The Role of a Bank Director - Corporate Governance

As a director, you won’t be involved in the day-to-day management of the bank, but you will be involved in the strategic plan the board adopts for the bank. Your involvement also comes from:

  • participating in the board of directors meetings;
  • reading the various reports reviewed at the meetings;
  • supervising bank management; and
  • knowing the bank’s financial condition.

A bank’s corporate structure allows shareholders to benefit financially through their ownership without having to be actively involved in day-to-day operations. Shareholders rely on managers to oversee the corporation’s daily operations, while profits from these daily operations flow to the shareholders.
While this system can be highly beneficial, it can also lead to potential problems and conflicts of interest. To protect their interests, shareholders appoint directors to watch over, or govern, the managers running the corporation. This system of checks and balances is called corporate governance.  In this regard, bank directors:

  • establish policies that provide controls and limits on the various risks a bank faces;
  • monitor those risks, through periodic reports, to ensure they remain within acceptable ranges; and
  • oversee bank management to ensure it operates in the best interest of the shareholders and other stakeholders (e.g., employees, customers and community).

In short, you and your management team, the “players” in the bank’s governance, will identify, measure, control and monitor your bank’s risk to achieve profitability and protect its solvency. Click on "Players in Corporate Governance" under the Learn More column for more information.