American Association of Bank Directors - Agenda Item of the Month

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Over the years, we have noticed that some banks hardly vary their monthly Board meeting agendas, regardless of what is happening both inside and outside the bank.

It could be that a major borrower has defaulted, or that the bank is considering a major change in its strategy. Or it could be a development outside the bank that has an impact on the bank, such as the closing of a local factory or a major increase in past due real estate loans statewide or nationally. But, every month, the agendas and the minutes of the meetings pretty much look the same.

We also have observed that the agendas and minutes of the committees of the Board also do not seem to vary that much from month to month.

AABD believes that it is essential that the Board address issues on a timely basis that are material to the bank, and that the agenda and the minutes of the meeting should adequately reflect the issue and the discussion.

I am reminded of a lawsuit filed by the RTC against directors of a failed savings institution in 1995. My law firm represented several of the directors. The RTC alleged in the complaint that the directors had been derelict in their fiduciary duties when they approved a large loan that ultimately was written off. We discovered that neither the agenda nor the minutes of the meeting at which the loan was approved had any mention of the loan other than the fact that the Board approved it. The directors who we represented assured us that there was a full and thorough discussion of the loan at the meeting. But all that they could base their assertion on was their recollection (and that of other directors and officers who attended the meeting) of what had occurred.

AABD has initiated an Agenda Item of the Month section to its Web site (which will also be mailed to its members) to identify at least one current issue that might be a discussion point at a monthly meeting of the board or a board committee. The agenda item will necessarily be a general one. Banks should continue to take steps to assure that agenda items and the discussions and minutes of those discussions at Board and committee meetings reflect material events materially affecting the bank.

Agenda Item of the Month