On March 5 and March 6, Bank Director will hold its second annual Bank Board Training Forum at the Hermitage Hotel in Nashville. The day-and-a-half event was designed to augment Bank Director’s other conferences, which tend to focus on a specific topic, like mergers and acquisitions, audit, risk or compensation, and appeal to a more targeted audience. Instead, the Training Forum was designed for the entire board, and it covers a wide range of topics that all bank directors need to understand.
We are expecting a standing-room only crowd with about 120 people, which speaks to the pressure that directors feel to keep up with the changes that are occurring throughout the industry. Whether it’s something to do with technology, like the advance of mobile or the impact of social media, the rise of nonbank competitors like Google and Apple, or the growing impact that millennials are having on the U.S. economy, the pace of change seems to have accelerated. Staying on top of it all almost seems like a full-time job.
I’ve always thought that bank directors face a unique challenge because banking is a highly regulated industry and it takes time for a new director to grasp just the major requirements, let alone the entire rule book. (I wonder how many bank CEOs who grew up in the industry know the entire rule book.) Banking is also a complex business (as is finance generally) and a new director whose background is in, say, manufacturing or retail can end up having a pretty steep learning curve. The fact that most bank directors come from outside of the industry only adds to the challenge.
Ultimately, directors’ effectiveness will depend on how much they know about the business of banking and, specifically, their own bank. How can a board exercise their fiduciary duties to shareholders, or be a valuable resource to management, if its members don’t understand the industry, its issues and how those are changing?
There are a variety of ways that directors can keep themselves informed. Attending events like the Training Forum, or those offered by other industry organizations, is certainly one approach. I would also strongly suggest that directors read a variety of industry publications on a regular basis. Bank Director magazine is one of them, obviously, but there are others. I think it would be extremely helpful if there was someone on the board, perhaps the lead director or independent director, or even the corporate secretary, who could flag important articles, research reports and webcasts and push that content out to the entire board.
I have come across a number of bank boards that make it a regular practice to have a member of senior management brief the board on a particular topic, say, credit trends throughout the industry, or the latest developments in cybersecurity. I think it’s entirely reasonable for the board to expect management to help keep it informed on important industry trends as well as what’s going on inside the bank. But the management team can’t do it all. Directors themselves have to make a personal commitment to training and education for as long as they serve on the board. Basic intelligence, life experience and sound judgment are important qualities for a director, but they can only take you so far.