ABA Banking Journal - July/August 2016 - (Page 53)
> BOARD MATTERS
New Directors Can Benefit
from Purposeful Onboarding
BY dEBRA CoPE
NEW dIRECToRS doN'T come on board every day. When they do, equipping
them to be effective as quickly as possible can yield positive results for banks.
"It's both the new director's goal
and the bank's goal for that person
to have an understanding of the
business of the bank," says John
Gorman, a partner in the Washington
law firm Luse Gorman. In addition,
new directors need crash courses
in fiduciary obligations, the bank
regulatory environment, and the legal
obligations for the bank's specific
corporate structure, whether public or
private, mutual or stock.
Gorman notes that orienting newly
appointed community bank directors
to their roles has long been an
informal process. However, some
formal elements-such as job
descriptions and director-onboarding
letters-are gaining currency,
particularly at publicly owned banks.
In effect, orientation begins during the
director-recruitment process, because
that is when prospective directors start
asking questions about the company.
"At the community bank level, it is
not an overly complicated business
model, although not without risk and
challenges. Potential candidates
should be able to get their arms
around it," Gorman says.
But once directors are on board,
there are issues they need to grapple
with quickly. Gorman offers six tips for
* Read the company's code of ethics.
This is where critical concepts such
as conflicts of interest, confidentiality,
fair dealing, compliance, are
* Review the basic regulatory
requirements that directly impact
directors, such as insider lending
rules. Another example of the legal
obligations for public companies is
Securities and Exchange Commission
Reg FD, which was designed to
stamp out selective disclosure, as
well as relevant stock exchange rules.
* Prepare to learn about the
complexities of bank regulation and
supervision. Consumer rules, safety
and soundness rules, bank regulation,
and holding company regulation-a
director must understand a vast
array of banking regulatory concepts.
Often, a bank's law firm or regulator
is an excellent source of concise
information on these topics. (ABA also
offers a Quick Reference Guide to
* Be informed about the bank's
business model and the most
significant risks facing the company
NEW! ABA Banking Journal Directors Briefing
Subscribe now at aba.com/DirectorsBriefing.
and industry. "It's easy if it's a public
company-just read the 10-K,"
Gorman says. "For non-public
companies, they can look at the
call reports, but they are harder to
interpret." In those instances, it is
important for the bank to provide a
* Understand the time commitment.
How many board meetings are there,
how long do they last and how much
additional time must be invested
before and after each meeting? What
does the typical board package
contain, and how much time should
be devoted to reviewing it?
* What are the financial
arrangements? Are there stock
ownership requirements? How are
Onboarding can be highly customized
because it's unusual for banks to
add more than one new director at
a time. One common practice is to
schedule the new director for a halfday of meetings with different people
from management, inside counsel and
The corporate governance and
nominating committee also should
stay abreast of director education
programs, especially during the first
three to four months of a director's
tenure, and should budget for
dEBRA CoPE is editor-in-chief of the new ABA
Banking Journal Directors Briefing, from
which this article was excerpted.
aba.com/BankingJournal | ABA BANKING JOURNAL
Table of Contents for the Digital Edition of ABA Banking Journal - July/August 2016
HOW BANK STARTUPS BUILD LEADERS
LEADERSHIP LESSONS FROM THE WORST JOB I EVER HAD
BREAKING THROUGH $10 BILLION
PLATFORMS AND PARTNERS
EXCEEDING CUSTOMER EXPECTATIONS STARTS AT THE CORE
ABA COMPLIANCE CENTER INBOX
FROM THE STATES
CORPORATE SOCIAL RESPONSIBILITY
INDEX OF ADVERTISERS
ABA Banking Journal - July/August 2016
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