Many banks need to add new board members because some are reaching a mandatory retirement age or because others who agreed to stay through the financial crisis now want to rotate off the board. Banks need to keep in mind that they will be under close scrutiny by any prospective candidate who will be conducting due diligence on the bank at the same time the bank is conducting due diligence on the candidate. In order to ensure your bank can attract top candidates for board positions, consider the following before beginning the recruiting process:
(1) Needs assessment: The board of directors should conduct a needs assessment to identify which qualities and skills in new board members would augment the skill set of the current board.
Identifying the knowledge and skills the board needs is critical to ensuring a satisfactory recruiting process.
(2) Corporate Governance: While all potential board members will likely inquire first about the amount of the bank's Directors & Officers Liability Insurance coverage, the more knowledgeable candidates regarding banking will also inquire about the corporate governance practices, i.e. the manner in which the bank is overseen by the board of directors. The board should determine how answers to the following questions would affect the recruiting process:
(3) Board Training: New board members need to make informed decisions from their first meeting, so how they get up to speed on the issues facing the bank is important.
(4) Strategic Planning: The OCC's Semiannual Risk Perspective for Spring 2014 states that "strategic risk remains high for many banks."
(5) Board Assessments and Peer Evaluations: Board assessments and peer evaluations are part of good corporate governance.
There is no better time to get your house in order than when guests are due to arrive, and likewise, reviewing these five topics, and perhaps making some adjustments ahead of the search process, will pay dividends in attracting new board members.
Catherine Ghiglieri is the former Texas Banking Commissioner and is President of Ghiglieri & Company based in Austin, Texas. She is co-founder of The Bank Directors' College which provides training to bank directors. See www.ghiglieri.com and www.thebankdirectorscollege.com.
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