Bank Director's 2024 Governance Best Practices Survey Examines Risk Oversight & Board Practices

Bank Director's study reveals various barriers to effective boards, including dominant stakeholders and a lack of diverse viewpoints. Board responsibilities, engagement and risk oversight are also reviewed.

NASHVILLE, Tenn., July 30, 2024 /PRNewswire/ -- Bank Director, the leading information resource for directors and officers of financial institutions nationwide, released its 2024 Governance Best Practices Survey Results, sponsored by the law firm Bradley Arant Boult Cummings LLP. Survey findings reveal that about one-fifth of respondents report the outsized influence of a dominant executive or director in the boardroom.

Bank regulators have pointed to these so-called "dominant policymakers" as a governance gap. A bank's board has an essential role in the success of an institution, but a dominant CEO or board member could have a negative impact on the safety and soundness of a bank's operations. In proposed guidelines issued by the Federal Deposit Insurance Corp. in October 2023, "dominant policymakers" could inhibit directors' independent judgment and lead to the mismanagement of the institution. Further, a possible "power vacuum" could result should the dominant individual step down.

"While the FDIC's proposed guidelines would apply to a limited number of banks over $10 billion in assets, the agency has posed this as a safety and soundness concern that it can apply as deemed appropriate," says Emily McCormick, vice president of editorial and research at Bank Director. "While most of the board members in our survey don't report such a dominant individual at their own institutions, a number do — and anecdotally, we've seen the adverse consequences play out at some failed and distressed banks."

In the survey, respondents pointed to other shortfalls in their boardrooms. These include a lack of diverse viewpoints or backgrounds (21%) and a lack of long-term vision (20%). Only one-third of respondents perceived no deficiencies in their board's culture.

"Bank Director's 2024 Governance Best Practices Survey validates that the board time commitment is growing because our directors are focused on their current responsibilities, which is creating a gap for one-fifth of bank boards that do not have a long-term vision for the institution," says Robert Maddox, a partner at Bradley. "This may be a stressful environment, but just surviving is not a successful strategy."

In addition to addressing director engagement and independence, the survey examines how boards oversee risk, and the skills and diverse backgrounds reflected in bank boardrooms today. Almost half say their board has three or more members who they would characterize as diverse, based on gender, race or ethnicity. And 56% consider these characteristics when evaluating director candidates.

The 2024 Governance Best Practices Survey Results include the views of 178 independent directors, chairs and CEOs of U.S. banks below $100 billion in assets. The majority of responses reflect banks under $10 billion.

View the Full Survey Findings

About Bank Director
Bank Director reaches the leaders of the institutions that comprise America's banking industry. Since 1991, Bank Director has provided board-level research, peer insights and in-depth executive and board services. Built for banks, Bank Director extends into and beyond the boardroom by providing timely and relevant information through Bank Director magazine, board training services and the financial industry's premier event, Acquire or Be Acquired. For more information, please visit BankDirector.com.

Bradley Arant Boult Cummings LLP
Founded in 1870, Bradley is a national law firm with a reputation for skilled legal work, exceptional client service, and impeccable integrity. Attorneys in Bradley's Banking & Financial Services Practice Group serve as counsel for a broad range of banks, lenders and financial institutions across the United States. As part of its nationwide practice, the team (which includes more than 80 members) advises banks, mortgage servicers, lenders, credit unions and other consumer finance companies across a broad spectrum of legal issues, including litigation, regulatory compliance, governmental investigations and enforcement actions, risk assessments, and multi-state settlements. The firm's unique, cross-disciplinary team has a national reputation as a leader in the consumer finance industry with a particular focus on mortgage origination and servicing compliance, enforcement, and litigation. For more information, please visit www.bradley.com.

For more information, please contact Bank Director's Director of Marketing, Deahna Welcher, at [email protected].

SOURCE Bank Director