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One size fits none in quest to define ideal bank board

 


American Banker | June 13, 2018



The American Banker article, “One size fits none in quest to define ideal bank board," quoted Russell Reynolds Associates Consultant Jack "Rusty" O'Kelley III about the the difficulty in defining independence and establishing governance rules. The article is excerpted below.

M&T’s board sticks out for a couple reasons: It’s bigger than those at other regionals, and it has a relatively large share of inside directors.

The Buffalo, N.Y., bank’s recent election to the board of Kevin Pearson — its vice chairman in charge of commercial banking, among other functions — gave it 18 directors. Most other regionals have 12 to 14.

Pearson became its fourth inside director. That is not a large number, but at 22% of the total board, the $119 billion-asset M&T’s share of inside directors is the highest when compared with seven other big regionals.

...

For many companies, a typical board of directors might number around 10, although 12 is a little more normal for the banking industry because bank boards have more committees than those in other industries, experts said.

At 14, Eastern’s board is also a little bit on the larger side, although Rivers said the bank has staffed its board a little bit higher than normal in anticipation of some upcoming retirements. Half of the bank’s directors are also now either women or people of color.

Again, establishing firm rules is hard — as is defining “independent.” A board stacked with company outsiders who have mostly served for a decade or more can still raise questions of independence, said Rusty O’Kelley, the global leader of Russell Reynolds Associates’ board consulting and effectiveness practice.

“You become very close to management,” he said. “Many directors become personal friends and close to each other on the board as well as with management, and you may not exercise the independence and dispassion you would have shown earlier.”

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One size fits none in quest to define ideal bank board