Considerations for Board Membership Tenure

Do you want to have one of those awkward board room discussions? If so, bring up the topic of board member term limits. As I type this I can hear my two girls in their high pitch voices saying…awkward! This may be a tough discussion item, but I believe it is one that needs to occur in bank board rooms across the country. Many bank boards are comprised of significant stockholders and community leaders, but often with terms that are reminiscent of US Supreme Court justices.

I had a conversation recently with a client and they expressed a desire to bring some “new blood” with fresh ideas to the board but don’t have room on the board unless current members retire. That statement may be part of the issue. Often, leaving a board is considered “retiring” and only happens due to mandatory age limits or health reasons. 

How do you facilitate a process that continuously brings new board members into the fold? 

You need to make use of a nominating committee and an effective director assessment program.  The most effective boards are those where the members are highly engaged, perform advance preparation for meetings and provide thoughtful, challenging questions.  

A director self-assessment process is a great starting point but should be accompanied by a one-on-one meeting between the board chairman and the board member. This meeting should focus on the board member’s level of engagement and commitment to the board as well as developmental needs. Results of the self-assessments and one-on-one meetings should then be discussed at the nominating committee level. This group should ensure that the right skillsets are represented on the board.  See our earlier blog on board diversity and its link to financial results. Automatically re-nominating existing board members is not an appropriate practice if you want your bank to reach its full potential. 

Service as a board member is a privilege and not a right.  Does your bank have processes in place to ensure you have the right board members at the table? 

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Topics: Bank Trends, Bank Growth

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