Magazine article American Banker

WEEKLY ADVISER: When the CEO Signs Every Check, Efficiency Is Bound to Improve

Magazine article American Banker

WEEKLY ADVISER: When the CEO Signs Every Check, Efficiency Is Bound to Improve

Article excerpt

I recently spent an afternoon with the chief executive of one of America's top-performing banks. The bank's return on assets and return on equity were great; its efficiency ratio was something to be admired; and the banker effused an enthusiasm for his job and his bank that many would envy.

"What makes you so profitable?" I asked.

Among his answers: careful lending that cut losses to a minimum and the luck of having a customer base that still likes to keep core deposits in savings and demand deposits-at least for now. This differs from the experience of some banks in major cities where senior citizens figure out interest to the penny and demand the top rates going or ask for a withdrawal slip.

But what interested me most was the fact that even though his is a multibillion-dollar bank with more than 100 offices, its CEO stated that either he or his second-in-command signs every check paid by the bank and that every expenditure over a modest minimum must be reported to the board (most of whose members, I must add, are also very large shareholders).

"You will be amazed what you find when you sign every check other than routine salary checks," he explained.

"In acquiring other banks, we have found checks being sent out as rental payments for buildings they have not occupied for years.

"We have seen charges for telephones that can't be found; duplicate, triplicate, and quadruplicate subscriptions for inappropriate publications; and other similar waste."

The bills for nonexistent phones also was a red flag warning that some employees were stealing. So having a top officer sign expense checks can lead to exposing waste, he said.

(Two decades ago, I hosted a monthly seminar series that banks could buy on cassette. The publisher would send out quarterly bills for $36 instead of annual ones for $144 because he knew that in many banks any bill under $50 would be automatically paid but a larger invoice would lead to questioning. …

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