How to get new board members up to speed

Illustration by Neil Webb/Getty Images

Onboarding programs for new directors can build their knowledge and strengthen the board’s value to your community bank.

By Carol Patton

Two years ago, Heartland Bank’s board of directors elected two new directors. As part of the “naturalizing” process, the $1.03 billion-asset community bank handed each director a copy of Financial Institution Directors’ Liabilities & Responsibilities by Jeffery E. Smith, Esq., and Craig Bernard.

“We asked them to read the book before they accepted so they understand what they’re getting into,” says Scott McComb, chairman, president and CEO of the Whitehall, Ohio, community bank. (See Scott McComb: A true relationship builder) “Everyone wants to be on a bank board until they find out how much they have at risk.”

It usually takes several years before new directors, particularly outside directors, fully understand a bank’s operations, its legal environment and its fiduciary responsibility. However, many community banks don’t support onboarding programs, perhaps because director turnover is typically low. Still, such programs have proven beneficial in helping new directors get up to speed and maximize their value to community banks, their customers and the communities they serve.

Quick stat

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Courses offered through ICBA’s Bank Director Online Training program, with topics like IT security and mortgage fraud

Heartland Bank’s formal program includes an offsite, two-day orientation where McComb and other staff members share their expertise on a wide variety of topics, including delinquency, underwriting and collections. Directors can also access the board portal, which offers other relevant information, such as definitions of key banking terms. McComb also mentors new directors by periodically meeting with them to address their questions and concerns.

“I don’t understand why [some] banks don’t have an onboarding program,” he says. “If the management team and board chair are not providing it, they’re doing their shareholders and board a big disservice.”

Built-in training

Five years ago, Bank of the Prairie in Olathe, Kan., developed a director onboarding program with a built-in training component, says Chris Donnelly, president and CEO of the $145 million-asset community bank.

Donnelly or the bank’s chief financial officer deliver 30 minutes of training at the end of each monthly board meeting on topics ranging from compliance and bank liquidity to interest rate sensitivity. New directors also attend a full-day, offsite seminar covering their core responsibilities and actively engage in weekly or monthly bank committee meetings.

Donnelly says directors are often also shareholders and must learn to place the community bank’s interests ahead of their own to avoid potential conflicts of interest. He says that’s one of the most difficult concepts for them to grasp. “If they’re not learning, not engaged on a constant basis and don’t have input into what’s going on, how can they help you, how can they perform and move forward into the future?” Donnelly says. “You need to get them engaged in all of the different components of the bank and [understand] what their responsibilities are.”

Steady stream of information

There are many resources community banks can use to create an onboarding program. ICBA offers a bank director program that includes a bimonthly newsletter, 20 online education courses, access to attorneys through a governance helpline and discounts on live events, explains Shirley Ringhand, ICBA vice president of certification, seminars and the bank director program.

At the minimum, she says programs must include documents that describe the bank’s structure, corporate culture, strategic plan and common banking acronyms, while exposing directors to key compliance components and regulatory requirements.

Likewise, she says community banks should make sure that new directors serve on bank committees that best suit their background, knowledge and expertise.

“Provide them with the tools and information prior to their first board meeting. Get them immersed in banking, much like a brand-new bank employee.”
—Shirley Ringhand, ICBA

“Provide them with the tools and information prior to their first board meeting,” says Ringhand. “Get them immersed in banking, much like a brand-new bank employee. Tell them what to expect during the first board meeting, what they will encounter, and to ask questions to understand what the issues are.”

Some community banks prepare a welcome manual for directors to use as a reference tool, says Jeffrey Gerrish, an attorney and chairman of the board at Gerrish Smith Tuck, a consulting and law firm focusing exclusively on community banks in Memphis, Tenn.

He suggests including materials in the manual that describe how the board works, hot-button issues, compliance concerns, the member evaluation process, committees supported by the bank and what they do, key state and federal regulations, the chairperson’s role, director responsibilities and instructions for accessing last month’s online board package.

Other community banks overlap incoming and outgoing members as part of an onboarding strategy, he says, even though that results in a temporary increase in director payments.

“Individual directors will be much more effective more quickly if you have an onboarding program,” says Gerrish, who authored a book containing banking acronyms and definitions, Gerrish’s Glossary for Bank Directors. “Otherwise, it’s just on-the-job training.”


Carol Patton is a writer in Nevada.

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