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Elevate Your Company’s Governance

Elevate Your Company’s Governance

Financial Services Sector

Recently, I was discussing with Roosevelt Giles, Board Chair and interim CEO at Atlanta Life Insurance, the serious challenges that society is facing, from Main Street to Wall Street and in cities and small towns across the country. We agreed that establishing or reestablishing trust is going to be central to recovery and helping build a brighter future. Companies large and small have begun to identify specific actions that they can take to help move our country forward.  

History is relevant. To be successful, a forward-looking strategy requires business leaders to first understand how decisions of the past have led us to where we are today. This is certainly applicable to the banking and financial services sector. Roosevelt and I share a long history of financial services sector experience, and we believe that banks, and financial services more generally, will play an important role in our economic recovery. And by recovery, we mean an economic recovery that extends to individuals, companies, and communities for whom the old way of doing business isn’t working. A recovery that is driven in part by a commitment to fixing what isn’t working, broadening stakeholder focus, and promoting efforts around ESG. A quote from Peter Drucker, management consultant, educator, and author, is especially helpful here: “If you want something new, you have to stop doing something old.”

In our crisis-defined era, board leadership is being challenged like never before. Present social discord, the coronavirus pandemic, and responsibility for administering Paycheck Protection Program(s) are again—like the financial crisis twelve years ago—emphasizing for bank boards the importance of foundational corporate governance excellence. Having worked with many financial services sector leaders, experience conveys confidence and emphasizes that well-governed institutions outperform their peers.  

Foundational Principles of Governance Excellence

Central to strong, purposeful, and effective governance is integrity. Integrity is an English word that delivers strong meaning because it bridges architecture, literature, law, banking, construction, and—if we think about it broadly—nearly all aspects of business and culture. A strong foundation is trustworthy, maintains a strength of character, and promotes openness. It also supports and drives creativity and innovation. Maintaining foundational integrity—including that of a board—requires a regular comprehensive and candid evaluation of its structure, processes, members, and oversight, as well as implementation of changes that will result in improving the board’s functioning.

Several years ago, I asked Jay Lorsch, a leading corporate governance academic at Harvard Business School, to describe for me the quality of corporate governance in the boardrooms of America. Jay quickly responded, “D+,” which is a failing grade at most business schools. After my session with Jay, research led me to another one of Peter Drucker’s maxims, “What’s measured improves.”

In the past decade, many boards across industries have adopted a practice of self-assessment—with varying degrees of success. There are approaches to board evaluation that ultimately add value not only to the board, but to the company and its shareholders and stakeholders as well. Others fall short of even satisfying a check-the-box exercise.

To help set the direction for a successful board evaluation, consider the foundational principles that define and anchor your business and approach to leadership. How do you emphasize these for yourself and among your board and team?

  • Active listening
  • Openness to learning
  • Conversion of data into understanding
  • Executing the strategy or business plan

Effective leaders and teams do these four things very well. Execution is the result of seeing what needs to be done and doing it. 

Board Evaluation as a Catalyst

How does a board improve? How can the board help management anticipate change? Where does improvement begin?

Today, effective boards are visibly messaging a tone from the top, as well as an understanding of stakeholder needs and the challenges confronting us. Look among “Banker of the Year” honorees or comb through proxy and annual reports and you will soon discern the institutions that are well- governed and building upon a strong foundation with sound integrity. Boards looking to maintain good governance practices may consider utilizing an annual board evaluation as a catalyst for driving board excellence and results.

No two banks are exactly alike in terms of their missions, vision, philosophies, organizational structures, cultures, or the communities they serve. It follows, then, that there is no one-size-fits all approach to board evaluations. A robust board evaluation encompasses a review of all aspects of the board, committees, and individual directors, with a goal of identifying strengths and opportunities for improvement. It also includes a review of oversight areas that have been brought to the forefront by recent events, such as vendor diversity and community engagement. It evidences the board’s commitment to the bank and its shareholders, and to the bank’s stakeholders—from the management team to loan officers, from its largest business customers to Main Street business owners.

Think Opportunity

Identifying and leveraging opportunity is a core call to action of corporate governance. In helping the country recover financially and meaningfully addressing inequities that have led us to where we are today, board leaders have an important responsibility. That is to build and rebuild trust, support diverse business growth within communities served, and identify responsible ways to provide access to opportunity-creating capital. Community, regional, and national banks alike have an important role to play in building a foundationally sound way forward. The way forward—if it is to be successful and sustainable—begins with a sound foundation, followed by a strategy built on and supported by strong board leadership and governance practices.

Measuring Board Engagement

A component of productive employee performance programs is year-over-year comparisons that highlight growth. Nasdaq’s Board Engagement team serves clients by delivering value through its unique qualitative and quantitative board and leadership assessment services. Our board evaluation may be a catalyst for building board effectiveness and integrity. In April 2020, Nasdaq launched a bank-specific board evaluation platform that provides comparative metrics, is cost effective, and is built on our team’s experience from conducting board evaluations for banks internationally.

Let us show you today how our team can support your board’s commitment to governance excellence and help you position your bank for the challenges of tomorrow.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Byron Loflin


Byron Loflin is Global Head of Board Advisory at Nasdaq, where he leads board assessments and boardroom training for Nasdaq Governance Solutions.

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