Happy Birthday Ralph!
You’re 90 Years Old; Don’t You Think It’s About Time You Retired As A Director?
By Stephen A. Enna, John Parry & Alexander
I find the topic of director aging and mandatory retirement both interesting and important for the shareholders of organizations whether they are public or private. One can debate the pluses and minuses of mandatory retirement but there is not much debate around the fact that directors of community banks have as one of their duties is a responsibility to replenish the board on an ongoing basis with new thinking, ideas and talent. This is a responsibility that directly affects shareholders.
Age is an issue that we all have to deal with and, yes, this includes bank directors. With age comes a variety of positive things; for example: wisdom, experience and increased knowledge. On the other hand aging also brings with it negative things; such as, medical or health issues, memory problems and an overall decrease in energy level.
Sure, there are many examples of those who simply never have a problem. They live a great life until one day at age 90 they fall asleep and die. But most of us will go through a gradual process of deterioration before death. This, coupled with the responsibility to shareholders to replenish the board on an ongoing basis, leads me to the conclusion that mandatory retirement for directors should be a requirement in every organization.
How many times have I heard the statement that Joe Biff who is 80 is our best director. Joe is the sharpest of the bunch. No doubt there are examples where that is true and there is nothing wrong with making an exception to the policy and allowing a director to serve past a mandatory retirement age; but, without the policy, the board or board chair is faced with a difficult task of weeding out those that they determine are no longer making a contribution. More often than not those who should be removed are not simply because the organization has difficulty finding cause for their removal.
Think about it. We all know that some directors simply make little, if any, contribution as a member of the board. However, if they read the materials in advance, show up for meetings and once in a while participate in discussions, it would seem on the surface that they are doing their job and there are no grounds for their removal. In fact there are some community bank directors who simply do as described but do not add value or new thinking, contacts or ideas that will help the bank move to the next level. A mandatory retirement plan provides the opportunity to say thanks and yet move on with others that can make a contribution without the difficulty of weeding those out.
I will never forget the night I made a board presentation to a community bank and recommended that the bank implement a mandatory retirement plan for directors. I recommended age 75. After the meeting one director came up to me and said “Sonny, if I heard what you said, I think you said I should have retired 12 years ago.” I said “Well sir if that is how the math works, then that is what I said.” He looked at me for a minute or two and then smiled and said “I think you’re right. I come because these guys are my friends and I like to listen to them talk.”
I believe that this is more common that is let on. The answer is mandatory retirement. This coupled with a director emeritus program and a means of recognition for their service contributions can only benefit the shareholders over the long run.