Bank Board Letter — May 2014
Jeff Green & Dustin Birashk

Facing a transition period with your board of directors? Replacing board members is an important undertaking that must be done with care. Jeff Green and Dustin Birashk from Moss Adams LLP share five factors to look at during any transition.

After navigating one of the worst financial crises of our times — one that hit the financial services sector particularly hard — some boards of directors feel it may be time to add some new energy to their ranks as members look to transition or retire. But transitioning an existing director off the board and adding a new member is an important undertaking, and one that should be made with great care. To facilitate a smooth transition and ensure the right member joins your board, you need a plan. Let’s look at five key factors that can help you formulate the right plan for your next board of director transition.

The first step in a board member transition should be a comprehensive review of your board of director nominating process. This can help you determine that you’re following robust due process and demonstrates to stakeholders that your selection methods are fair and thoughtful.

The foundation of the nominating process is an effective nominating committee, which generally consists of three to five individuals, including:

-Two to four current board members, each from a different board committee. This helps ensure the committee is well balanced in its views and has a strong understanding of the institution’s future direction, strengths, weaknesses and opportunities.
-The CEO. Having the CEO on the committee can be a bit controversial, but he or she can often help the committee remain balanced and provide strong insights into the daily operations of the institution and its people, culture and strategic direction.

Once the nominating committee is formed, the chairperson should request that the board chair provide the committee with the institution’s procedure for nominating new board members and the criteria for being a board member.

The nominating committee needs a clear understanding of the institution’s strengths, weaknesses and opportunities. For example, if the institution wants to move into a new market, it may be helpful to find a candidate familiar with that market — someone with a good reputation who can provide insight an outsider may not possess. And if the institution wants to introduce a mobile banking app, a social media presence and so on, it may be important for the candidate to have a strong technology background.

A firm sense of the institution’s strategic direction helps the nominating committee look for specific candidates to help lead the organization and reach its goals.

One of the best tools to help evaluate board changes or additions is a self-assessment program. This can be a very detailed document or process, or it can be very informal. Either way a self-assessment of some sort can help the board identify the gaps in its skill set, expertise, networking abilities, geographical coverage, and ability to drive change.

Once complete, the assessment will make the board more aware of specific areas of need, which can help focus the recruiting process for new board members. The most desirable attributes for board candidates include industry expertise, financial and operational expertise, and risk management and technology experience.

Now, more than ever, it’s important that all board members have high ethical standards, personal integrity, an independent approach to problem solving and decision making (no rubber stamps), and can express their own thoughts and ideas. In addition, the board profile should reflect and represent the major stakeholders of the institution with respect to gender, race and age.

There’s never a perfect time for board transition, and each organization will have particular facts and circumstances that will impact transition timing. To help mitigate timing challenges, a board should include a succession planning discussion on its regular agenda at least once a year. A well-timed transition would be planned in advance and allow an incoming board member time to shadow the existing member.

Some organizations can accomplish this through a director emeritus policy. A director emeritus is a former board member who has completed his or her service as a director but continues to work with the board as an advisor. Transitioning directors to emeritus status provides an organization with a way to make room for new board members while retaining the benefit of the former directors’ experience and knowledge.

A well-governed and cohesive, contributing board can be one of an institution’s greatest assets. The next time board transition comes up at one of your meetings, consider these five factors so that when the time comes you can add a director who best suits your organization’s strategic goals.

Jeff Green has been in public accounting since 1988. He specializes in accounting, auditing, and strategic issues for financial institutions. He can be reached at 425-303-3017 or

Dustin Birashk has been in public accounting since 1999 and specializes in audits and agreed-upon procedures for financial institutions. He can be reached at 425-303-3023 or

Editor’s Note: This article is reprinted with permission from the April 2014 issue of InTouch, the official publication of the Community Bankers Association of Kansas. The authors are partners in Moss Adams LLP, certified public accountants and business consultants.