Directors Digest Enters Second Year
Nancy E. Sheppard, WIB President & CEO

This edition of Directors Digest marks the beginning of the second year of publication of this valuable members-only benefit. The feedback we have received on this has been overwhelmingly positive, and I hope you will continue to find the format and information useful. We are pleased to have five new - but familiar - experts join in as columnists.

I have just returned from our Annual Conference in Maui. There were a record number of directors in attendance, underscoring once again your desire for more director education. In the coming year WIB will offer more programs for bank directors than ever before. For information on all WIB director education, click here.

Strategic Issues

Strategy 101, Part IV
By Cass Bettinger, Cass Bettinger & Associates

In this column, Cass Bettinger will discuss key strategies for managing the fourth financial driver of ROA, overhead expense/avg. assets. In addition, the strategic relevance of the efficiency ratio will be addressed. <read more> 

The Directors' Role in Strategic Planning
By John Oliver, Laurel Management Systems

A fundamental part of the director’s role is ensuring the ongoing viability of the institution. This responsibility must encompass planning for the future. How can directors make this strategic planning process more effective? <read more>

Capital Management
By Jeffrey Wishner, Keefe, Bruyette & Woods 

Efficient capital management is about lowering your weighted average cost of capital. Regulators allow for up to 25% of a bank’s Tier 1 capital in trust preferred securities, which is a cheaper form of capital than common equity. In today’s market, trust preferred securities have a 4.1% after tax cost, while common equity carries an implicit cost of 14.2% for a Western Small Cap Bank. <read more> 

CORPORATE GOVERNANCE

Polish Up Your Tone at the Top
By Howard Gould, Carpenter & Company

As directors we need to periodically polish up our house as well - our governance house that is. Along with your fellow board members you’ve hopefully conducted your annual “board self assessment” (if not, put that on your agenda soon). But frequently board self assessments focus mostly on structural and operational aspects of the board’s role in governance. We also need to step back and assess our attitudes, leadership style, and interpersonal relationships - those things that position our role in our bank both internally and externally - what we refer to as “Tone at the Top”. <read more>

Five Keys to Successful Stockholder Meetings
By Philip Smith, Gerrish McCreary Smith, PC

Stockholder meetings come in all shapes and sizes. Some are very quiet affairs with only directors, senior officers and a handful of stockholders. Others may be large catered banquets with several hundred stockholders attending. Sometimes, the meeting is standard protocol with a simple reelection of directors. Other times, it may be controversial in voting on substantive changes to the organization. Whatever the situation, the following five points should help you run your meetings more effectively and efficiently.  <read more>

General Interest 

Compensation Committee on the Hot Seat:
Make Stock Option Accounting Work for You
By Larry Raber, Perry-Smith LLP

New accounting rules for stock-based compensation and new comprehensive disclosures in proxy statements regarding executive compensation have put compensation committees on the hot seat in the corporate governance arena. Recent articles in the Directors Digest have suggested that the compensation committee’s work is just beginning as they evaluate the most effective ways to compensate both executive officers and directors in order to attract and retain those individuals who will build long-term shareholder value for their company. <read more>

Hiring a Competitor's Employees: The Lurking Perils of Lift-Out
By James M. Rockett, Bingham McCutchen LLP

The process has become so routine in banking circles that it has acquired a moniker: “Lift-Out.” Lift-Out has become the process of a competitor hiring one or more employees from another bank with the intent of building a team to compete in a specific marketplace or a particular product line. As one banker recently informed me, “it is cheaper than buying a bank because there is no premium and every bit as effective in capturing market share.” But, given the requirements of California law and the increasing sensitivity of bankers to vigorously protect their competitive interests, there can be serious and expensive consequences if the lift-out is not properly handled. As a director, your bank can be at risk if your bank's policies do not adequately address this issue. <read more>