Laura Alix is the Director of Research at Bank Director, where she collaborates on strategic research for bank directors and senior executives, including Bank Director’s annual surveys. She also writes for BankDirector.com and edits online video content. Laura is particularly interested in workforce management and retention strategies, environmental, social and governance issues, and fraud. She has previously covered national and regional banks for American Banker and community banks and credit unions for Banker & Tradesman. Based in Boston, she has a bachelor’s degree from the University of Connecticut and a master’s degree from CUNY Brooklyn College.

Addressing Poor Performance in the Boardroom
Boards may be tempted to consider term limits or mandatory retirement ages, but there are better ways of dealing with an ineffective director.
It’s the board’s responsibility to handle poor performance by individual directors, but too often, it’s a task relegated to blunt tools like age limits. Sometimes, it can even be swept under the rug.
“People want to avoid a difficult conversation, so the thinking goes, ‘If we set a term limit then, we don’t have to have a difficult conversation when somebody isn’t engaged,’” says Julie Bell, head of leadership advisory with the executive search firm Chartwell Partners.
A poor fit on the board can encompass a range of behavior, from a director who’s not meeting a minimum standard for performance to one who’s actively combative toward other directors and management, says James McAlpin Jr., a partner at the law firm Bryan Cave Leighton Paisner and member of Bank Director’s board. “A bad fit doesn’t get better with time. And in my opinion, if you have a significantly problematic board member, it’s the responsibility of the board to just deal with it,” he says. “Age limits and term limits are a bit of a copout.”
Mandatory retirement ages are particularly popular in the banking industry: Four years ago in Bank Director’s 2020 Governance Best Practices Survey, 43% reported using a firm mandatory retirement age as a way to create new seats in the boardroom; 15% had a mandatory retirement age with exceptions. Just 5% used tenure or term limits.
Term limits and age limits on the board can be a divisive topic, and with good reason. An infusion of fresh ideas and new voices can benefit the board, but the wisdom gleaned from years of experience can also be a valuable asset, especially in a highly-regulated field like banking.
“While many bank boards perceive longevity as being highly valuable, oftentimes, longevity comes at the expense of having directors on the board who are more current and active in the business community, have skills that are more relevant for where the bank is today, and also at the expense of simply bringing fresh voices into the boardroom,” says Alan Kaplan, founder and CEO of the executive search and board advisory firm Kaplan Partners. While Kaplan favors term limits and age limits in some circumstances, he also describes them as artificial mechanisms for fostering board refreshment.
But there are tools that can help boards be proactive about director composition and engagement. Regular board evaluations and peer assessments can drive conversations around director performance, but many boards are missing out on that opportunity. According to Bank Director’s 2024 Governance Best Practices Survey, conducted in May and June, 41% of directors reported that their board does not conduct performance assessments, which can be used to evaluate governance practices and the effectiveness of the overall board. Just 26% conduct annual or less frequent peer-to-peer evaluations, which examine the performance of individual directors. Bank Director offers both as part of its Bank Services Program.
Performance evaluations, which can be conducted by a third party, allow directors to provide their anonymous input on their fellow directors’ performance. The results of a peer-to-peer assessment can also be used to drive conversations with individual board members about their contributions in the boardroom. Some banks make individual directors’ renominations contingent upon a positive performance evaluation.
Assessments can serve as a wake-up call for a director whose performance has slipped, Kaplan says. Even a very good director can become distracted by outside issues related to their health, family or business, and an assessment may gently nudge them to revisit their board service contributions. Performance assessments may also reveal areas where the board needs more training.
Forty-three percent of survey respondents said they conduct board assessments annually, while 16% engage in this exercise less frequently. Just 13% said their board administers individual peer assessments every year, but Bell and Kaplan both say that peer assessments don’t have to happen yearly to be effective.
“The role of the board is to be a strategic advisor to management and if the board isn’t comprised of a varied group of highly skilled people who can add value, strategically and risk wise, clearly contributions over time simply become more limited,” says Kaplan. “A board seat is a rare, precious thing.”
Then there’s the question of how to approach a conversation with an underperforming director. That conversation can be treated as an opportunity to reengage a director, communicating to an individual that they’re not meeting the demands expected of them and outlining expectations going forward. A third party can use the results of an assessment to initiate that discussion, Bell says.
Alternatively, the board might frame the conversation in terms of the bank’s strategic direction. If the bank is growing rapidly, expanding into new markets or adding new lines of business, then it may need a more diverse and sophisticated set of skills on the board. Setting more robust expectations for directors may be a part of that.
Establishing expectations from the get-go about what board service entails may save boards a lot of headache in the long run, Bell says. “Banking is an industry of relationships, and it’s no different on the board. It’s hard to tell someone you’ve become fond of or close to that their services are no longer needed,” she says. “It’s easier when expectations are set up front.”