Pub. 2 2014 Issue 2

spring 2014 27 435 banks smaller than $50 billion in size shows that more than 50% of the indepen- dent directors of these banks lack profes- sional backgrounds in banking, account- ing, law, investments, or bank regulation. Some banks do not have one independent director with experience in any of these five fields. Fifth and finally, here is another action directors should take. Let’s return to a decade ago and the bank and CEO introduced at the beginning of this article. When the bank’s CEO and board real- ized they had a talent issue, they decided to entertain offers to sell. The bank was indeed sold a few years before the crisis to a regional institution. Being ahead of the curve, this bank was paid a rich premium to book value. Today, after confronting possible talent gaps, succession planning issues, and con- cerns about bench talent, bank directors need to determine if selling the bank is the best way to mitigate talent risk. Expect to see more bank mergers in 2014-18 because of the need acquirers and sellers have to mitigate talent concerns. Acquiring banks would be wise to carefully assess the depth of talent in potential acquisitions and know if the talent they are acquiring is likely to stay on after the merger. Sellers of talent-laden banks should be able to earn a richer valuation. Conclusion There are hopeful signs that the banking community is beginning to recognize the talent issue. CEOs of a few community banks have resurrected college recruiting programs and instituted general manage- ment training. A growing number of banks have made progress in closing director skill gaps by providing training and bringing in directors with the experience to govern banks. In addition, the boards of a small number of leading banks have formed human resource (or human capital) com- mittees. The war for talent in banking is here. As in any war, there will be winners and losers. Winners will be the banks whose leaders recognize that concrete steps are needed now to attract, develop, and retain talent. Here are the questions that directors, CEOs, chief HR officers, and chief risk officers need to ask and answer today: 1. Should the bank have a board commit- tee focused on human resources? 2. Does the bank have an effective perfor- mance management system in place? 3. Have talent gaps been identified and is there a clear-cut plan to close the gaps? 4. Does the bank have a succession plan for key management positions? 5. Is there a pipeline of next-generation talent being developed? Looking ahead to 2020 and even 2030, is the bank developing the general management skills of future CEOs and other executive officers? 6. Just as the bank employs external audi- tors to attest to the integrity of financial systems and reporting, has it conducted an external audit of its critical talent manage- ment systems and processes? Like financial markets, the market for talent is dynamic and ever-changing. Great banks will act immediately to make sure they have the rigorous systems and disciplined processes in place to win the talent war. n Richard J. Parsons is a former executive vice president and corporate operational risk executive with Bank of America. He is the authr of Broke: America’s Banking System, Common Sense Ideas to Fix Banking in America, published by RMA. He can be reached at richardparsons@gmail.com Attorney advertising material. We Speak Banking. At Chapman, our lawyers are on the front lines of finance, helping our bank clients and their customers document, structure, and restructure their financing transactions. We speak your language. Talk to us about your next project. James C. Burr Adelaide Maudsley 801.536.1447 • burr@chapman.com 801.320.6731 • maudsley@chapman.com 201 South Main Street, Suite 2000 Salt Lake City, Utah 84111 801.533.0066 chapman.com  Talen Risk — continued from page 23