
|
Value
|
|
at
December 31, 2005
|
|
at
December 31, 2005
|
Name
|
|
On
Exercise
|
|
Realized
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
Dominic
Ng
|
|
200,000
|
|
$
6,635,666
|
|
1,392,050
|
|
276,300
|
|
$
35,476,380
|
|
$
5,110,728
|
Julia
S. Gouw
|
|
40,000
|
|
1,299,424
|
|
245,550
|
|
21,930
|
|
7,475,495
|
|
253,928
|
Wellington
Chen
|
|
-
|
|
-
|
|
-
|
|
10,630
|
|
-
|
|
-
|
Douglas
P. Krause
|
|
30,350
|
|
698,725
|
|
13,950
|
|
11,678
|
|
327,342
|
|
112,497
|
William
J. Lewis
|
|
-
|
|
-
|
|
30,900
|
|
36,615
|
|
611,253
|
|
483,053
|
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table provides information as of December 31, 2005 regarding equity
compensation plans under which equity securities of the Company were authorized
for issuance.
|
|
|
|
|
|
Number
of securities
|
|
|
|
|
|
|
remaining
available for
|
|
|
Number
of securities
|
|
Weighed
average
|
|
future
issuance under
|
|
|
to
be issued upon exercise
|
|
exercise
price of
|
|
equity
compensation plans
|
|
|
of
outstanding options,
|
|
outstanding
options,
|
|
excluding
securities
|
|
|
warrants
and rights
|
|
warrants
and rights
|
|
reflected
in Column (a)
|
Plan
Category
|
|
(a)
|
|
(b)
|
|
(c)
|
Equity
compensation plans
|
|
|
|
|
|
|
approved
by security holders
|
|
3,449,183
|
|
$
13.50
|
|
3,201,151
|
Equity
compensation plans not
|
|
|
|
|
|
|
approved
by security holders
|
|
-
|
|
-
|
|
-
|
Total
|
|
3,449,183
|
|
$
13.50
|
|
3,201,151
|
Retirement
Plans
The
Company has two retirement plans. The Company’s 401(k) Plan (the “401(k) Plan”)
is a qualified retirement plan under the Internal Revenue Code of 1986 as
amended (the “Code”) and is open to all employees of the Company and its
subsidiaries with at least three months of service. In 2005, the Company matched
100% of the first 6% of employee salary contributions to the 401(k) Plan, up
to
a maximum contribution of $14,000 per employee. The matching is in the form
of
the Company’s Common Stock, and the employees are not restricted in their
ability to sell the Common Stock and reinvest in other permitted
investments.
The
Company also has a Supplemental Executive Retirement Plan (the “SERP”) which
provides supplemental retirement benefits to certain employees whose
contributions to the 401(k) Plan are, under applicable Internal Revenue Service
regulations, limited. The Board of Directors designates those employees who
are
eligible to participate in the SERP. The Board has designated named executive
officers Mr. Ng, Ms. Gouw, and Mr. Krause
as
participants in the SERP. Benefits under the SERP include income generally
payable commencing upon a designated retirement date until age 80 and a death
benefit for the participant’s designated beneficiaries based on the present
value of the projected future payments. Participants will be entitled to a
projected benefit equal to 50% of his or her 2001 total compensation, adjusted
3% per year for cost of living. The designated retirement date is the
20th
anniversary of employment by the Company and early retirement after 15 years
is
permitted with lower benefits. SERP benefits begin to vest after 15 years of
service, however vesting accelerates to 100% upon a change in control of the
Company. Upon a termination of employment for “cause,” the participant forfeits
all benefits. The participant is entitled to all vested benefits in the case
of
a termination without “cause,” however, if a participant voluntarily resigns
prior to becoming 100% vested, his or her benefits are forfeited. The Company
has purchased life insurance contracts on the participants in order to finance
the cost of these benefits and it is anticipated that, because of the
tax-advantaged effect of this life insurance investment, the return on the
life
insurance contracts will be approximately equal to the accrued benefits to
the
participants under the SERP, other than in the event of accelerated vesting
because of a change of control. As of December 31, 2005, Mr. Ng, Ms. Gouw,
and
Mr. Krause respectively had 14, 16, and 9 years of service under the SERP.
As of
December 31, 2005, the vested benefit obligation under the SERP for Ms. Gouw
was
$1.5 million.
The
SERP
is an unfunded non-qualified plan, which means that the participants have no
rights under the SERP beyond those of a general creditor of the Company, and
there are no specific assets set aside by the Company in connection with the
plan. There are accordingly no assurances to the participants that the Company
will upon retirement be able to pay the accrued benefits. The SERP is not an
employment contract.
Employment
and Change of Control Agreements
The
Bank,
the Company’s principal subsidiary, has entered into employment agreements with
certain of its executive officers intended to ensure that the Bank will be
able
to maintain a stable and competent management base. The Bank entered into an
employment agreement with its Chief Executive Officer, Mr. Ng, in June 1998
in connection with the sale of the Bank by its prior stockholders. This
employment agreement provides for a three-year term, which extends automatically
unless written notice of non-renewal is given by the Board of Directors after
conducting a performance evaluation. In addition to a base salary and bonus
to
be determined annually, the employment agreement provides for, among other
things, participation in stock benefit plans and other fringe benefits
applicable to executive personnel and four weeks paid vacation per year.
In
the
event the Bank chooses to terminate Mr. Ng’s employment for any reason other
than for cause (as defined in the employment agreement), or in the event of
Mr.
Ng’s resignation from the Bank upon (i) failure to re-elect him to his current
offices; (ii) a material change in his functions, duties or responsibilities;
(iii) a relocation of his principal place of employment by more than 25 miles;
(iv) liquidation or dissolution of the Bank; (v) a breach of the agreement
by
the Bank; or (vi) his death or permanent disability, Mr. Ng, or, in the event
of
death, his beneficiary, would be entitled to receive an amount equal to the
greater of (i) the remaining payments due to him and the contributions that
would have been made on his behalf to any employee benefit plans of the Bank
during the remaining term of the employment agreement and (ii) three times
the
preceding taxable year's base salary and bonus. In addition, Mr. Ng will be
entitled to an additional payment to the extent he is subject to an excise
tax
because such severance benefits constitute “excess parachute payments,” as
defined in the Code. In general, under the Code, an “excess parachute payment”
is the amount by which payments contingent on a change in ownership or control
exceed three times the employee's average annual compensation over five
years.
Certain
other executive officers have agreements providing that, should they be
terminated without cause or should they resign for good reason, including a
detrimental change in responsibilities or a reduction in salary or benefits,
the
Bank shall pay such executive officer a designated lump sum. The payments range
from six months to three years of base salary plus bonuses and certain benefits.
If
all of
the executive officers with these agreements were terminated without cause
following a change in control, the executive officers would be entitled to
receive an aggregate payment of approximately $12.1 million (estimated as of
March 31, 2006). In addition, existing options and restricted stock issued
under
the Company’s 1998 Stock Incentive Plan and benefits under the SERP, also will
vest upon a change of control. Although the above-described employment
agreements could increase the cost of any acquisition of control of the Company
or the Bank, management does not believe that the terms thereof would have
a
significant anti-takeover effect.
REPORT
OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The
Company's Compensation Committee establishes the general policies regarding
compensation of the executive officers and approves the specific compensation
levels for the Chief Executive Officer. The Compensation Committee also reviews
the compensation of the executive officers and approves all grants of incentive
shares. The members of the Compensation Committee are Peggy Cherng, Keith W.
Renken, and Jack C. Liu as its chairman. Each member of the Compensation
Committee is independent under the standards of Rule 4200(a)(15) of the National
Association of Securities Dealers listing standards. The Committee employs
a
nationally recognized independent compensation consulting firm to assist it
in
its deliberations.
Set
forth
below is a report of the Company’s Compensation Committee addressing the
compensation policies for 2005 applicable to the Company's Chief Executive
Officer.
OVERALL
PHILOSOPHY
The
goals
of the executive compensation and benefits programs are to enable the Company
to
attract and retain high caliber executives, provide a total compensation package
in a cost effective manner, encourage management ownership of the Company’s
Common Stock and to maximize return to its stockholders.
The
Company’s philosophy is to provide a compensation program that is designed to
reward achievement of the Company’s goals and objectives and to provide total
compensation opportunities that are competitive when compared with those of
comparable financial institutions.
To
achieve these objectives:
· |
The
principal objective of the salary program is to maintain salaries
that are
targeted at the median for comparable positions in similarly sized
financial institutions,
|
· |
Annual
incentives are designed to reward for overall Company success and
individual performance and provide for competitive total cash compensation
opportunities when performance targets are met and for above competitive
levels when warranted by above target performance,
and
|
· |
The
principal objective of the long-term stock-based incentive plan is
to
align management’s financial interests with those of the Company’s
stockholders, provide incentive for management ownership of the Company’s
Common Stock, support the achievement of long-term financial objectives,
and provide for long term incentive reward
opportunities.
|
Employee
benefits are offered to provide a competitive total compensation program and
to
encourage retention of key employees.
ELEMENTS
OF THE COMPENSATION PROGRAM
There
are
three principal elements of the executive compensation program - base salary,
bonus compensation (annual incentive) and long-term stock-based incentive
compensation (stock options and/or restricted stock). In determining each
component of compensation, the total compensation package of each executive
is
considered.
Base
Salaries
The
salary of each executive officer is determined initially according to
competitive pay practices, level of responsibility, prior experience, and
breadth of knowledge, as well as internal equity issues. The Company uses its
discretion rather than a formal weighting system to evaluate these factors
and
to determine individual base salary levels. Thereafter, base salaries are
reviewed on an annual basis, and increases are made based on a subjective
assessment of each executive’s performance, as well as the factors described
above.
Annual
Incentives
The
Company provides annual incentives to all employees, including executive
officers. Annual incentives are intended to reward for overall Company success
and individual performance and provide generally competitive total cash
compensation opportunities at target performance and above competitive levels
when warranted by performance above target. In 2002, the stockholders of the
Company approved the Company’s Performance-Based Bonus Plan (the “Bonus Plan”).
The Bonus Plan was adopted in light of Code Section 162(m), which does not
permit a publicly traded company to deduct compensation in excess of $1,000,000
unless the compensation in excess of $1,000,000 is
“performance
based.” The Bonus Plan is structured so that bonuses paid under the Plan will
qualify as “performance-based” compensation. To qualify as performance-based,
the bonus must be determined by measurable and objective financial criteria,
such that the amount of the bonus, once the formula is established, is
non-discretionary, except that the Compensation Committee may discretionarily
adjust the actual bonus downward from the formula bonus. Because bonuses are
paid under the Bonus Plan only if the Company’s financial or other results meet
or exceed certain quantifiable performance goals established by the Compensation
Committee, the Compensation Committee believes that the Company may deduct
such
bonuses for Federal income tax purposes even if the bonus payments, together
with salary, paid to an executive officer in any one year may exceed $1 million.
Currently, Mr. Ng, the CEO of the Company, is the only officer participating
in
the Bonus Plan.
For
other
executive officers’ bonuses, the Company sets competitive bonus target and
awards actual bonuses based partly on overall corporate goals and partly on
individual or department goals. The corporate goals in 2005 related to earnings
per share, return on equity, return on assets, commercial business loans, trade
finance loans, demand deposits, noninterest income, expenses and strategic
goals. The company also considers in a non-formulaic way each executive
officer’s individual contributions and performance.
Long-Term
Stock-Based Incentives
The
Company believes that long-term incentive compensation opportunities should
be
stock-based to strengthen the alignment between management’s interests and those
of Company’s stockholders. Under its 1998 Stock Incentive Plan, the Company
generally grants incentive shares in Restricted Stock and/or stock options
to
all executive officers of the Company and the Bank. All stock options have
been
granted at an option price not less than the fair market value of the common
stock on the date of grant. Thus, stock options have value only if the stock
price appreciates from the date the options are granted. Restricted Stock
provides a tangible ownership stake whose ultimate value is linked to the stock
price, and which helps in retaining talented executives. The object is to
support an executive team focused on the long-term success of the company and
on
the creation of stockholder value over the long term. The restricted stock
granted to the CEO in 2006 is performance restricted stock, with the number
of
shares vesting dependent on the achievement of multi-year earnings per share
performance criteria.
In
determining the number of incentive shares granted to individual executives,
individual contributions, business unit performance, competitive practices,
the
number of incentive shares previously granted, and value of the stock on the
date of the grant are considered. Formal weightings have not been assigned
to
these factors.
CHIEF
EXECUTIVE OFFICER COMPENSATION
The
bonus
of the Chief Executive Officer is described in the Summary Compensation Table.
This indicated bonus was determined pursuant to the Bonus Plan and the terms
of
Mr. Ng’s employment contract. The bonus was based on the satisfaction of
performance criteria determined by the Board. The performance criteria
established for 2005 were based on the company’s Earnings per Share; Return on
Equity; and Return on Assets. Because of the Banks’ outstanding performance
during 2005, the formula bonus could have paid at maximum, which was 250% of
base salary. The actual bonus paid was above target, but below this formula
maximum. No bonuses were paid to the Chief Executive Officer outside of the
Bonus Plan. In early 2006, the Committee approved a grant of 45,000 stock
options and 41,000 shares of performance restricted stock for Mr. Ng, reflecting
competitive practice and his outstanding contributions to the company’s
success.
Dated:
March 27, 2006
|
THE
2006 COMPENSATION COMMITTEE
|
|
Jack
C. Liu, Chairman
Peggy
Cherng
Keith
W. Renken
|
The
Compensation Committee Report is not deemed to be “soliciting material” or to be
“filed” with the SEC or subject to the SEC’s proxy rules or the liabilities of
Section 18 of the Exchange Act and the report shall not be deemed to be
incorporated by reference into any prior or subsequent filing by the Company
under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act
except to the extent the Company specifically incorporates this Compensation
Committee Report therein.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None
of
the members of the Compensation Committee is, or ever has been, an officer
or
employee of the Company or any of its subsidiaries.
Except
as
provided herein, there are no existing or proposed material transactions between
the Company or the Bank and any of its executive officers, directors, or the
immediate family or associates of any of the foregoing persons.
REPORT
BY THE AUDIT COMMITTEE
The
Audit
Committee operates pursuant to a written charter most recently revised and
adopted by the Company’s Board of Directors on May 17, 2004. A copy of the Audit
Committee Charter is attached to this Proxy Statement as Appendix A and is
available through the Company’s website at www.eastwestbank.com by clicking on
Investor Relations
then Shareholder Information and
then
Corporate Governance.
The
Board
of Directors has determined that each of the members of the Audit Committee
is
independent under the standards of Rule 4200(a)(15) of the National Association
of Securities Dealers listing standards.
In
performing its function, the Audit Committee has among other tasks:
· |
reviewed
and discussed the audited financial statements of the Company as
of and
for the year ended December 31, 2005 with management and with the
independent auditors;
|
· |
discussed
with the Company’s independent auditors the matters required to be
discussed by Statement of Auditing Standards No. 61 (Codification
of
Statements on Auditing Standards), as may be modified or supplemented;
and
|
· |
received
the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as may be modified or supplemented,
and has discussed with the independent auditors the independent auditors’
independence.
|
Based
on
the foregoing review and discussions, the Audit Committee recommended to the
Board of Directors that the Company’s audited financial statements be included
in its Annual Report on Form 10-K for the year ended December 31, 2005 for
filing with the SEC.
Dated:
March 27, 2006 |
THE
2006 AUDIT COMMITTEE |
|
John
Kooken, Chairman
Keith
W. Renken
Herman
Y. Li
|
The
Audit
Committee Report is not deemed to be “soliciting material” or to be “filed” with
the SEC or subject to the SEC’s proxy rules or the liabilities of Section 18 of
the Exchange Act and the report shall not be deemed to be incorporated by
reference into any prior or subsequent filing by the Company under the
Securities Act or the Exchange Act, except to the extent the Company
specifically incorporates this Audit Committee Report therein.
STOCK
PERFORMANCE GRAPH
The
following graph shows a comparison of stockholder return on the Company’s Common
Stock based on the market price of the Common Stock assuming the reinvestment
of
dividends, with the cumulative total returns for the companies in the Standard
& Poor’s 500 Index and the SNL Western Bank Index for the 5-year period
beginning on December 31, 2000, through December 31, 2005. This graph is
historical only and may not be indicative of possible future performance of
the
Common Stock.
_________________
Source:
SNL Financial LC, Charlottesville, VA, © 2006, (434) 977-1600,
www.snl.com.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
Company from time to time may lend money through its subsidiary, the Bank,
to
various directors and corporations or other entities in which a director may
own
a controlling interest. These loans (i) are made in the ordinary course of
business, (ii) are made on substantially the same terms, including interest
rate
and collateral, as those prevailing at the time for comparable transactions
with
other persons, and (iii) do not involve more than a normal risk of
collectibility and do not present other unfavorable features. The Company does
not have, and does not intend to make, any loans to named executive officers.
None of the directors or named executive officers of the Company, or any
associate or affiliate of such persons, had any other material interest, direct
or indirect, in any transaction during the past year or any proposed transaction
with the Company.
INDEPENDENT
AUDITORS
The
independent auditor of the Company and the Bank is Deloitte & Touche LLP.
Deloitte & Touche LLP performs both audit and non-audit professional
services for and on behalf of the Company and its subsidiaries.
The
following table sets forth information regarding the aggregate fees billed
for
services rendered by Deloitte & Touche LLP for the fiscal years ended
December 31, 2005 and 2004.
|
|
|
2005
|
|
2004
|
Audit
Fees (1)
|
|
|
$810,443
|
|
$
747,680
|
Audit-Related
Fees (2)
|
|
|
50,204
|
|
16,050
|
Tax
Fees (3)
|
|
|
-
|
|
-
|
All
Other Fees (4)
|
|
|
-
|
|
-
|
___________
(1) |
Includes
fees paid by the Company to Deloitte & Touche LLP for professional
services rendered by Deloitte and Touche LLP for the audit of the
Company’s consolidated financial statements in the Form 10-K and review of
financial statements included in Form 10-Qs, including examinations
of
management assertions as to the effectiveness of internal control
over
financial reporting and for services that are normally provided by
an
accountant in connection with statutory and regulatory filings or
engagements.
|
(2) |
Includes
fees for assurance and related services that are reasonably related
to the
performance of the audit or review of the Company’s financial statements.
|
(3) |
Includes
fees for tax compliance, tax advice and tax
planning.
|
(4) |
Includes
fees for any service not included in the first three categories
above.
|
All
work
performed by independent auditors must be pre-approved by the Audit Committee.
All audit-related, tax and other services were reviewed and approved by the
Audit Committee, which concluded that the provision of these limited services
by
Deloitte
& Touche LLP did
not
compromise that firm's independence in the conduct of its auditing function.
All
professional services rendered by Deloitte & Touche LLP during 2005 were
furnished at customary rates and terms.
PROPOSAL
NO. 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The
Board of Directors Recommends a Vote "For" the Ratification of Auditors
Deloitte
& Touche LLP has
been
approved by the Audit Committee of the Company to be the independent auditors
of
the Company for the 2006 fiscal year. The stockholders are being asked to ratify
the selection of Deloitte
& Touche LLP.
If the
stockholders do not ratify such selection by the affirmative vote of a majority
of the votes cast, the Audit Committee will reconsider its selection. Under
applicable SEC regulations, the selection of the independent auditors is solely
the responsibility of the Audit Committee.
Representatives
from the firm of Deloitte
& Touche LLP will
be
present at the Meeting and will be given the opportunity to make a statement
if
they desire to do so, and will be available to respond to stockholders'
questions.
PROPOSALS
OF STOCKHOLDERS
Proposals
of stockholders intended to be included in the proxy materials for the 2007
annual meeting of stockholders must be received by the Secretary of East West
Bancorp, 135 N. Los Robles Avenue, 7th
Floor,
Pasadena, California 91101 by December 10, 2006 (120 days
prior to the anniversary of this year's mailing date).
Under
Rule 14a-8 adopted by the SEC under the Exchange Act, proposals of stockholders
must conform to certain requirements as to form and may be omitted from the
proxy statement and proxy under certain circumstances. In order to avoid
unnecessary expenditures of time and money by stockholders and by the Company,
stockholders are urged to review this rule and, if questions arise, to consult
legal counsel prior to submitting a proposal.
SEC
rules
also establish a different deadline for submission of shareholder proposals
that
are not intended to be included in the Company’s proxy statement with respect to
discretionary voting (the “Discretionary Vote Deadline”). The Discretionary Vote
Deadline for the 2007 annual meeting of stockholders is February 24, 2007 (45
calendar days prior to the anniversary of the mailing date of this proxy
statement). If a stockholder gives notice of such a proposal after the
Discretionary Vote Deadline, proxy holders will be allowed to use their
discretionary voting authority to vote against the shareholder proposal without
discussion when and if the proposal is raised at the 2007 annual meeting of
stockholders.
The
Company has not been notified by any stockholder of his or her intent to present
a stockholder proposal from the floor at the Meeting. The enclosed Proxy grants
the Proxyholders discretionary authority to vote on any matter properly brought
before the Meeting.
ANNUAL
REPORT
The
Annual Report for the fiscal year ended December 31, 2005 will also be mailed
to
all stockholders. The Annual Report contains consolidated financial statements
of the Company and its subsidiaries and the report thereon of Deloitte &
Touche LLP, the Company's independent auditors.
Stockholders
may obtain without charge a copy of the Company's annual report on Form 10-K
including financial statements required to be filed with the SEC pursuant to
the
Exchange Act for the fiscal year ended December 31, 2005 by writing to East
West
Bancorp, Inc. at 135 N. Los Robles Avenue, 7th
Floor,
Pasadena, California 91101.
OTHER
BUSINESS
Management
knows of no business, which will be presented for consideration at the Meeting
other than as stated in the Notice of Meeting. If, however, other matters are
properly brought before the Meeting, it is the intention of the Proxyholders
to
vote the shares repre-sented thereby on such matters in accordance with the
recommenda-tion of the Board of Directors and authority to do so is included
in
the Proxy.
|
East
West Bancorp, Inc. |
|
|
|
DOUGLAS
P. KRAUSE
Executive
Vice President, General Counsel
and
Corporate Secretary
|
Pasadena,
California
March
27, 2006
|
|