ABA Banking Journal - February 2008 - (Page 51)

COMMUNITY BANK MANAGEMENT “odd-man out.” For both parties, interacting with the other can easily deteriorate into a necessary evil, making one’s life miserable. But the new reality is you must strive for improvement in your board-management relations. The costs of ignoring a suboptimal relationship are just too great. While the relationship between CEOs and boards is typically complex, and any total breakdown of that relationship generally results from many factors, the sudden departure of a CEO often suggests that the relationship had become suboptimal. This is attested to by the recent, well publicized experiences of HP (where Mark Hurd replaced Carly Fiorina), Capmark Financial (formerly GMAC Commercial Holding, where William Aldinger III replaced Robert Feller), and Home Depot (Frank Blake replaced Robert Nardelli). Other less visible examples are also plentiful. One East Coast mid-size institution is on its third CEO in recent years, largely due to relationship issues between the board and management. Moreover, in today’s post-Enron environment, greater and more effective involvement with the board is a necessity. Current regulatory and legislative pressures continue to redefine the roles of public boards. And the complexities of running an institution today demand greater skills and guidance from directors. The good news: Board-management relations can indeed be moved from a suboptimal level towards optimizing. To effect change, there are a number of prerequisites required of all participants. Foremost is the recognition that the relationship would benefit by seeking positive change, and a determination by all to make it happen. Even for those institutions who would characterize their relationship as “good,” both parties must recognize the need and understand the value in seeking further improvement. Each participant must also put the organization ahead of any personal aims. For directors, it’s all about representing shareholders’ interests in setting an effective direction for the institution, and overseeing execution of those plans. For the CEO, it typically requires working with executive management and the board in charting an effective course, and navigating the successful execution of the www.ababj.com/subscribe.html plans to achieve desired results. Finally, improving the relationship isn’t necessarily about “getting along.” Candid exchanges, if constructive and targeted towards the betterment of the institution, should be welcomed. For some directors, this may require a shift in mind set; from that of a club member seeking fellowship, to a dedicated focus on performance of their fiduciary responsibilities in representing others. With the proper prerequisites in place, some sort of deliberate intervention by an objective and independent third party is usually required to achieve the desired improvement. Ideally, you would begin with a baseline measurement from all participants to assess their needs in and satisfaction with organizational direction and effectiveness, personal role fulfillment, and the corresponding working relationship between the parties (you may think informed guidance and contribute towards making effective decisions. 2. It is imperative that boards improve both the depth and balance of the skills they bring to the relationship. We are often asked what is an appropriate role for a board of directors. The answer depends on the skills and experience they offer. Broadening their individual and collective skills will encourage a greater and more meaningful role. One should keep in mind that where controversial issues persist, it is best to yield to those who possess the greater expertise. 3. Strengthen communications. The CEO and chairman must set the tone and foster a culture of open communications. This should encompass encouraging constructive and probing questions, taking turns as devil’s advocate, even wel- Improving the relationship isn’t necessarily about “getting along.” Candid exchanges, if constructive and targeted, should be welcomed of this as a sort of “health checkup” on the relationship). Using this data, commonalities and differences among the parties can be identified, highlighted and prioritized for intervention. Possible remedies should also be researched and evaluated, and a time line established for implementation and monitoring progress. Communication alone usually goes a long way towards resolution. Explicit recognition of the challenges, and seeking an understanding into why they exist, can often be enough impetus to bring about improvement in a number of cases, if reasonable minds prevail. While each institution will find they have a unique set of issues, and must tailor solutions to fit their own situation, we have discovered four elements common to all optimizing relationships. coming dissenting views. Moreover, once the deliberations are done, don’t insist on unanimous agreement. Instead, seek majority consensus, with the willingness of all participants to embrace the eventual decision. 4. 1. Management and the board must allocate sufficient time to ensure open and comprehensive exploration of the strategic issues facing the organization. This includes ready access to any information needed, in order to generate Those with optimizing relationships require performance accountability for each participant. This includes measurement and evaluation of individual director and CEO performance. Neither position should be considered a tenured post. Have a mechanism to remove weak performers. By employing these four solution principles, coupled with your own effectiveness in addressing your unique needs, you should be able to move your board-management relations towards an optimizing environment. Directional work can once again become stimulating, with challenging questions resolved in an open and creative setting. Indeed, in moving your relations from ugly to optimizing, it can be a pleasure once again to work together. BJ ABA BANKING JOURNAL/FEBRUARY 2008 51 http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - February 2008

ABA Banking Journal - February 2008 Contents On ABABJ.COM: Have You Visited Our Brand-New Website? Editor's Column "That's Edutainment" Snapshot: Tier 1 Ratios Stable so Far 100th Anniversary: Then and Now ABA Resources ABA Chairman's Position Don't Despair Pass the Aspirin Cover Story: Socially Responsible Banking Profitably - Incoming America's Community Bankers Council Chairwoman, Dorothy Bridges Demonstrates the Way A True "Rags-to-Banker" Story Retail Banking: On the Money Hunt Community Bank Management: The Ugly Truth About Board Relations Does Core Really Matter? Security 2.0: Not Just a New Kettle of Phish A Personal Case of Mal-Serendipity DOD Credit Regs Demand Attention Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - February 2008

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