Evaluating and Monitoring Management

If providing competent management for the bank is the board’s most important responsibility, then the next would be periodically evaluating that management to make sure it is meeting your expectations. A formal performance appraisal process is not required, but is highly recommended as it provides for a regular, documented discussion of the CEO’s performance. This is true for all bank employees, although directors usually evaluate the CEO, with management evaluating the remainder of the staff.
Information from several sources is considered in evaluating management. The sources are listed in the Learn More table at the right.

Caution: Avoid falling into the trap in which financial performance trumps all else when evaluating the CEO. Financial performance should not be the sole measure of management performance. Emphasis should also be given to organizational and operational matters, e.g., management’s provision of adequate risk management and internal controls, to determine if bank performance is sustainable. Analyze the level of risk the bank has assumed, whether it is reasonable and within the board’s risk tolerances. Determine if management is aware of those risks.