Evaluating Board Performance

New regulations, technological innovations and a highly competitive environment that leaves little room for error have placed unprecedented demands on the time and talents of bank boards and their individual directors.  As many who support the banking space can attest, a strong board begins with a set of enlightened governance policies and procedures that center on honesty, personal integrity and accountability.

At Bank Director, we coined the phrase “strong board, strong bank” in response to the mounting pressures placed on the banking community.  Over the years, we have introduced new research projects, conferences and magazine issues to provide exceptionally timely and relevant information to a hugely influential audience.

As I prepare to head down to Florida (and the Ritz-Carlton, Amelia Island) this weekend for our annual Bank Executive & Board Compensation conference, I am anticipating conversations about potential regulatory changes and current strategic challenges related to a bank’s growth and profitability.  Alongside my colleagues Michelle King and Amanda Wages, I also expect to field questions from the audience (depicted in the image above) about how high performing corporate boards employ evaluation tools that match the talents & experiences of their board members to an organization’s strategic goals.  FWIW, I anticipate such inquiries as many consultants and attorneys encourage such assessments — and the board performance self-evaluation tool we designed & offer to banks has earned a strong reputation for providing an independent review of a board’s effectiveness.

To be sure, the banking industry seems to be doing well based on a variety of measures — profitability is high, credit quality is much improved and tangible capital ratios are stronger than ever. However, such financial measures don’t necessarily reflect the challenges facing many banks and their boards.  So in advance of our annual event, I asked our research team to roll up the results from twenty-two bank boards — all randomly selected — that completed a performance survey this year.

While tempting to look at individual board results and draw conclusions, anonymously lumping this group together allows some interesting patterns to emerge given more then 200 individual responses:

  • 50% recognize a need for more diversity on the board;
  • 55% say they need more expertise/knowledge in technology on the board, and 44% indicate a need for more training on IT issues;
  • 51% are dissatisfied with some aspect of the bank’s succession plan, for the CEO and/or the board; and
  • 56% are certain they have the M&A experience to meet the bank’s growth goals (44% say no or are unsure).

While these four points caught my eye, I asked our Director of Research, Emily McCormick, what stands out to her. In her words:

“Many boards lack a consensus on their succession plan, meaning that they’re often not on the same page regarding the depth of that plan. That, to me, is a red flag.”

Anecdotally, many bank CEOs — and board members — that I’ve talked with in person know they need new skills, particularly in technology, and recognize a need for diversity. But as we find, few want to add additional board members.  A fact to keep in mind next week as we explore how to build and support the best teams based on the strategies and tactics being used by successful companies today.

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We designed our Bank Service offerings to help board members and senior executives develop strategies to help their bank grow, while demonstrating excellence in corporate governance that shareholders and customers deserve and today’s regulators demand.  To learn more, click here.

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