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Not your grandfather’s boardroom: Building a modern board of directors


One of the biggest challenges for many financial institutions is how to prepare for the next generation of board members. Financial institutions frequently indicate they should have a succession plan in place but don’t know where to begin. The modern bank director must be fluent in risk, governance, technology, disaster recovery, security and regulations—all on top of the actual business of banking. 

The days of selecting directors based on the largest deposit balances or biggest store in town have passed. For example, I recently spoke to a banker who shared a conversation he recently had with a board member on their special asset committee. The board member asked why they only talked about the “bad loans.” Inviting directors to, or leaving directors in, roles for which they are not equipped is not fair to the institution, to the customers or to the directors, and civil money penalties are not myth. 

Getting started

To prevent disruption in your financial institution, implement a strategic succession plan—one that’s comprehensive, vetted and ready for you when you need it. Just as you have, or should have, a succession plan for key employees, or a business continuity plan for your information technology areas and key business systems, you must also have a plan in place that addresses departing board members. Not sure where to start? Consider the following:


Successful planning can develop a foundation for understanding your current board makeup and when you may need to start thinking about transitioning to new board members. Key steps include:

Complete a board assessment to better understand the current state of your board and its members. This assessment involves several key steps, including: 

  • Evaluate the number of board members
    • Confirm the board has expertise in an appropriate mix of areas
    • Establish and communicate the expected level of participation and process for removing non-participating members
    • Detail committee types, frequency of meetings and data reviewed
    • Indicate specific term limits and retirement information (this isn’t about age, it’s about ability to perform the function; some institutions have directors that are over 70 who are excellent and some much younger who aren’t)
  • Following that, create a formal succession plan and make sure it supports your institution’s overall strategic plan, satisfies regulatory needs and allows for recruiting to fill spots with new members who have skills that your present board may lack.  


Establish a framework to cultivate the skills of both current and potential future board members. Key aspects should include:

  • Develop a program for selecting and recruiting candidates, to identify and nurture their talents.   
    • Recruit candidates based on what they can bring to the board. Are they knowledgeable in a specific area that current board members aren’t (e.g., technology, security, commercial properties)? 
    • Consider integrating associate or non-voting members, to begin the training process, in advance of the transition.
    • If you don’t have diversity on your board, add some. People of different ages, genders and races make decisions differently, as do your customers.
    • If you cannot find the experts you need (e.g., in technology or cybersecurity), consider using a third-party advisor to answer questions and provide training as needed.
  • Provide ongoing development and training for not only the proposed members, but the existing members as well. As the industry has undergone significant changes, so have the responsibilities, requirements and liabilities associated with board membership.


Implement a process to help ensure that future board members are prepared for their new responsibilities, and that your succession plan is effective even as demands evolve. This process should include:

  • Formalize your evaluation process to include periodic check-ins, reviews and communication with key successors to address challenges or training needs.
  • Connect successors with members of the management team, when appropriate, to provide formal and informal mentoring.
  • Integrate a communication strategy when successors are placed in their new roles to achieve buy-in and acceptance among employees, customers and third-party relationships.
  • Revisit your succession plan annually, and adjust as needed given board, institution and industry changes.

Benefits of a succession plan

There are some immediate benefits to succession planning. First, it helps financial institutions attract needed new members to the board of directors. Perhaps more importantly, succession efforts often position an institution to more easily accept change when it becomes necessary. 

Although we can’t predict the future, creating a comprehensive succession plan can also provide the institution with a higher level of protection. Start early though; succession planning is best when developed before it’s needed, and when mentoring and training are integrated into your efforts and are part of the board’s overall strategy.



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