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TOMORROW'S BANKING: FOUR PERSPECTIVES The New Director by JOSEPH F. DiMARIO, National Service Director for Banking, Pittsburgh In tomorrow's business environment, every industry, including banking, will be subject to increased scrutiny. This development has been prompt-ed by a variety of circumstances, from illegal corporate acts to the bank-ruptcy of major businesses, including some banks which were once con-sidered stalwarts of the business com-munity. How are banks responding to these developments? What role will be played by the bank director? What are some of the specific issues that the director will face as he evaluates his position vis-a-vis the bank and the community? Finally, what is the broader picture, given that neither corporate statutes nor the courts have clearly defined what directors should or should not do? The picture is unclear. As a result, a bank director today must largely define his own role. He must not "meddle" with day-to-day manage-ment, yet he must know what is going on and make his influence felt. What he must keep in mind is that his responsibility lies with the share-holders and the public at large, rather than directly with management. Therefore, he must be alert to possi-ble inappropriate action by cor-porate officers. In many respects, he walks a fine line between his degree of involvement and the broader responsibility of establishing cor-porate policies and monitoring ad-herence to those policies. This, in turn, has made his responsibility more arduous and hazardous. What degree of involvement should a bank director assume? In recent years, various suggestions that affect his role have been made to banking corporations: Appoint a full-time, compensat-ed board whose members spend a significant portion of their time on bank matters—similar to the method used in Europe. Assign a corporate officer to the board of directors whose sole responsibility will be to assist in answering questions, performing studies and analyses, and so on. The officer would function much like an internal audit department which re-ports to the board, but his responsi-bilities would encompass all aspects of the operation and cross-func-tional lines extensively. Create audit committees to im-prove communications with the out-side auditors and highlight the need for diligence in financial matters. • Organize an outside group of ex-perts to counsel the board from an independent, objective viewpoint. It is evident that these proposals lead to a situation in which the bank director knows more, becomes more involved, and asserts his authority more often and with more meaning. Indeed, the courts have now held that a heightened awareness is required by directors on the matter of com-pany operations and the detection and correction of wrongdoing. Where does that put today's poten-tial bank director? How will his actions change in the future if to-day's environment continues? The Bank's R e s p o n s i b i l i ty First, it is imperative that the bank's management recognizes the board's increased activity and provides assis-tance to its members. The sometimes historic reasons for being a board member—i.e. influence in the busi-ness community, significant business relationships, community recog-nition— are not the only criteria. Management must respect the fact that the bank director has a first obligation to the shareholders and public at large, and must apprise the board of all operating matters of significance. Many banks today are developing ongoing programs for their directors. The subject matter has included: —A history and perspective of the individual bank. —What banks can and cannot do according to law. —What directors can and cannot do. —Areas of directors' liability. —Measures taken by the bank to lim-it day-to-day problems. T h e Board's R e s p o n s i b i l i ty New bank directors must have the interest and available time to cope with their new assignment. They will obviously ask more questions of man-agement prior to accepting a board position. They will weigh the bank's economic environment and the in-tegrity of its management. In effect, the potential board member will be interviewing the bank as well as the bank interviewing him. When approached, a potential bank director should evaluate: —The background, interests, and in-volvement in bank operations of other directors. —The bank's history in conforming with laws and regulations, and its 57
Tomorrow's banking: Four perspectives
Change in structure
Challenge to productivity
DiMario, Joseph F.
Kangas, Edward A.
Conover, C. Todd
Sochowicz, Charles M.
Stause, Philip E.
Banks and banking -- Forecasting
Touche Ross. New York Office
|Abstract||Illustration not included in Web version|
Tempo, Vol. 23, no. 1 (1977), p. 57-63
|Source||Originally published by: Touche Ross, & Co.|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|