Thrift Execs Given a Guide To Suriving Litigious Era
Executives at the convention of the U.S. League of Savings Institutions got a blueprint last week for survival in the litigious 1990s from a panel of legal experts and corporate consultants.
Among their suggestions:
* Boards of directors should be comprised of members who are independent, scrupulous, and free of conflicts of interest.
* Size of the board should be kept to no more than nine members, only one of whom is an executive of the financial institution.
* Directors should be knowledgeable and cautious in exercising their fiduciary responsibilities.
* The boards' responsibilities should be spelled out in writing.
In sum, directorships should be considered sensitive, high-responsibility posts, not just places of honor.
"Putting Ma and Pa on your board will no longer cut the mustard," said John M. Nash, president of the National Association of Corporate Directors, a Washington-based trade group that advises companies on selecting directors.
Mr. Nash stressed that directors should be appropriately compensated, but he insisted that they should be fired if they occupy board posts merely for the money or benefits.
Directors must be able to read a balance sheet and have a working knowledge of the bank or thrift they serve, Mr. Nash said. They also should continuously monitor management and evaluate economic trends in the industry.
Many Are Sued
Financial institution directors are more vulnerable now to liability lawsuits than in the past, said Stephen H. Glickman, a partner in the Washington law firm Zuckerman, Spaeder, Goldstein, Taylor & Kolker.
Mr. Glickman said he instructs his clients not to become directors of institutions without "directors and officers" liability insurance.
"Remember, you don't have to be guilty to be sued," said Robert E. Wendt, senior vice president of the Chicago-based Financial Institutions Insurance Fund.
More than 650 people have been convicted of thrift-related fraud in the last three years, and 200 more are under indictment, said Harris Weinstein, chief counsel at the Office of Thrift Supervision. "The conviction rate is well over 90%," he said.