The Bank Director's Lament

Being a director at a bank has gone from being a privilege to a pain.

In sharing his experience about being a director in the last cycle and his subsequent aversion to ever going down that path again, Stew Leonard Jr., the owner of an eponymous grocery store chain in New York, echoed the groans from today's directors. They join boards because it was viewed as an honor and they truly believe they are serving their community by doing so. When things get rough, though, directors are often left drained emotionally from watching the bank crumble and sometimes financially if the bank fails and the Federal Deposit Insurance Corp. decides to hold directors culpable.

"From their perspective, they don't feel like they've done anything wrong. They acted in good faith," said Walter G. Moeling, a partner at Bryan Cave LLP in Atlanta, as he was en route to a bank board meeting. "From the FDIC's perspective, they say, 'we are not saying you're an immoral, bad person, were saying you should pay us $10 million for failing to stop things that ultimately hurt the bank.' That's when you see the stunning realization sink in."

Directors at relatively healthy banks might not be faced with the potential attack of their personal wealth, but are comparably exhausted from the downturn, Moeling said.

"Most of them joined because it is one of the great clubs in an area and there is an opportunity to help people in your community," Moeling said. "But after four years of foreclosing on your neighbors, watching your friends lose their jobs and seeing your investment lose its value, you're done."

Moeling said banks can still find local people to serve, but those directors will have to be prepared to roll up their sleeves a lot.

"There is tremendous satisfaction in serving on a board," he said. "But the compliance burden is huge. Regulators are going to expect directors to be on top of things. The meetings will be longer and more detailed. It will be a lot more demanding than it ever was in the past and it is not going to be as much fun."