Dir Duty & Board Conduct

Dir Duty & Board Conduct - 1 Directors’ Duties &...

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Unformatted text preview: 1 Directors’ Duties & Conduct of the Directors’ Board Meeting Board James B. Bexley, Chair Smith-Hutson Endowed Chair of Banking Sam Houston State University Huntsville, Texas How Is Your Board Used? Rubber stamps w Advice--only when you need it w “Eyes and ears” for the bank w Set policy w Review loans w Refer prospects * w 2 Role of the Board Multi-faceted role w Legal liability for condition of institution w Accountable to investors & regulators w Evaluate management performance w Generating business * w 3 Characteristics of a Director Be successful in their profession w Possess leadership & good judgment w Have analytical skills to evaluate data w Be a person respected in the community w Have ability to promote the institution & Have direct business to it direct w Be forward-thinking, objective * w Continued 4 Characteristics of a Director (Cont.) Be financially responsible w Spend time studying issues w Possess good common sense w Good chemistry & rapport with chief Good executive officer * executive w 5 Director Issues w w w w w w w w w w Quality Service--39.4% Loan Quality--17.3% Enhanced Shareholder Value--10.9% Competition From Non-banks--10.0% Strategic Planning/Business Strategies--6.3% Government Regulation--5.5% Changing Technology--3.8% Director Training & Competition from Other Banks--2.1% Risk Management--1.6% Director Liability--1.0% * 6 How Does Board Accomplish How Its Duties? Its Regular meetings w Review all major areas of responsibility w Be fully informed on all major activities Be since last meeting since w Take action on matters requiring attention Take * w 7 Organization of the Board Proper organization is key to effective and Proper efficient board efficient w Meetings should last from one and one-half Meetings hours ideally to a maximum of three hours hours w Well organized agenda w Data summarized for the board * w 8 Chairman/Chairwoman Strong leader w Start & end meeting on-time w Allow for thorough discussion, but don’t Allow take too much time--keep on track take w Critique meeting and set course for next Critique meeting meeting w Insure that management is implementing Insure the boards directives * the w 9 Management Input Good communication with board is a must w In one month between board meetings, at least In 180 hours of banking take place--so the board must get a good review by management of the month’s activities month’s w Management must not withhold meaningful Management information from the board information w Adversarial relationship between management Adversarial & the board not in best interests of bank * the w 10 Prior Meeting Data Send financial data (such as balance sheet & profit & loss statement) to board at least one week prior to meeting w Also send any other data that needs study prior to the meeting (such as policies, etc.) w Board Briefing or financial summary (1 to 2 pages) to accompany financial data * w Continued 11 Example of Board Briefing May XX, 2XXX EARNINGS. The bank continues to perform well through the first four EARNINGS. months of the year with earnings of $1,040,656, which is a 12% increase over same period last year. Interest rates on loans remain strong with a $130,000 increase over last year. Fee income has increased greatly this year and accounts for 6% of the earnings increase this year. Another significant item is the substantial reduction of nonthis Another interest expense which accounts for 4% of the earnings increase. As interest you know, it is our goal to protect earnings by reducing or controlling expenses. expenses. BALANCE SHEET. Asset growth in our bank is up 11% over the same BALANCE period last year. Loan growth has been strong, but we perceive that it will decline in the last half of the year. Therefore, we plan to increase our efforts to identify quality loan prospects to offset the anticipated decline in demand. The recent bank examination revealed an excellent asset quality just as we anticipated. asset NEW PRODUCTS. We have introduced a new package plan that NEW should give us a decided advantage over the competition……………. ……………………………………………………………………….* ……………………………………………………………………….* 12 Meeting Agenda a Must! Agenda should let participants know actions Agenda desired & materials to be covered desired w Agenda should coincide with time allotted Agenda for meeting for w Don’t list every possible item & hope to get Don’t it covered it w Lack of preparation reflects negatively w Sample agenda follows * w Continued 13 Sample Agenda 1. Determine quorum/call meeting to order 2. Minutes of previous meeting--Ask for motion to waive reading of minutes/call for corrections reading Motion by ______________ Seconded by ___________________ 3. Review and approve financial statements Motion by ______________ Seconded by ___________________ 4. Review and approve investment portfolio purchases/sales Motion by ______________ Seconded by ___________________ 5. Review and approve Loan Report a. New loans over “x” amount b. Delinquent loans over 30 days c. Problem loans d. Borrowings by officers and directors (FIRA) Motion by ______________ Seconded by ___________________ Continued 14 Chair Chair Jones Green Gray Sample Agenda (Continued) 6. Review and approve Operations Report a. Cash items b. Cash collections c. Overdrafts d. Tellers overs/shorts e. Report of thefts/defalcations (if any) Motion by ______________ Seconded by ___________________ 7. Review and approve Trust Report (if you have Trust Dept.) a. Minutes b. New and closed out accounts c. Special reports Motion by ______________ Seconded by ___________________ Continued Smith Black * 15 Sample Agenda (Continued) 8. Review and approve Marketing Report a. Top prospects b. Director generated customer prospects c. Officer call program Motion by ______________ Seconded by ___________________ 9. Review and approve Audit Committee Report (if any) Motion by ______________ Seconded by ___________________ 10. Review and approve Nominating Committee Report (if any) Motion by ______________ Seconded by ___________________ 11. Other Matters a. Presentation by Director Smith about his company b. Presentation by Officer Jones about Opns. Area 12. Old Business (List each item to be discussed) Chair Motion by ______________ Seconded by ___________________ Continued 16 Thomas Harris Redd Smith Jones Sample Agenda (Continued) 13. New Business (List each item of new business to be 13. discussed--such as new policies, etc.) discussed--such Motion by ______________ Seconded by ___________________ 14. Executive Session/Management Report (non-board members leave meeting) leave a. Budget plans b. Personnel matters 1.) Officer promotions/salary increases 2.) Organizational changes c. Various status reports Motion by ______________ Seconded by ___________________ Motion 15. Adjournment 15. Motion by ______________ Seconded by ___________________ * 17 Chair Chair CEO Things To Remember Take a break after an hour or hour and one-half w Lack of involvement can be interpreted as Lack negligence in the conduct of their duties negligence w Customer data must be treated confidential w 75% attendance is the minimum acceptable level w As a director, you are liable for actions of bank As so ask questions if you don’t understand so w Vote your convictions * w 18 A Success Story In 1980, took over bank in city of 60,000 w Bank was 2nd largest in city, not aggressive w Some directors feared competition w Plans to aggressively attack competition Plans met with apprehension by some met w In four years, bank grew from $164 mm to In $425 mm $425 w Competition now feared us * w 19 Total Commitment Lloyd Bentsen, Sr. said it best w “Director commitment is much like a Director marriage--you need to make a total commitment to the bank” commitment w Questioned director’s loyalty w How committed are you to your bank? ** w 20 ...
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This note was uploaded on 09/30/2010 for the course FIN 468 taught by Professor Bexley during the Fall '10 term at Sam Houston State University.

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