Emily McCormick is Vice President of Editorial & Research for Bank Director. Emily oversees research projects, from in-depth reports to Bank Director’s annual surveys on M&A, risk, compensation, governance and technology. She also manages content for the Bank Services Program, including Bank Director’s Online Training Series. In addition to speaking and moderating discussions at Bank Director’s in-person and virtual events, Emily writes and edits for Bank Director magazine, BankDirector.com and Bank Director’s weekly newsletter, The Slant. She started her career in the circulation department at the Knoxville News-Sentinel and graduated summa cum laude from The University of Tennessee with a bachelor’s degree in Spanish and International Business.

2024 Governance Best Practices Survey: Exercising Independence
Board responsibilities, risk oversight, composition, engagement and governance practices are examined in Bank Director’s annual Governance Best Practices Survey.
Brought to you by Bradley

Can a dominant CEO or board member have a negative impact on their bank?
In July 2023, Heartland Tri-State Bank closed after its CEO funneled $47.1 million out of the $139 million Kansas bank over a matter of weeks, according to prosecutors. Federal agents said that was the direct cause of the Elkhart bank’s insolvency, but the Federal Reserve’s Office of the Inspector General pointed to an underlying factor: Hanes’ excessive influence as the bank’s CEO and one of its larger shareholders.
Employees asked to conduct the wire transfers were reluctant to question or report the activity, which didn’t align with the wire policy and limits approved by the board. “Significant internal control breakdowns and the influence of the CEO as a dominant management official created an opportunity for the series of apparently fraudulent wire transfers to be initiated and processed,” wrote the OIG.
In Bank Director’s 2024 Governance Best Practices Survey, sponsored by the law firm Bradley Arant Boult Cummings, almost one-fifth of responding directors and CEOs report that a single individual directly or indirectly dominates their board’s deliberations. Most say this presents a mixed effect on discussions, and some even believe it’s beneficial.
But Bradley Partner Robert Maddox says boards overly influenced by one individual can’t act in the best interests of the bank and its owners. “They’re not exercising independent control,” he says. The outsized influence of a dominant personality “means the other directors are not independently asserting themselves.”
Proposed guidelines from the Federal Deposit Insurance Corp., issued in October 2023, set out the agency’s expectations for banks above $10 billion in assets that are regulated by the agency. The guidelines focus on board independence, composition and risk oversight, and highlight the dangers of any individual having too much influence in the boardroom. “Dominant policymakers” could inhibit directors’ independent judgment; the FDIC also expressed concerns about prospective mismanagement and a “power vacuum” should that individual leave.
Training focused on the board’s role could help directors address this potential problem without being adversarial, says Maddox, “because you’re not discussing the person; you’re discussing the broader responsibilities of the board.”
The survey of directors and CEOs, conducted in May and June, examines board engagement, risk oversight and recent regulatory scrutiny around governance practices.
Key Findings
Confident Directors
Respondents widely indicate assurance in the board’s ability to execute on its responsibilities, particularly meeting its fiduciary responsibility to shareholders, supporting an independent audit and risk function, and reviewing and approving bank policies. However, signs of weakness appear. Eighteen percent report ineffectiveness in establishing a succession plan for the CEO or key executives, a key board duty.
Active Deliberations
Forty-four percent say all board members actively contribute to discussions; almost half say most directors contribute, with one or two who don’t actively participate. When asked about their own participation, two-thirds say they speak more than the average board member.
Few Perfect Cultures
Respondents point to various shortfalls in their boardrooms, including a lack of diverse viewpoints or backgrounds (21%), a dominant board member or executive (21%) and a lack of long-term vision (20%). One-third perceive no deficiencies in their board’s culture.
Board Composition
Almost half say their board has three or more members who they would characterize as diverse, based on gender, race or ethnicity. Most say their board relies on directors’ (87%) and/or executives’ (66%) personal and professional networks to source candidates.
Onboarding Practices
Eighty-five percent have an onboarding plan for new directors, which commonly includes one-on-one meetings with the CEO (83%), reviewing recent financial statements (73%) and meeting with the chair or another director to discuss board policies and procedures (66%).
Setting the Risk Appetite
Forty percent say their board reviews the bank’s risk appetite — put simply, the amount of risk the bank should accept, measured by metrics like concentration limits — every year. One-third review this statement quarterly, while 12% say their board doesn’t review the risk appetite at all.
To view the high-level findings, click here.
Bank Services members can access a deeper exploration of the survey results. Members can click below to view the complete results, broken out by asset category and other relevant attributes. To find out how your bank can gain access to this exclusive report, contact [email protected].
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