CORPORATE GOVERNANCE
Role of the Board of Directors, Leadership Structure and Risk Oversight
The Role of the Board of Directors
The
Corporation’s business and affairs are managed under the direction of the Board. The Board elects the Corporation’s officers, who serve at the discretion of the Board. The responsibilities of the Board include determinations of fair value of the Corporation’s assets, corporate governance activities, oversight of the Corporation’s financing arrangements, and oversight of the Corporation’s investment activities.
Board Structure and Leadership
The Board has structured itself in a manner that it believes allows it to perform its oversight function effectively. The Board consists of five Directors, four of whom are not “interested persons,”
as defined in the 1940 Act, and are Independent Directors, as defined in Nasdaq Marketplace Rule 4200(a)(15) (the “Independent Directors”). The member of the Board who is not an Independent Director, Ms. Ko, is referred to as an Interested Director (the “Interested Director”). Ms. Ko is deemed to be an Interested Director because of her position as a Managing Director of Crescent.
The Board does not have a lead Independent Director. All of the Independent Directors serve as members of each committee of the Board, which the Independent Directors believe allows them to participate in the full range of the Board’s oversight duties, including oversight of the risk management process. In addition, although the Independent Directors recognize that having a lead Independent Director may in some circumstances help
coordinate communications with management, and otherwise assist a board in the exercise of its oversight duties, the Independent Directors believe that, because of the relatively small size of the Board, the ratio of Independent Directors to Interested Directors, and the good working relationship among the Directors, it is not necessary to designate a lead Independent Director at this time.
The Board, through the Nominating Committee, completes an annual self-assessment during which it reviews its leadership and committee structure and considers whether its structure remains appropriate in light of the Corporation’s current operations. The Board also periodically reviews its leadership structure. The Board believes that its leadership structure, including the current percentage of the Board members who are Independent Directors,
is appropriate given its specific characteristics. These characteristics include (i) the extent to which the work of the Board is conducted through the Board's standing committees, each of whose meetings are chaired by an Independent Director; (ii) the extent to which the Independent Directors meet as needed in the absence of members of management and the Interested Directors; and (iii) Ms.Ko’s positions with Crescent, which enhance the Board’s understanding of the operations of the Advisor.
Board Oversight of Risk Management
The Board’s role is one of oversight, rather than active management. Oversight of the Corporation’s investment activities
extends to oversight of the risk management processes employed by the Advisor as part of its day-to-day management of the Corporation’s investment activities. The goal of the Board’s risk oversight function is to ensure that the risks associated with the Corporation’s investment activities are accurately identified, thoroughly investigated, and responsibly addressed.
The Board reviews risk management processes at both regular and special Board meetings throughout the year, consulting with appropriate representatives of the Advisor, as necessary, and periodically requesting the production of risk management reports or presentations. The Board receives a wide range of reports on the Corporation’s activities from the Advisor and other service providers, including reports regarding the Corporation’s investment portfolio, the
compliance of the Corporation with applicable laws, and the Corporation’s financial accounting and reporting. The Board also meets periodically with the Corporation’s CCO to receive reports regarding the compliance of the Corporation with the federal securities laws and the Corporation’s internal compliance policies and procedures, and meets with the Corporation’s CCO at least annually to review the CCO’s annual report, including his risk-based analysis for the Corporation. The Audit Committee (the “Audit Committee”) also meets regularly with the Chief Financial Officer and the Corporation’s independent registered public accounting firm to discuss, among other things, the internal control structure of the Corporation’s financial reporting function. The Board also meets periodically with the portfolio managers of the Corporation to receive reports regarding the management of the Corporation, including its investment risks.