Board Dynamics
Board succession planning is just as much for the incumbent directors as their successors. The atmosphere, productivity and director’s interaction within the walls of the board room is seldom associated with succession planning but what happens and the manner in which it happens has a huge impact on the decisions that get made. Board succession planning goes beyond setting the stage for the future – it is an incredible opportunity to tighten up the structure you currently have. Focusing on the expectations and rules of engagement for a board member now begets an organization and increasingly powerful board that sets the standard for recruiting new directors.
For example, times dictate the high involvement of the board from a regulatory perspective. In fact, never has there been so much pressure on a board’s performance. Credit issues, capital constraints and shrinking earnings are but a few of the problems that have faced the governance of your bank. For many, the pressure has lifted a bit but the heavy director involvement has not. As we look to conquer a new era in banking, board dynamics at your institution is critical.
Productive Versus Intrusive
There is a fine line between productive and intrusive oversight. Productive oversight matches the list of critical duties of a bank director, such as monitoring and protecting the long-term value for the shareholders, strategic planning and enterprise risk management. Intrusive oversight rears itself in excessive interest in loan decisions, personnel issues and tactical planning. The proper balance at the governance level is directly related to proper balance in board dynamics.
For a healthy and productive board of directors the balance between productive and intrusive oversight is critical. It has been difficult to measure, and thus, difficult to change. Creating the balance is achieved through difficult conversations and practices. This should result in a written statement of expectations, defined rules of engagement and yearly evaluations. This sequence is the foundation of your succession plan and is critical to a high-performing bank.
It’s not just about who is going to be the next director, it is about setting up a strong governance structure that you can take advantage of now.
We can help.
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