Today, Board reports closely resemble War and Peace. Why? The same reason regulators focus on the little things... to CYA! We don't want to be criticized that our Board was uninformed, so that little embarrassment about the audit exception that turned into employee fraud is on page 262 of your Board report.
You mean you didn't see it? That's on you, fella.
Are we trying to fool ourselves into believing that all of our Board members are reading the 300+ pages we send to them two days prior to the Board meeting every month? Sure, there will be some that do. But my suspicion is there are more that do not. How could they? It's 300 pages! In two days! And most Board members have full time jobs!
According to the FDIC pocket guide for directors, a financial institution's Board should:
- Select and retain competent management
- Establish, with management, the institution's long and short-term business objectives in a legal and sound manner
- Monitor operations to ensure that they are controlled adequately and are in compliance with law and policies
- Oversee the institutions' business performance
- Ensure that the institution helps to meet its community's credit needs
How many pages per month do we need to fulfill Board responsibilities? What is not in the above list are the following things that I often see Boards debating:
- Selecting contractors for the buildout of the new branch
- Determining raises for employees that are not Senior Management
- Credit underwriting
- Small ticket charitable donations
- Loan administration's $100 budget variance
All of these distractions take valuable time away from Boards doing what they should be doing, described above. Here is what I suggest for Board reporting:
1. Financial reports for the current period, and trends.
2. Budget variance reports
3. Financial progress towards strategic plan
4. Financial condition and performance versus peer
5. High level risk management reports (because more granular risk reports are reviewed in Committee) and trends.
6. Compliance and audit reports, not included in 5 above
7. Other business such as approving policy changes, large/exception credits requiring Board approval as per policy.
Aside from including a whole policy (changes are blacklined so Board member doesn't have to search for them), or a credit package, I can't see why a Board package has to be more than 100 pages.
Executive recruiter Alan Kaplan recently wrote an article for Bank Director magazine titled What Makes Great Boards Great. His number one characteristic was quality dialog, debate, and discussion. With Board packages that are 300+ pages and agenda's crammed with unfocused topics not directly related to Board responsibilities, how can there be quality dialog, debate, and discussion?
Especially since most directors don't have the time to read 300 pages for their upcoming Board meeting. So they sit in silence when they should be focusing on debate emanating from what is on page 262.
Do you think Board packages focus on the right things?