12
Wisconsin Community Banker
January/February 2014
COUNSELOR'S CORNER
Strategic Planning Toolkit
What Questions Should Your Board Be Answering?
Pete Wilder, left, and Josh Torres,
attorneys with the Financial
Institutions Practice Group at
Godfrey & Kahn, S.C.
In our practice,
we’ve noticed a substantial disparity
in the amount of time, effort, and for-
mality community bank boards invest
in developing a detailed, forward-
looking strategy for where they want
to go and how they want to get there.
Some community banks hold off-site
strategic planning retreats with a pro-
fessional third party facilitator, while
others informally “tack on” strategic
planning discussions to regularly
scheduled board meetings without
the help of any outside resources. In
our experience, there is no absolute
right or wrong way to structure your
strategic planning process, so long as
your board is thoughtfully answering
the right questions.
So what questions should a com-
munity bank board be answering?
We’ve put together a list of questions
addressing issues that we regularly
encounter with our community bank
clients. We developed these ques-
tions as a tool for boards to use, and
hope that they will facilitate strate-
gic discussions in community bank
boardrooms. We’ve included below a
sampling of our questions with some
commentary. If you would like a copy
of our full list of questions, feel free to
contact the authors, and we would be
happy to share it with you.
Succession Planning
Who is the next generation of
potential directors in your commu-
nity? Make a list. A lot of community
bank boards consist of individuals
who are at or approaching retirement
age. Identifying the next generation of
directors is critical. Who in your com-
munity has the requisite competence,
experience, character, and integrity to
successfully direct the course of your
community bank? Will the candidates
actively contribute to the bank in and
outside of board meetings? Will the
candidates be good referral sources?
Does your candidate pool have a
diverse mix of backgrounds (e.g.
manufacturers, real estate investors,
accountants, lawyers, etc.)?
Are any executive officers plan-
ning to retire in the next five years?
Who will replace them? How long
do you think it will take to find a
replacement? A lot of banks will need
to replace a retiring executive offi-
cer within the next five years. When
should your board start its search for
a successor? Perhaps you have identi-
fied a successor within the bank. If so,
is that individual training someone to
take over his or her current position?
If you have to look outside of the bank
for a candidate, it could be a challeng-
ing process, especially if you are trying
to convince someone to move to a
small community where they have no
roots. Either way, developing a plan
of action with a list of possible candi-
dates, referral resources, and timelines
is prudent.
Capital and Shareholder Issues
Does your institution have enough
authorized and unissued shares of stock?
If you want to raise capital or are pre-
sented with an acquisition opportunity,
you will need sufficient authorized and
unissued shares of stock. If there are
not enough authorized shares, you will
need to seek shareholder approval to
authorize additional shares. Needs and
opportunities often arise unexpectedly,
and you do not want to be in a position
of having to seek shareholder approval
to authorize additional shares in order
to act on an opportunity. It’s best to get
additional shares authorized proactively
in order to give your board the flexibility
that it needs.
How should you respond to share-
holders looking for liquidity for their
shares? It is very common for sharehold-
ers wanting liquidity to seek to sell their
shares either to the holding company or
to a third party. Some holding compa-
nies act as a “matchmaker,” whereby the
holding company will connect willing
buyers and sellers of the holding com-
pany’s stock. These matching services
can sometimes work well for small vol-
ume transactions, but can be an unreli-
able liquidity source for shareholders
(especially large ones). They also expose
the holding company to liability if not
structured and operated properly.
Some holding companies repurchase
shares from their shareholders to pro-
vide liquidity. Your board needs to take
great care to ensure that such a repur-
chase is the best use of capital and does
not result in preferential treatment for
a select group of shareholders.
Buy, Sell, or Remain Independent?
What do you (i.e. management and
the board) want the bank to look like in
three, five, and ten years? Some boards
envision themselves as an aggregator of
other community banks in a “roll-up”
strategy. Others see themselves as being
one of the banks “rolled-up” as part of
a strategy to cash out or because there
is no management succession plan in
Make a list of potential directors representing diverse
backgrounds—manufacturers, real estate investors,
accountants, lawyers, etc.
