When directors are considering management succession, a good corollary is the growing challenge of board-level succession.

 

In her presentation on succession planning at ABA’s 2009 National Conference for Community Bankers, Susan O’Donnell, managing director at search firm Pearl Meyers & Partners, Boston, addressed board succession.

 

Increasingly, she said, boards must recognize that simply picking some younger versions of the usual types of candidates to succeed retiring directors may not work. Increasingly, special demands on bank boards call for candidates with specialized expertise. Among the specialties in demand are compensation experts and corporate governance experts.

 

Such needs may arise even before a board is confronted by looming retirements, and she has heard from client firms that they want to add such experts, but have boards that are already too large.

 

O’Donnell said boards must also face the reality that there are growing external pressures on bank boards that will influence who serves on bank boards and who can be approached to fill positions. Board members’ workloads and time commitments are growing. Rules and regulations that bank boards must deal with, often at a depth not traditionally expected of boards, are increasing. And retention is becoming a bigger problem in the face of those and other factors.

 

O’Donnell suggested the boards’ nominating committees begin planning not only for the next expected vacancy, but two or three vacancies, out. This will ensure that the board is looking at candidates with sufficient lead time to avoid holes in the full board’s makeup.

 

In addition, O’Donnell called for boards to implement regular evaluation of their members skills and performance. This can help formalize addressing of gaps is skill levels, and shortfalls in performance. O’Donnell also indicated that ongoing education and development of board members was critical, and something nominating committees could work to encourage.

 

Audience members asked about board terms, and a mild debate ensued. One attendee, for instance, believed there should be no potential for “appointments for life” to a bank board.

 

He said his bank offered new directors a five-year term, and the possibility of a second five-year term. And then, that’s that, under the bank’s bylaws.

 

“If you don’t tell them, they won’t want to retire,” said the listener. “I don’t think long-term directors are a good idea.”

 

A fellow listener, however, disagreed with such cut-and-dried measures.

 

Continuing service on a board ought to hang strictly on competence and skill, this attendee maintained.

 

And a third listener, who works in a family owned bank with a board consisting strongly of trusted family members and relatives by marriage, backed up that viewpoint.

 

“I’ve got some older directors that I don’t want to see retire,” said the youngish CEO. “I value their experience, and I would miss them.”

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