Rebuilding the Team

As the board meeting adjourned, several directors of the $4 billion dollar Tri-State Bank & Trust paused for a short discussion prior to attending the retirement party in the boardroom reception area. Two longtime directors had reached the board`s mandatory retirement age and the bank was expressing thanks for their service. But farewell speeches weren`t the topic of this informal discussion. The issue at hand was the nomination of two new directors. Because there had not been any board vacancies in more than six years, the nominating committee members were unsure about the procedure for selecting new directors. The CEO made no bones about who should be considered, but some of the committee members believed that a further analysis of the board`s current composition would be appropriate to make sure new director would add value. The committee decided to approach the board chairman for additional guidance. Bank Director asked several individuals what advice they would offer in this situation. Selection of replacement directors is one of the hardest tasks that a chairman faces. Productive boards have a special chemistry that is forever altered by the departure of even one member. The immediate objective is to find individuals who possess abilities that the board determines are needed and the personal skills to work with an established team. The ultimate goal will be to foster their collective talent into a cohesive unit on which the chairman can rely. The list of desirable qualities in directors is endless, but the essential attribute is personal integrity. In addition, directors should have ideas of their own and the courage to express them. They must also have sufficient time to fulfill their responsibilitiesu00e2u20ac”and the absence of financial difficulties that might embarrass the bank. Knowledge of the duties and responsibilities of the position, genuine interest in the job, capability of recognizing and avoiding conflicts of interest, sound business judgment, familiarity with the community and trade area, and an independent approach to problem solving and decision making are all useful traits. The chairman and the selection committee would be wise to look beyond their circle of friends and business partners to the larger community that the bank serves for new directors. Civic organizations, local governments, and universities are likely sources of qualified, community-minded individuals who have the kind of ability that the bank`s board is seeking. Human nature inclines us to evaluate only those people who are familiar to us, but the board will be doing shareholders a greater service by considering all qualified candidates. Cottrell L. Webster

FDIC Regional Director

Memphis, TennesseeThe chairman of the nominating committee should request the chairman of the board provide him with the bank`s procedure for nominating new board members and the criteria for being a board member. If the bank has not developed this information, then the chairman should suggest that the nominating committee develop a recommendation to the board of directors for procedures in selecting new board members. These procedures should include criteria for selecting board members based on the current needs of the bank, as well as clearly defined roles and responsibilities of a board member. I would suggest a survey that allows the board to have input in developing this information. Individual board members would list their perceived responsibilities of a board member in order of importance. For example, a board member may perceive that the most important role of a board member has shifted over time, from setting policy to business development. The survey should include questions designed to identify the most important criteria that should be used in filling the immediate two vacancies. This could provide insight into possible voids in the existing board. As a result of bank modernization, foreseeable changes in the banking industry may result in a need to select a new board member based his or her expertise in a nonbank sector of the financial services industry. In addition, each board member and the CEO should be asked to provide a short list of potential new directors. The survey results should provide the nominating committee clear direction in developing procedures for selecting new board members, an understanding of the most important attributes that should be used, and a list of potential candidates. Based on the survey, the nominating committee should be in position to make a recommendation to the full board of directors on the procedures for selecting new board members. They will also be able to suggest new board members who will add value and strength to the board. Bruce E. Page

CEO, Cypress Ban

Palm Coast, FloridaAs a former bank CEO who has given up the reins and now serves as chairman of the board, I get chills down my spine when I think what our board would look like today if I left the director selection process entirely up to the board nominating committee. My board was much more likely to invite its friends on the board than I was. I played a very active role in who ultimately received a board seat invitation and made it clear to my directors that the CEO had to approve any candidate proposed by the nominating committee. I know it sounds very controlling, but had I not taken that stance, we would have had a board right off the links of the country club with little thought to diversity or what skills they brought to the bank. Our bank was large enough to have institutional shareholders that were looking for any excuse to question management and board actions. The directors I inherited had not grown as fast as the bank, and I used to sweat bullets every annual meeting in fear that some savvy shareholder was going to ask the board some pointed questions. Modestly speaking, ours was a case where the CEO was more attuned to the board makeup and independence than the board was. I can only imagine the challenges that exist in other, less sophisticated banks. This leads me to believe there are no hard-and-fast governance rules that fit every organization or situation. As far as I`m concerned now, it`s a good time to be a retired CEO and an almost-retired chairman! Name withheld upon request

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