Bank directors should be getting back in the boardroom — the one with the big table at the bank’s headquarters, not the virtual one at home.
Having served on and presented to many bank boards for decades, I know there is no substitute for in-person board meetings, especially in America’s most heavily regulated industry and at a time when the regulatory pendulum is swinging back toward stricter supervision.
After more than a year of virtual board meetings, it is clear that all the high-tech videoconferencing gadgets, even when they work without any freezing, signal loss, or unsynchronized audio, are no match for high-touch in-person meetings.
Yes, we can still go through the agenda and meet all the legal requirements by having attorneys, outside experts and even regulators provide virtual presentations, but way too much is being lost in the video translation.
There is no substitute for one-on-one contact around the board table where the really important and hard questions about bank strategy and risk management can be asked and then followed up with even harder questions and individual sidebars conversations.
There is no better way to get immediate feedback on how fellow board members really feel than by reading body language around the table. How do we really know where all the board members really stand on a proposed merger or acquisition or regulatory issue if the only feedback we get is a matrix of talking heads on a computer monitor?
Most studies on the effectiveness of in-person vs. virtual board meetings obviously conclude the former is preferred, although they were impossible during the pandemic. For example, one study found that “virtual communication sometimes discourages team members from speaking up” and “reduces the social cues that help team members bond, which can diminish motivation to share ideas and information.” That same study found that “people may hold back when they can’t directly observe teammates’ reactions to their contributions.”
A New York Times article titled “Why Zoom Is Terrible” summarized many of the common problems associated with video meetings versus in-person ones: more rapid meeting fatigue; feeling isolated and disconnected from the group; lack of focus and concentration; inability to mirror and discern emotional content of fellow participants; difficulty in reading people’s reactions and thus predicting their actions; inhibition of trust with lack of eye contact; and self-absorption in one’s own image and room background instead of being focused on others.
These and other virtual meeting pitfalls may result in suboptimal or even improper risk assessments, especially if done over a long period. Only time will tell if the most crucial board decisions and risk assessments made virtually during the pandemic will turn out to be the right ones.
Most bank board members I know have been vaccinated, but some of them are hesitant about coming back into the bank for monthly board meetings. It is understandable that many of them are more comfortable attending a virtual meeting from home after more than a year of doing this. Shareholders, however, are not interested in their comfort, but in whether or not they are fulfilling their responsibilities.
Most banks have gone through great efforts and expense to ensure the safety of their employees, especially customer-facing ones, during the pandemic. They have likewise done everything possible to protect their directors returning to the board room, especially since many of them are seniors rightfully concerned with their health.
Despite all these efforts, there will still be some directors who will not return to the bank for many months, perhaps not at all this year, for health, vaccination, travel or other personal reasons. This raises the very difficult question: Are they acting in the best interests of the bank and its shareholders?
No two bank boards are the same, and individual differences must be respected. Nonetheless, banks need to do whatever they can to encourage directors to get back in the boardroom, sooner than later.
