Magazine article American Banker

Comment: How Directors Can Stay Current (and Why They Should)

Magazine article American Banker

Comment: How Directors Can Stay Current (and Why They Should)

Article excerpt

At too many banks, board members are merely rubber stamps for the managers who put them there in the first place.

But now regulators are emphasizing that this can lead to troubled bank operations, and board members themselves are recognizing that they can be held personally liable for bank actions that they did not oppose, simply because they did not question those actions.

Of course, there are banks where the managers do not want the board to know too much, as this would hamper their operations. In those instances, board members have to work independently or with other board members or even appeal to regulators to gain a better understanding of the role they should play in the decision making process.

But for those bankers who want their boards to be well educated and thus more useful in keeping the bank viable and profitable, there is much that can be done.

A guest column by Marilyn Seymann, the chief executive officer of the Phoenix consulting firm M One Inc. ("Picking Board Members' Brains Means Having an Open Mind," June 14, page 7), summarized what steps bank executives should take to enhance their corporate governance.

Among her suggestions: Keep the reporting simple and consistent; compare your bank against industry norms; encourage interaction between management and board members; develop an orientation program for new directors; embrace a "no surprises" philosophy; and provide publications that will help directors keep up on industry trends.

Bank executives may also want to consider handing out copies of "Basics for Bank Directors," a 100-page book written by Forest E. …

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