A bank’s board of directors should reflect the diversity of its senior management, its employees, its shareholders, customers, and its community. A diverse board of directors can help cultivate multiple perspectives from the top of the organization down to all levels of the company, and extend out to the communities served by the bank. The Securities and Exchange Commission (SEC) is in the process of drafting regulations that will require public companies to disclose the diversity of their respective corporate boards, which demonstrates the agency’s support of diverse boards of directors. While the proposal is still pending, the regulation could result in a greater diversification of public company boards, which we believe would become a best practice for both public and private companies. Greater diversity among the directors in turn can enhance the effectiveness and efficiency of board-level management in setting the strategic direction for the institution.

A diverse board of directors consists of individuals with varying backgrounds, gender, ages, and a vast array of expertise. While a candidate’s experience working with federal and state bank regulators is worth considering, key areas of expertise for potential bank directors extend to compliance, technology, finance, legal, various industries, and community leadership. Directors should have professional experience related to the business of the company and recognized achievements in their respective fields. This relevant experience would tend to provide strategic insights and the ability to oversee management, while working collaboratively with the entire board. Directors with varying degrees of recent experience, including previously held positions as directors and members of board committees, bring a skill set and knowledge base that contribute to a well-functioning board.

For financial institutions in particular, expertise in compliance and risk management is a desired attribute. A candidate’s ability to devote time to serve and contribute financially as a director demonstrate the individual’s commitment to the company and its continued well-being. Potential directors should be asked relevant questions during the interview process to attempt to determine whether the potential director possesses the necessary business acumen and the commitment to the institution to be a qualified and productive member of the board of directors.

Overall, a board of directors composed of a group of diverse individuals can enhance the decision-making process of the bank through capable management and oversight. Thus, when interviewing candidates for a board seat, questions should seek to proffer responses relative to a diverse outlook. We encourage the relevant committee of the board (i.e., governance or nominating) to create a list of questions to ensure that such committee is reviewing qualified candidates and using a consistent vetting process to help create an engaged, committed, and diverse board of directors to provide the strongest possible leadership and vision for the institution.