October 29, 2019

Create a Winning Strategy for Your Bank’s Board and C-Suite (Guest Article)

Diversity in the financial institution boardroom and in the C -suite is so important. Increasingly, the issue has been getting the attention it deserves from regulators, from stakeholders, and from financial institutions themselves. Identifying and bringing in that optimal mix of different backgrounds, gender, opinions, and experiences can be easier said than done. I should know.

I have spent my 30-plus-year career working in financial institutions. I started as a management trainee with Barnett Banks of Florida, and I have gone on to hold executive leadership roles in Top 50 banks, multi-regional, regional, and community banks, most of which were headquartered in the Mid-Atlantic region. My focus lately has been on troubled community banks, and I am currently the CEO of Cecil Bank.

Throughout my time in the financial services sector, I have witnessed and lived with the issue of gender bias. As a young female professional, I found myself on the outside of some key business development and mentoring opportunities because they were exclusive to men. These strong currents or headwinds have always been present for women in banking, and as a result many drop out of the race due to these barriers and the increasing frustration that these headwinds create for forward advancement. 

As a result, one of the many negative effects for our industry is that the talent pipeline suffers. One consequence is a scarcity of qualified women for C-suite opportunities. Given my history and the history of so many women bankers like me, recently, I found myself on a very short list that featured women CEOs of publicly traded U.S. banks. Upon examining it, it reminded me that the barriers for women in banking, the talent pool issues, and the lack of a robust pipeline for C-suite roles still exist. I decided that if community banks were going to not only exist in the future but also prosper, these gender imbalances have to be addressed and solved for the sake of the community banking sector.

From the board’s perspective, I see challenges, too. Cecil Bank has quite a few women in management roles but not within our board. In fact, I’m the only one. But, over my long career this “ phenomenon “ has been routine and perhaps with the exception of one other outside female director, I am typically the lone female director in boardrooms bank after bank. With more and more research published on the power of cognitive diversity, with the threat of legislative quotas for gender diversity (which I do not support), and with the fight for the best and brightest talent becoming a significant threat to community banking, along with the aging out of C-suites and directors, perhaps we are at a critical nexus of forces that will propel change and accelerate gender diversity in the community banking sector.

I’m trying to do something about all of the above, and there are ways that your financial institution can, too.

What Im Doing

So much has changed in banking and finance since I began my career, but the very short list of women CEOs of publicly traded banks really shook me. It reminded me that organic change to improve gender diversity would never be enough or happen soon enough to aid the community bank sector. Therefore, I took the list to a conference, and I talked it over with another woman who has witnessed the gender diversity issue within depository institutions: Jennifer Docherty, a Managing Director with Sandler O’Neill & Partners LLP.

For several years, Jennifer has been a lawyer and investment banker who works with financial services companies. In her career, she says, she’s spent a lot of time training highly educated, talented young professionals. She writes:

One of my biggest frustrations has been watching smart, energetic women begin their careers only to leave at the crucial business development transition point. To be certain, these are not easy career paths but most women leave, not because they want to start families or are seeking better work-life balance, but because they are driven to succeed and don’t see a future for themselves in the community bank space. They lack both role models and evidence that being qualified and working hard are sufficient for success.”

So, Jennifer and I decided to do something about it. We created a not-for-profit organization to help educate community banking decision-makers about the importance of boardroom and C- suite diversity. Our not-for-profit, Bank on Women, Inc., focuses specifically on community banks for a couple of reasons:

  1. Community banks are where we have both spent a good portion of our careers, and so we feel a personal connection to and a keen understanding of this banking segment
  2. Community banks tend to face less public pressure and have more to gain than large national commercial banks from diversifying

Bank on Women, Inc. holds seminars and events that share some pretty compelling facts. Research supports the fact that having women in your boardroom can enhance business performance. We like to think of it as a “WIN-ning” strategy (short for Women IN the boardroom).

What You Can Do to Contribute to a Winning Strategy

You can help spread the word to your institution as well. When communicating with key decision-makers and other members of the board, it’s important to stress that diversity in the board room and C- suite is not just a nice thing to do; it’s a smart, winning strategy that’s beneficial for your, shareholders, employees, and customers.

Financial services professionals are “numbers people.” We have to be. One of the most interesting things Jennifer and I have found as we started to put our Bank on Women, Inc. programs together is the impact that diversity can have on banks’ bottom lines. You can look at performance data — return on equity, return on assets — and they are statistically better for more diverse banks than non-diverse banks.

You should also focus on how people who have a different mix of backgrounds and experiences enhance your board and C-suite’s decision-making. There are a lot of research papers out there that point to the fact that you can have the smartest people at the table trying to make strategic, tactical decisions, but if they’re all one-dimensional — same background, same perceptions of the world, same upbringing —  their decision-making about critical matters will be worse than a more diverse group. Financial services organizations have a lot of tough decisions to make, and being able to look at an issue from different perspectives can be vitally important, particularly given the evolving demographics of your customers, shareholders, and your employees

Identifying the Right Talent

We have found, and the research supports, that there are many reasons as to why community banks have homogeneous boards. Several of the key reasons include a search for qualified candidates in all of the wrong places, a lack of grooming talent, a lack of recognition of the importance of gender diversity, not recognizing the power of cognitive diversity for quality decision-making, and finally not using outside resources for board searches who can make the search a more formal and balanced search.

One of the ways (other than our educational efforts) that Bank on Women, Inc. seeks to assist banks in board searches is through its efforts in the long term by creating a repository of experienced female banking professionals who would be good candidates for board positions. I would encourage your institution to reach out to its extended network and make a concerted effort to find the diverse candidate in advance of a board opening. Finding the right person may take a little bit more time, but it’s well worth the effort. This recent article has some additional points to consider.

Want to Learn More?

If you’re interested in learning more about the power that diversity can have on your institution, please don’t hesitate to reach out to me or to Jennifer through LinkedIn. We both welcome the opportunity to talk about this issue that is so near and dear to our hearts and that is so critical to the future competitiveness of community banking.

Guest authors Terrie Spiro is the CEO of Cecil Bank. She be reached here on LinkedIn. Jennifer Docherty is Managing Director at Sandler O’Neill + Partners, L.P. She can be reached on LinkedIn here.

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