In the Boardroom: As Directors Grow Old, Banks Face Thorny Retirement

except for one director, who has served for 17 years and is 78. The bank has no intention of asking him to step down. "I look at his age as a plus rather than a negative," said Robert C. Arneson, president of $50 million-asset Ridgedale State. "He's very active in the community, and I would never ask him to retire." Ridgedale State is probably the exception to the norm. As directors grow older, banks can be forced to address the uncomfortable question of how to replace the old with the young. In many cases, elderly directors are also the banks' founders, making the situation even more difficult. George Freibert, president of Professional Bank Services Inc., Louisville, Ky., and an adviser to banks on board issues, knows of a bank that had to go to a nursing home to pick up one of its directors for each board meeting. The man is in his eighties. Eventually, the bank convinced the director that it was a health risk and too much of a strain for him to come to the meetings. Mr. Freibert recommended the board grant him emeritus status - a compromise allowing the board to find a younger replacement. Roberta L. Wagner, president of the Director Resource Group, Warrenton, Va., has heard stories from chief executives who say that while they value the experience of their older directors, these directors - long since retired - often drag out meetings unnecessarily. "Banks need to implement some sort of policies, because if they don't their boards will get stacked up with senior citizens," Mr. Freibert said. "I've got nothing against senior citizens, but they won't accurately reflect their communities." A survey released last month by the Director Resource Group, showed that a majority of banks are doing just that. Of the 72 banks polled, 54% said they have a mandatory retirement age for directors. Of these, 31% require directors to resign between the ages of 65 and 70, and 22% allow their directors to stay on until they reach 71 to 75 years old, the survey showed. Most of these banks implemented the requirements within the past 10 years or so, many as a result of the savings and loan debacle of the 1980s, observers said. But for the first time, many institutions are considering other sorts of board policies, such as mandatory term limits and board performance assessments. "Age isn't always the determining factor," said Ms. Wagner of the Director Resource Group. "You can have a director who is 75 and very effective that you would like to keep, and someone who is 43 that you want off the board." Ms. Wagner and others recommended an assessment test for bank boards, similar to the ones used by boards to measure their chief executives' performance. If a director does not meet the standards previously established, then he or she can be asked to step down. Though only a few are using such a practice, Ms. Wagner expects it to be commonplace within the next 10 years, she said. Mr. Freibert recommends that banks require their directors to step down within two or three years after the director has retired from his or her profession. Any longer, and the director's knowledge of the industry starts to become outdated, he said.