The director of a failed Florida bank was sued by the Comptroller of the Currency to recover losses resulting from the bank's demise. During the court hearing, information was presented about how the director took action to try and save the bank. He'd bought additional capital stock in the bank, loaned the bank money and kept large interest-free deposits at the bank. It was also noted that the director had attended only three of the last 31 board meetings. The director attributed his lack of attendance to the poor health of both him and his wife.

Consider the questions below. Select your answer by clicking the option of your choice. Because we are asking your opinion, there is no "correct" answer, but be sure to compare your answers to the court's response by clicking on the gavel icon, shown after the questions.

Based on this information, what do you think of the director’s performance in his duties as a board member?
A. Excellent	B. Poor	C. Not Sure

Do you think this director should be held liable for the bank's failure?
A. Yes	B. No	C. Not Sure

Which do you think was more valuable to the director's bank - the money or the time he invested?
A. Money	B. Time Invested	C. Not Sure

Bringing the Past to Present

The bank in this story failed in 1930. The director was James Cash Penney, founder of the J.C. Penney department store chain. His advice and counsel would have been invaluable to the bank's management team had Mr. Penney regularly attended board meetings. For more detailed information on the J.C. Penney story see New Perspectives for Bank Directors, Richard B. Johnson, editor, (Southern Methodist University Press, Dallas, 1977), pp. 6-7.

As you will learn later, as you attend the board meeting, Madison McCard is like J.C. Penney; she has not attended many board or committee meetings at Insights Bank within the last year. When she does attend, she often makes valuable contributions to the management of the bank. Her lack of attendance, however, deprives the bank of her expertise and knowledge of the community.

The rules for directors haven’t changed much since J.C. Penney’s days. Today’s directors are still an integral part of a bank’s management team. In many ways, the challenges they face are similar to those faced by J.C. Penney.  And those faced by J.C. Penney were faced by generations of directors before him. Consider, for example, the advice from the very first Comptroller of the Currency.

As part of the management team, your job as an outside director is to provide oversight and offer counsel to the bank's senior officers. You also represent the interests of the bank's shareholders, depositors, deposit insurer, employees and the community. (For a printable overview of things to keep in mind as a director, review the Ten Commandments for Bank Directors.) Ultimately, you are responsible for all aspects of your bank’s operations.  This includes, among other things:  

• making certain the bank has competent management and periodically evaluating management to ensure it is running the bank in an acceptable manner;
• establishing boundaries on the bank's risk taking; and
• reviewing the bank's performance to keep abreast of its risk taking and the effectiveness of its risk management.
  
  For more information on director responsibilities, click here.

Your bank's success depends heavily on meeting these and other responsibilities. It also requires that you actively participate in the affairs of your bank, offering advice and counsel when you feel it is needed. To be effective in doing this requires that you attend all board and committee meetings. When you attend, remember to offer your individual thoughts, insights and perspectives on matters brought to the table. You may have personal knowledge about the community and individuals within it that bank management does not have. Furthermore, you may have occupational experience, educational background, analytical abilities and reasoning skills that are invaluable in helping bank management make correct decisions.