Try This: Sample Board of Directors' Self Assessment

In addition to evaluating management, the board of directors should evaluate its own performance and that of its members. Peer review is an important ingredient in ensuring the board remains effective in its bank oversight. Organizational accountability is a key role for any board. Accordingly, the board must hold itself accountable for the quality of its governance. Click each category below to view more information regarding categories of self assessment.

1. DETERMINING THE BANK’S MISSION AND PURPOSE

The board should establish the bank’s mission statement and periodically revise it when necessary. The mission statement should be clear, concise, understood, and supported by each board member.

Are you satisfied or not satisfied that:

  • All board members are familiar with the current mission statement?
  • All board members support the current mission statement?
  • The mission statement is appropriate for the bank’s activities for the next two to four years?
  • The board’s policy decisions are consistent with the bank’s mission statement?

Are there any areas related to the bank’s mission statement that need to be discussed?

2. ESTABLISHING THE BANK’S STRATEGIC PLAN

Strategic planning is an essential board responsibility. The formal planning process should take place at least every three years, because changes in the environment may present new opportunities or challenges and may require the bank’s leadership change. These changes may also affect the bank’s goals.

Are you satisfied or not satisfied that:

  • The board has a clear understanding of the bank’s market and its customer base?
  • The board has a strategic vision of how the bank should evolve over the next three to five years?
  • The board periodically engages in a strategic planning process to consider how to take advantage of new opportunities or deal with new challenges?

Are there any areas related to the bank’s strategic planning process that need to be discussed?

3. APPROVING AND MONITORING THE BANK’S PRODUCTS AND SERVICES

The bank carries out its mission by offering specific products and services that have been approved by the board. Additionally, the board has the responsibility for monitoring and evaluating products, ensuring their quality is consistent with the bank’s objectives. Monitoring means tracking progress toward the goals established in strategic and annual planning. Evaluating means measuring the effectiveness and quality of the bank’s products and services. Monitoring and evaluating can be accomplished by reviewing performance data, observing products and services firsthand, surveying customers, or retaining a consultant to conduct an evaluation.

Are you satisfied or not satisfied that:

  • The board is knowledgeable about current products and services?
  • The board knows the strengths and weaknesses of the bank’s current products and services?
  • The board periodically considers adding new products and services or discontinuing existing products and services?
  • The board has a process for tracking the performance of products and services?

Are there any areas related to the bank’s products and services that need to be discussed?

4. SELECTING AND SUPPORTING THE CEO AND REVIEWING THE CEO’S PERFORMANCE

A primary board responsibility is the selection and retention of the chief executive officer. An effective board will have a clear job description to utilize in evaluating the CEO’s performance or to facilitate a carefully executed search process if the position is vacant. Additionally, the board will support the CEO by providing frequent and constructive feedback, and periodically conducting evaluations to strengthen the CEO’s performance.

Are you satisfied or not satisfied that:

  • A written job description clearly defines the responsibilities of the CEO?
  • The board assesses the CEO’s performance in a systematic and fair way on a regular basis?
  • The board’s process for determining the CEO’s compensation is objective, adequate, and ties performance to compensation?

Are there any areas related to the board’s selection, support, and review of the CEO’s performance that need to be discussed?

5. PROVIDING EFFECTIVE FISCAL OVERSIGHT

Another important board responsibility is preservation of a bank’s resources and assets. The board should establish budget guidelines, approve an annual operating budget, and monitor adherence to the budget throughout the year. In addition, the board should consider having an annual audit by an independent accounting firm to verify to shareholders and the public the bank is accurately reporting its sources and uses of funds. The board is also responsible for ensuring funds are appropriately invested to safeguard the bank’s future.

Are you satisfied or not satisfied that:

  • The board ensures that the budget reflects priorities consistent with the strategic plan and annual plan?
  • The board receives financial reports on a regular basis?
  • Financial reports are understandable, accurate, and timely?
  • Management has established appropriate controls over financial reporting?
  • Accounting personnel have appropriate experience and on-going training to prepare financial statements in accordance with generally accepted accounting principles?
  • The board considers having an annual financial statement audit by an independent accounting firm and documents in its minutes any reasons why this is not done?
  • The board has established appropriate investment policies?
  • The board has approved policies that enable the bank to manage risks and reduce them to a tolerable level?
  • The board has an adequate amount of liability insurance in the event of lawsuits filed against the bank as a whole or against members and staff as individuals?
  • The board periodically reviews analysis of the insurance carried by the bank (e.g., directors’ and officers’ general liability and workers compensation) to ensure adequate coverage and competitive pricing?

Are there any areas related to the board’s fiscal oversight that need to be discussed?

6. UNDERSTANDING THE RELATIONSHIP BETWEEN THE BOARD AND THE BANK’S STAFF

Board members must have a clear understanding of their role and that of the bank’s staff, including an awareness that the respective responsibilities may change as the bank grows and changes. Many important organizational issues require a partnership of the board and the bank’s staff if they are to be addressed effectively. The primary board-staff relationship is between the board and the CEO, and the quality of this relationship is extremely important. When other staff members are assigned to work with board committees, their role should be clearly defined and approved by the CEO.

Are you satisfied or not satisfied that:

  • The respective roles of the board and staff are clearly defined and understood?
  • The respective roles of the board and the CEO are clearly defined and understood?
  • A climate of mutual trust and respect exists between the board and the CEO?
  • The board gives the CEO enough authority and responsibility to lead the staff and manage the bank effectively?
  • When bank staff is assigned to assist board committees, each understands their role?
  • Board members refrain from directing the work of the bank’s staff?
  • The board has adopted adequate and appropriate human resource policies?

Are there any areas related to the relationship between the board and the bank’s staff that need to be discussed?

7. ENHANCING THE BANK’S PUBLIC IMAGE

Board members can do much to develop the bank’s image. If a bank is successful, but its achievements are kept secret, it will not be able to raise additional capital, attract desirable board candidates or staff, or serve a broad cross-section of the community. Accordingly, the board should develop a marketing and public relations strategy. Such a strategy might include written and visual communications such as annual reports, newsletters, fact sheets, press releases, Web pages, and participation in community events. As part of its public relations strategy, the role of board members should be defined for communications with key businesses, government, media, and regulators. The role of the CEO should also be defined for these purposes. While encouraging individual board members to spread the word about the bank they help govern, the board should also have a policy about who should serve as the bank’s official spokesperson when, for example, a news reporter requests an interview about a possibly controversial issue. Conversely, board members also need to understand that much information they learn as board members is confidential and should not be repeated in the community at large.

Are you satisfied or not satisfied that:

  • The bank has an effective public relations and marketing strategy?
  • Board members promote a positive image of the bank in the community?
  • Board members understand who can serve as the official spokesperson for the bank?
  • Board members understand what information is confidential and is not to be repeated in the community?

Are there any areas related to the bank’s public relations and marketing strategy that need to be discussed?

8. CAREFULLY SELECTING AND ORIENTING NEW BOARD MEMBERS

An effective bank board is made up of individuals who contribute needed skills, experience, perspective, wisdom, time, and other resources to the bank. Because no one person can provide all of these qualities, and because the bank’s needs change over time, the board should have a plan to identify and recruit appropriate people to serve on the board. Once new members have been recruited, the board should have an orientation program to acquaint new members to their responsibilities and to the activities of the bank. Additionally, consideration might be given to having board members periodically rotated off of the board to ensure that it can benefit from new ideas and experience without creating a board so large that it becomes ineffective.

Are you satisfied or not satisfied that:

  • The board has an effective process to identify, select, and nominate new members?
  • The board ensures that prospective board members have adequate time to devote to board responsibilities?
  • The board’s composition reflects the diversity of background, expertise, and other resources needed by the bank?
  • The board provides new board members with a comprehensive orientation to the bank’s programs and finances?
  • The board has established policies for length of board service, mandatory retirement, and rotation of board members to ensure appropriate leadership, energy, and skills to oversee the operations of the bank?

Are there any areas related to selection or orientation of new board members that need to be discussed?

9. ORGANIZING ITSELF SO THE BOARD OPERATES EFFICIENTLY

Boards carry out their work in meetings. To make board meetings productive, board members need to receive and review agendas and background materials before the board meetings. Effective boards utilize board agendas that focus on important issues, allow discussion, and culminate in action. Since boards operate in accordance with by-laws and organizational policies, board members need to be familiar with these documents. By-laws and policies need to be reviewed periodically and, if necessary, revised.

Are you satisfied or not satisfied that:

  • Board members receive clear and succinct agendas and written material with sufficient time to review prior to board and committee meetings?
  • The board focuses much of its attention to long-term, significant policy issues rather than short-term administrative concerns?
  • Board members have adequate opportunities to discuss issues and ask questions?
  • Board members are each comfortable discussing controversial issues and asking difficult questions?
  • The frequency of the board meetings is appropriate for the responsible discharge of the board’s duties?
  • The length of board meetings is adequate to thoroughly vet all items on the board’s agendas?
  • The size of the board is appropriate for the effective governance of the bank?
  • Board members are actively involved in the work of the board?
  • The board periodically reviews and approves its policies, procedures, committee charters, and by-laws?
  • Board members are familiar with by-laws, policies, procedures, and charters?
  • The board has adopted and approved a code of ethics for itself and the bank’s staff?
  • The board has adopted and approved an effective conflict-of-interest policy for itself and the bank’s staff?
  • The board has appointed appropriate committees to improve its efficiency and effectiveness?
  • Committee assignments reflect the interests, experience, and skills of individual board members?
  • Each committee has a charter or policy that defines its responsibilities and authorities?
  • Policies regarding committee assignments offer adequate opportunities for leadership development?
  • Does the board evaluate board member independence at least annually?
  • If the board does not have an audit committee, does the full board perform all of the responsibilities that would have be conducted by the audit committee?
  • Does the board hold line management accountable if they do not follow up satisfactorily or effectively on control weaknesses?
  • Board members have a full understanding of their financial, legal, and public responsibilities?

Are there any areas related to board organization that need to be discussed?

10. GENERAL ASSESSMENT

In addition to the issues covered by the questionnaire:

  1. Have any board members been identified that need additional training regarding any aspect of their responsibilities?
  2. What issues should occupy the board’s time and attention during the next couple of years?
  3. How can the board’s organization or performance be improved during the next couple of years?
  4. What other comments or suggestions would you like to offer related to the board’s performance?