Winning the board-size struggle
By Steve Cocheo, executive editor, is also editor of the monthly ABA Bank Directors Briefing newsletter.
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj0410/index.php?startid=52
Bridgewater Savings put its board on a diet and built a succession program
Like pounds that sneak on between physicals, boards can grow and yet not seem weighty until an outside party points it out.
“The regulatory agencies said, ‘You’ve got a big board of trustees’,” recalls Robert Todd, nonexecutive chairman at $510 million-assets Bridgewater Savings, Raynham, Mass. “‘How do you manage them?’”
Indeed, the 138-year-old mutual’s board had swollen to a veritable host of 22.
The trustees, who perform similar duties as directors, traditionally are drawn from the board of corporators. (Unique to the mutual charter, corporators are akin to advisory board members and often are descendents of the mutual’s founders, as well as other civic leaders.) Three of the trustees, Todd and CEO James Lively knew, would like to retire, but felt they had made a commitment. The bank has a mandatory board retirement age of 72, but offered a special early-retirement package in hopes of giving these trustees a graceful way to bow out.
Actually, 11 trustees took the attractive package.
Subsequently, a mutual holding company was formed. In the process, the MHC formed its own board of trustees. The bank, now a stock corporation, turned its board of trustees into directors (they serve as MHC trustees as well).
The number of outside directors of the bank had fallen to ten when, earlier this year, the company completed a merger with smaller East Bridgewater Savings.
Sometimes mergers can bloat a board all over again. This didn’t happen.
First, the target’s CEO was 62. He found retirement attractive. “So that eliminated the CEO issue,” says Todd.
Second, while East Bridgewater had no retirement age, the acquirer’s bylaws, including its mandatory retirement age, became the successor organization’s bylaws. The target’s chairman was 76. “So that took care of the question of chairmanship,” says Todd.
Finally, there was the stickier issue of merging the two boards. Normally, the ratio of asset size would dictate the carryover of trustees, and that would have called for three new members added from the target.
However, East Bridgewater had 11 trustees—only five of whom weren’t older than 72, says Todd. This left five potential “recruits,” who were all taken aboard.
Why run the risk of bloat all over again? Todd and Lively weren’t going to lose the deal over two extra seats—especially when they could use them. And not when, from 2014 to 2017, a chain of six board retirements will begin.
One last detail. Todd himself, chairman for 14 years, and a member of the board since 1976, has a succession plan for his own post. Four years ago, the position of vice-chairman was created and a younger man was appointed.
“He could succeed me,” says Todd, “without a hiccup.” â–