WASHINGTON — In the battle over the Consumer Financial Protection Bureau, Republicans have insisted the new agency's sole director must be replaced by a five-member board, arguing it would enhance accountability.

But would it really make a difference?

While most financial regulators are operated by a board of five to seven people, several analysts argue the structure of an agency matters much less than the people involved.

A strong leader will find a way to accomplish their goals even with a board structure while an ineffectual one will be crippled regardless. Add unique historical factors and political considerations into the mix, and some say an agency's structure has only a limited impact.

"There's no proven form of governmental organization that transcends either history or human frailty," said Karen Shaw Petrou, managing partner at Federal Financial Analytics. "We've seen powerful, potent boards, and completely incompetent ones. Is it the board or the people? … I'm an agnostic on this issue because in the entire body of organization theory there are things about each of the structures that define success, not one characteristic that predestines success."

Among the federal financial regulators, only two — the Federal Housing Finance Agency and the Office of the Comptroller of the Currency — are run by individual leaders. Agencies subject to committee votes and quorum rules include the Federal Deposit Insurance Corp., the Federal Reserve Board, the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Add to the mix the Financial Stability Oversight Council, a hodgepodge of various agency heads charged with keeping tabs on systemic risk issues; non-financial-specific entities such as the Federal Trade Commission that still deal with financially-related issues; and specialized panels borne of the financial crisis: the Financial Crisis Inquiry Commission, charged to investigate the origins of the crisis; and the Congressional Oversight Panel, formed as a watchdog over the Troubled Asset Relief Program.

It's clear that the board or commission structure has basically become a sort of default solution for solving our financial regulatory woes.

"People gravitate to the board model partly by habit," said Richard Carnell, a former assistant Treasury secretary of financial institutions and now a Fordham University law professor.

The most obvious benefits of multi-member boards are that they help ensure that agency decisions have broad support, and the decision-making process is more out in the open through public meetings. Some boards, like the FDIC, also have requirements that ensure members of both political parties are represented.

Most boards are subject to the Government in Sunshine Act, which requires advanced notice and a quorum before a meeting can take place. But a more deliberative process can also be a hindrance when a quick decision is needed.

"The timing factor is a downside of having a commission or board. On the other side of the coin, some people are real proponents of the Sunshine Act allowing an open and deliberative process when a board or commission meets to consider a rulemaking," said V. Gerard Comizio, a partner at Paul Hastings LLP.

But there are other significant drawbacks as well. For one, while the FDIC and Fed boards have generally functioned well, other agencies have been plagued by infighting among board members. The most obvious example was the Federal Housing Finance Board, which was eliminated in 2008 after years of sometimes openly hostile conflicts between the chairman and other board members.

Additionally, when positions are left vacant, it can wreak havoc on an agency's management. One current example is the FDIC, where the departure of board members — including former Chairman Sheila Bair — have left the board with just three out of five seats filled. Two of the current members hold acting titles.

"The best things about a commission or a board also can be the worst things about it. For example, what is the quality and caliber of the people appointed to these commissions or boards?" Comizio said. "Ostensibly, one benefit of a commission or board is a more broad-based discussion by a number of political presidential appointees from a variety of backgrounds and political parties. … But once in a blue moon, you do run into the question of people leaving and is there enough for a quorum?"

Carnell said while there is never a shortage of candidates desiring jobs chairing an agency board or commission, finding qualified nominees for the secondary voting seats can be a challenge.

"If you have a five-member board at a very specialized agency, you can have difficulty finding strong, confirmable candidates for all five seats," he said. "In recruiting candidates for the FDIC board, I approached some well-respected bankers who were nearing retirement age. They were open to chairing the agency but weren't interested in one of the other seats."

Donald Lamson, a former OCC official, said advantages to a board structure include a "healthy minority expressing a viewpoint" and the need for senators to confirm board members resulting in an "institution that is more responsive to the Hill."

But how a board will operate will also vary according who chairs it, he added. A weak chairman could leave other members with greater influence in the agency's daily operations, while a stronger chairman is more capable of setting the agenda.

"When Ms. Bair was presiding over the FDIC, she had a good degree of control over what the staff was doing," said Lamson, now a counsel at Shearman & Sterling LLP.

The question of board versus single-director leadership is relevant now as the new consumer bureau gets off the ground.

The Dodd-Frank Act established that a single executive should run the CFPB, but Republicans opposed to that idea have vowed to reject any nominee to the director's post until Congress institutes a board to oversee the agency, among other proposed reforms. The administration's nominee for the director's job, Richard Cordray, is in limbo as a result, and some have speculated the administration may be open to reforming the structure to get someone confirmed. Senior CFPB official Raj Date now leads the bureau on an acting basis, but his powers are limited.

Proponents of subjecting CFPB decisions to a board say it is necessary simply because the bureau was granted so much power under Dodd-Frank.

Mark Oesterle, a counsel at Reed Smith and former senior staffer for the Senate Banking Committee, said agencies led by single directors — such as the OCC and the FHFA — have limited authority. The FHFA, for example, is limited to supervising Fannie Mae, Freddie Mac and the 12 Federal Home Loan banks. The CFPB, by contrast, has broad purview to interpret and enforce every meaningful law protecting financial consumers, and can write rules for every financial institution, he said.

"The SEC, the CFTC and the Fed — all boards - were the agencies that had the most ability to make policy determinations," Oesterle said. "The FHFA has a single head, but the fundamental differences are that the statutes are a little more constrained and they only apply to 14 entities. … The CFPB has everybody. When you combine the scope of its powers and the range of entities it oversees, I would argue that no one else with a single director has that kind of authority."

But Petrou noted that Democrats and Republicans have switched allegiances in past debates.

In creating the FHFA, GOP lawmakers, who are generally skeptical of the activities of the government-sponsored enterprises, argued in favor of a strong independent regulator led by a single director to oversee the sector. Democrats, who are traditionally more supportive of the GSEs, were less thrilled with the idea.

Lawmakers often "want a result from an agency that they don't think they can get with the structure in hand," she said. "I don't think it has anything to do with an overarching view of organization theory as much as it has to do with near-term political or policy goals."

Comizio said the debate over how to run the CFPB is not really about what's best for the agency.

"The real question with the CFPB is: Is this just a strategic way to slow down the agency's mission down by two or three years?" he said. "With the time it will take to get a political consensus to set up a commission, and to actually appoint five commissioners, for this to come up at the time of the agency's inception is not so much a debate about the relative merits of a commission and a single appointee but a tactic to see if there is a consensus to slow the agency's mission down."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.