Management: Bank Directors Face an Ever-Evolving Role @sh#Board Members Are Increasingly Being Expected to Bring Business in the Door

Article excerpt

Since the savings and loan crisis, the role of the community bank director has evolved from sometimes passive supporter of bank management to assertive overseer of corporate health.

The change was necessary to the survival of many institutions. Today the impetus is more than survival: Directors are becoming integral to community banks' competitive performance.

Many community bank boards have shifted in both composition and activity. Whether it's the board of a start-up looking to gain a foothold or an established institution fighting merged monoliths, the results share some similarities: diversified recruitment of new directors, higher expectations of aggressive business development, and closer integration with strategic direction.

Union Bank of Florida, a $300 million-asset bank in Fort Lauderdale, says its goal is nothing less than the resurgence of Florida's homegrown banks in a market buffeted by mergers. To this end, says Lynne Wines, Union Bank's president and chief executive officer, the board has expanded from eight to 12 directors, with a concentration of local business executives.

"These directors make the bank more aggressive in setting high-level goals," Mr. Wines says. "We now have the expertise we normally would not be able to hire. And because they are entrepreneurial, our directors want to look at partnerships and grow the bank."

One recent offshoot of this director involvement is a joint venture and minority ownership of Eras JV, an Internet and imaging software developer in Orlando that specializes in the financial services market.

The partnership was first suggested by board members. But the first step in transforming the Union Bank board was setting a goal for growth, then bringing current directors closer to the strategic vision of the bank and adding new directors to buttress that stance.

Part of that expected growth depends on the business development potential of the directors. "They are helping us reach out to companies we normally would not have access to," Mr. Wines says.

Independence Community Bank Corp., a $7 billion-asset company in Brooklyn, N.Y., restructured its board 10 years ago, replacing community leaders from education and the arts with commercial business executives from real estate, finance, and corporate law. "We've grown tenfold in the last decade," says Charles J. Hamm, chairman, chief executive officer, and president of Independence. "The rapidity of this growth is certainly a reflection of the board's vision and capacity."

To maximize the board's potential, Independence's directors sit on various committees that study issues of interest to the bank. Committees examine commercial lending activities, credit, audit responsibilities, and technology in a process that emphasizes the governance role of directors. This approach helps target the attention of selected directors who later share their findings with the board as a whole.

Committee-driven boards have become more common for community banks, especially growing institutions. "Committees leave the boardroom for the bigger picture," says Walt Moeling, a partner at Powell, Goldstein, Frazer & Murphy, a law firm in Atlanta. "In time there will be a real revolution to a much more focused approach to the business of

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