Publications & Resources

November/December 2009
Focus: Directors Issues

 

Board Effectiveness & the Role of a Board Evaluation

Click here for a case study

By Nancy E. Sheppard, President & CEO, WIB

Given the many pressing issues impacting bank management and boards today, is gauging board effectiveness through an assessment just a nice-to-have corporate governance upgrade? Not in the opinion of many corporate governance experts and bank regulators. In fact, it is not uncommon today to see regulatory orders requiring a board assessment.

Quality, meaningful director education has long been a part of best practices to increase board effectiveness. But, education by itself doesn’t guarantee an effective board. We may learn what to do, but even then we often don’t do what we should. While WIB has been an advocate for board education for nearly two decades, in 2008 the WIB Board of Directors recommended that we find ways to help community bank boards and management step on a well-calibrated scale and to see how they are doing. Ergo, a task force of bankers and directors evaluated a number of programs to assess board performance and provide feedback mechanisms. In early 2009, WIB entered into agreements with three firms to help our member banks in this board assessment process. 

Chairman of the WIB Board Effectiveness Task Force, Dan Myers, president & CEO of Bridge Bank, N.A. in San Jose, Calif., believes in board assessments. “Understanding a board’s strengths and opportunities for improvement are critical to sound governance, especially in these challenging times for the banking industry. Effective board evaluations are the best way to get that understanding,” he says. Dan practices what he preaches. In 2008, his board used board assessment tools including board assessments, a corporate culture survey, and 360 degree surveys, some of which were developed by Cass Bettinger & Associates, a WIB endorsed vendor.

Here are a few of the attributes that our task force determined an assessment program should help measure. An effective board:

  • Understands what the role of the board is (governance) and what it is not (management)

  • Understands its independent, fiduciary responsibilities to shareholders

  • Has well-defined and documented organizational structure

  • Creates an open environment that encourages effective discussion and encourages constructive statements of opinion and dissent among the board and management

  • Promotes transparency, accountability and professionalism

  • Maintains objectivity in evaluating the company, its management and its performance

  • Stays strategically forward-looking and focuses on broad issues that affect the direction of the company

  • Is proactive in anticipating the shift in market trends and changes policies accordingly to better react to up and down markets, rates, etc.  

“In today’s environment, board members have more liability and responsibility than ever before; and this seems to be growing constantly,” according to Gayle Appelbaum, managing director & founder of Amalfi, another firm that WIB recommends for board assessments. “The board governance assessment tool is an objective and anonymous approach to evaluating a board’s skills, structure and effectiveness. The process identifies areas of strength and opportunities for improvement so that your board members can be as effective and efficient as possible.”

In addition, she notes, “this process examines the relationship between the board of directors and executive management, and provides recommendations to help strengthen this partnership. Board members indicate that as a result of participating in the assessment process, they have an increased confidence that they are focusing their resources and time on the right things. They also state that they feel more engaged and have a stronger sense of commitment to the organization.” 

The three firms WIB has endorsed for all provide for a 15% discount for WIB members for their tools and consulting services related to board assessments. Information, including a short presentation on each of their programs is available by clicking here.

Amalfi Consulting
Contact Gayle Appelbaum – (952) 893-6795
gayle.appelbaum@amalficonsulting.com

Cass Bettinger & Associates
Contact Connie Bettinger – (239) 586-2890
connie@cassbettinger.com

Brintech
Contact Susan Connor – (770) 919-8802
SConnor@Brintech.com

Nancy E. Sheppard is president & CEO of Western Independent Bankers. She was the staff person responsible for working with the Board Effectiveness Task Force to review board evaluation programs.

Unauthorized reproduction of all or part of this material without the express written consent of the author is strictly prohibited. All rights reserved.