Decline of the Imperial Ceo

THE C-SUITE ISSUE | FEBRUARY 2016

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DECLINE OF THE THE IMPERIAL CEO C-SUITE ISSUE

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DIGITAL MAGAZINE THE C-SUITE ISSUE CONTENTS

THE DECLINE OF THE IMPERIAL CEO

CEOs are seeing their role change in the age of the empowered board. Do You Have an Empowered Board?

LETTER FROM THE EDITOR Stay Connected Do you have an imperial CEO?

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THE CEO IS NOT THE ONLY ONE WHO MATTERS

e in the business press tend to contribute to the general idea that the CEO is the only person who Wmatters in a company. We clamor for interviews with the CEO, not the chief administrative officer or the chief financial officer. We put the CEO on the cover of newspapers and magazines. When things go wrong, we blame the CEO. But anyone who actually works inside a company knows the story

is different. There are multiple powerful people inside a company Naomi Snyder making decisions, creating the culture of the place, and producing is editor for Bank Director. profits or losing money. The CEO may have varying degrees of success in imposing his or her values and agenda on the rest of the team. And so in recognition of the importance of the other executive team players, we publish an issue devoted to the entire C-suite. In this issue, you’ll find that the role of the CEO has changed, and with that, the roles of the other C-suite officers. We have articles on the changing role of the chief technology officer at a bank, and on the companies that are promoting chief human resources officers to the C-suite. One of those executive suite officers is U.S. Bank’s Jennie Carlson, who speaks in a video about her efforts to change the lack

of diversity in her bank’s senior management team. SWIPE UP We also explore the changing role of the bank CEO. In this issue, hedge fund founder Tom Brown writes about the 10 crucial responsibilities of a modern CEO, recognizing the fact that running a bank has become a much more difficult prospect than in previous years, Tapand requiresbelow to tella different us what set you of think skills. of the digital magazine.

Our cover story looks Naomi at Snyderthe decline | [email protected] of the imperial CEO. In an age where increasingly empowered boards are exercising their muscles, CEOs, especially at publicly traded companies, are forced to BANKDIRECTOR.COM collaborate and share power. After the financial crisis wiped out many imperial bank CEOs, boards are recognizing the importance of proper oversight and chief executives who can handle constructive criticism. That’s not to say the CEO-who-knows-it-all no longer exists. And it’s not to say the CEO shouldn’t have confidence in his or her plan and abilities. It’s just that increasingly, and especially for publicly traded banks, the CEO can’t discount the opinions of very smart people or get offended by questions about the overall direction of the company, its risk management, or its strategy. The CEO is not the only person making decisions. We hope these articles give you ideas as you strengthen your own C-suite team. e in the business press tend to contribute to the general idea that the CEO is the only person who Wmatters in a company. We clamor for interviews with the CEO, not the chief administrative officer or the chief financial officer. We put the CEO on the cover of newspapers and magazines. When things go wrong, we blame the CEO. But anyone who actually works inside a company knows the story is different. There are multiple powerful people inside a company making decisions, creating the culture of the place, and producing profits or losing money. The CEO may have varying degrees of success in imposing his or her values and agenda on the rest of the team. And so in recognition of the importance of the other executive team players, we publish an issue devoted to the entire C-suite. In this issue, you’ll find that the role of the CEO has changed, and with that, the roles of the other C-suite officers. We have articles on

the changing role of the chief technology officer at a bank, and on |BD| THEthe companiesC-SUITE ISSUE that are promoting chief human resources officers to FROM THE EDITOR the C-suite. One of those executive suite officers is U.S. Bank’s Jennie Carlson, who speaks in a video about her efforts to change the lack ofTHE diversity CEO in ISher NOTbank’s THEsenior ONLYmanagement ONE team. WHO MATTERS We also explore the changing role of the bank CEO. In this issue, hedge fund founder Tom Brown writes about the 10 crucial responsibilities of a modern CEO, recognizing the fact that running a bank has become a much more difficult prospect than in previous years, and requires a different set of skills. Our cover story looks at the decline of the imperial CEO. In an age where increasingly empowered boards are exercising their muscles, CEOs, especially at publicly traded companies, are forced to collaborate and share power. After the financial crisis wiped out many Naomi Snyder is editor for imperial bank CEOs, boards are recognizing the importance of proper Bank Director. oversight and chief executives who can handle constructive criticism. That’s not to say the CEO-who-knows-it-all no longer exists. And it’s not to say the CEO shouldn’t have confidence in his or her plan and abilities. It’s just that increasingly, and especially for publicly traded banks, the CEO can’t discount the opinions of very smart people or get offended by questions about the overall direction of the company, its risk management, or its strategy. The CEO is not the only person making decisions. We hope these articles give you ideas as you strengthen your own C-suite team. SWIPE UP

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Naomi Snyder | [email protected]

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have heard plenty of bank directors over the years complain that their CEO is making too much money. So how much is too Naomi Snyder much? That may need a philosophical answer, or it might need a is editor for I Bank Director. statistical one. The following is a list of links to more information on what bank CEOs are making, as well as trends and statistics for other C-suite officers and the board.

Tap the numbered icons to cycle through topics 1234

CEO PAY The average compensation for a bank CEO/ president was $301,557 in 2015, according to accounting firm Crowe Horwath LLP, which surveyed 296 financial institutions in the fall of 2015, mostly below $1 billion in assets. Aside from the CEO, the next highest paid executive is the chief financial officer. In fact, CFOs have seen their salary rise an average of 31 percent in the last five years, to $194,542 in total compensation, according to the firm.

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THE C-SUITE ISSUE The Decline of the Imperial CEO CEOS ARE SEEING THEIR ROLE CHANGE IN THE AGE OF THE EMPOWERED BOARD.

Richard Fuld’s official title was not “imperial CEO.” He was better known as “the gorilla” after having once torn his shirt off it in a fit of anger. The former chief executive officer of Lehman Brothers, whose speech was filled with expletives, once pushed everything off a manager’s desk for asking Fuld to wait. An elevator was reserved for his private use, delivering him to his office on the executive floor referred to as “Club 31” by employees. None of this would be especially important, except that in 2008 Fuld presided over the collapse of the fourth largest investment bank in the

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The days of the aristocratic CEO sitting on his throne, calling all the shots, are on the wane; almost none of the largest banks that boasted such CEOs survived the financial crisis.

country, which helped spark the global financial crisis and ultimately became one of the largest bankruptcies in U.S. history. And yet during the entire episode, the board of directors never unseated him. It’s hard to say for sure what the dynamic was between the board and Fuld, except we do know that the risk committee of the board met only two times per year. The executive committee of the board was the most active committee. It had two members on it, one of which was Fuld. Nine of the 10 directors were re- tired, none were sitting CEOs, and none had any recent financial industry experience. One, quite inexplicably, was a former actress who had appeared in a Katherine Hepburn movie. The days of the aristocratic CEO sitting on his throne, calling all the shots, are on the wane; almost none of the largest banks that boasted such CEOs survived the financial crisis. The days of the empowered board are

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upon us. Now more than ever, boards are expected to provide a credible challenge to management. Especially for public company boards, investors and regulators alike are scrutinizing the skill sets and actions of the board of directors, demanding such things as board evaluations, strong nominating committees that pick independent boards members, and scrutiny of management’s strategic plan. More banks are installing independent non-executive chairmen as a counter balance to the CEO. Although research has not shown that such a move improves financial performance, except when the company has withstood financial problems, many more boards are adopting such a structure. Twenty-nine percent of S&P 500 boards had independent chairmen in 2015, compared to just 9 percent a decade ago, according to the executive search firm Spencer Stuart. That leaves the CEO needing collaboration and power sharing skills, and some have adapted commend- ably to the change. Collaboration between management and an empowered board is not new—it’s been an important part of well run companies for a long time. But as boards become empowered through increased regulation and heightened expectations for oversight from both regulators and institutional investors, fewer imperial CEOs are making it as the heads of companies. “I think the pendulum was such that CEOs had all the power, but now it’s swinging back to where the board or even the shareholders have a lot more power,” says Da- vid Larcker, a professor and faculty member with the Arthur and Toni Rem- be Rock Center for Corporate Governance at Stanford University. H. Rodgin Cohen, an attorney at Sullivan & Cromwell in New York, who has represented several banking giants, as well as a handful of banks below $50 billion in assets, says the likelihood of other imperial CEOs emerging has been diminished because of the empowerment of boards. He defines an imperial CEO as one who is the opposite of collaborative. He (and it’s usu- ally a he) sets the agenda without consulting the board. But imperial CEOs have almost always been an exception, Cohen says. “From my experience, the best companies had a collaborative process between the CEO and the board.” He mentioned JPMorgan Chase & Co., Goldman Sachs, and Amer- ican Express as companies whose boards enjoy a more collaborative power structure.

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RISK MANAGEMENT TOOLS • COMPLIANCE AWARENESS “I think the pendulum was such that CEOs had all the power, but now it’s swinging back to where the board or even the shareholders have a lot more power.” — David Larcker, professor, Stanford University

This doesn’t mean that the imperial CEO isn’t alive and well in many smaller banks, says Bryan Cave LLP attorney Jim McAlpin. In fact, it’s rare for banks below $1 billion in assets to have a formal evaluation of the CEO’s job performance. Often, at small banks where the CEO is also the board chairman, there is no formal lead director. For many CEOs, their boards consist of local businessmen and professionals who don’t have much experience in banking. They lean on the CEO for guidance and “there tends to be much more deference to the CEO” than in the boardrooms of larger companies, McAlpin says. This is a fact of life at smaller companies where insiders own a majority of the stock, and where there may be a dearth of outside expertise to really challenge the CEO’s strategic plan in a mean- ingful way. Still, many CEOs have noticed their roles have changed, particularly at publicly traded companies. William Aichele, the chairman and former CEO of $2.9 billion asset Univest Corp. of Pennsylvania, says when he was

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named CEO of the company 15 years ago, he basically brought board nom- inees to the board for approval. Nowadays, the nominating committee is much more proactive in assembling the slate of candidates for director- ship. Also, board members used to receive their board packets the moment they walked into a board meeting. Nowadays, they receive them the Friday before a Wednesday board meeting so they can prepare, and they are typically much longer, 300 to 400 pages, he says. “There is no question that the regulations continue to require boards to be more accountable,’’ he says. “If you get exam reports and are criticized by regulators, they mention the board and management. There is more emphasis on it now.” For many, the changing role of the CEO is a good thing. Does it dimin- ish the CEO? No, says McAlpin. “You need to be more of a politician in the boardroom, more adept at listening, more open to constructive feedback. To that degree, you are seeing those skill sets in effective CEOs.” An empowered board should bring specialized expertise to the table, and a CEO who listens can bring that knowledge to improve the company. “You want diversity of opinion and thought that mirrors the fact that the world is more complicated,’’ Larcker says. “If someone wants to jam something down the throat of another, that’s not the way it’s supposed to be. You want someone who is smart and competent [as the CEO], but someone who can listen,’’ he says. As for the board, a danger of the shift and the increased regulatory focus means the board could veer off into micromanaging the company. The board shouldn’t insist on signing off on every expenditure, says Peter Wein- stock, a partner at the law firm Hunton & Williams LLP in Dallas, who has Naomi Snyder seen that happen. Ideally, management is still making operating decisions, is editor for but with proper oversight from a board delving into strategy and risk man- Bank Director. agement. In the end, an empowered board is a good thing, Weinstock says. “It allows the CEO to do a better job. The CEO is truly getting the acumen of what’s hopefully, a very talented board.” |BD|

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DO YOU NEED A CHIEF TECHNOLOGY OFFICER? BY ADAM O’DANIEL THE C-SUITE ISSUE

Looking to jumpstart his career, information technology executive Kevin Pilgrim made a strange re- quest of his boss at Oklahoma’s First United Bank. “I went to my CEO and said, ‘I want to go to banking school,’” Pilgrim recalls. “He looked at me funny and said, ‘Why do you want to go to banking school? You’re in IT.’” That exchange about five years ago, and subsequent support from his CEO, proved to be prescient. Pilgrim, now the chief technology and information officer at Lone Star National Bank in McAllen, Texas, put himself on a path to stay ahead of a major trend in C-suites across the banking landscape. For many banks, it’s no longer acceptable to rely on technology leaders with deep information technology expertise, but limited understanding of banking strategy and execution. Chief technology officers increasingly bring strategic, operational and banking backgrounds to their jobs as technology moves to a starring role in the industry and away from its past as a supporting player. Many forward-thinking lenders have moved executives with a traditional banking background into senior technology roles. And technology pros, such as Pilgrim, have realized a deeper understanding of commercial and retail banking can be a boon to their careers. Two years ago, Pilgrim left the lender he had served with in Oklahoma to become the chief technology officer at Lone Star National Bank, which has about $2.2 billion in “I wanted to go to assets, and was soon after promoted to chief information officer. banking school so “I wanted to go to banking school so I could understand what our bank- I could understand ers eat, breathe and sleep everyday—deposits, loans, marketing and HR,” what our bankers Pilgrim says. “It gave me the foundational knowledge I needed to go to dif- eat, breathe and ferent meetings with the investment group and the bankers and know how sleep everyday— to find technology solutions that really met their needs. It bridged that gap, deposits, loans, to understand the banking aspects of our business.” marketing and HR.” Data and analytics, cyber security, client demand for technology solutions and intense competitive pressure have all pushed technology inside – KEVIN PILGRIM chief technology and the bank to the forefront, making the chief technology officer a strategic information officer, priority. A recent report from financial services research firm Celent calls Lone Star National Bank

BANKDIRECTOR.COM CHIEF TECHNOLOGY OFFICER 2 of 5 THE C-SUITE ISSUE “Not thinking the modern technology officer an “innovator, integrator and instigator” as about technology he or she takes a larger role inside the C-suite. as transformative “The innovator seeks to understand industry changes, current and fu- in financial ture business operating models, and the role that technology has in this services is one future. The instigator is a change agent bringing energy and focus to the of the greatest discussion of how the world is changing, and the impact on the business,” competitive Celent says. mistakes you can “It all comes down to the bottom line. That’s what the directors want to make.” know about,” Pilgrim says. “So, a technology executive has to understand – CATHY BESSANT chief technology and how the balance sheet and income statement works and where it all comes information officer, from. You’ve got to understand that to really dig into the technology, risk Bank of America Corp. and various products.” At Bank of America Corp., the nation’s second largest bank by assets, Chief Executive Brian Moynihan has looked to Cathy Bessant for several years as his management team’s chief technology officer. Bessant rose through the traditional corporate, commercial and consumer banking ranks to now oversee thousands of technologists working on innovative new products and solutions for the bank that holds more patents than any other. At a symposium in the bank’s hometown of Charlotte in 2015, Bessant told a luncheon audience that she never envisioned her current job when she began her career. However, she has embraced the central role technology plays in the future success of the company and her assignment as the bank’s tech leader. “Not thinking about technology as transformative in financial services is one of the greatest competitive mistakes you can make,” she told the Charlotte Business Journal. Bessant said bringing a financial professional’s language and approach to the technology division has helped bridge the gap between software developers and traditional bankers. “Cloud is something business people who are not technologists can’t put their head around. Fixed cost to variable cost? That’s the language of a CFO. That’s the language of business,” she said. “I just think jargon la- bels, especially for technologists who seem so distant from the expertise of many people, creates a divide that is unhealthy for the integration of technology into the business process.”

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Graham Michener, a managing director at RSR Partners and the executive search firm’s financial services leader, says bank CEOs and boards of directors are looking for chief technology officers who can bridge the divide between technology and business. He says CTOs who can understand how to strategically build organizations and communicate are a prized asset. “Technology changes at rapid pace,’’ he says. “The CTO needs to demon- strate that he or she knows how to assess, change and build an infrastruc- ture for not only today’s needs, but also for tomorrow’s. The CTO should be incredibly involved in the C-suite and must make sure the top of the house, including the board of directors, is involved in the communication. Know-

Tap each technology leader to take a closer look at that person’s background and broad experiences.

Cathy Bessant

Bruce Wallace

Kevin Pilgrim

A CLOSER LOOK See how forward-thinking banks and executives are relying on technology leaders with broad experiences.

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ing your audience and being able to speak their language is critical. It’s vital that the CTO can communicate with every constituent.” At $42 billion asset Silicon Valley Bank, the go-to bank for the technology industry, the C-suite was rearranged recently to bring banking products and technology professionals under the same supervision. Bruce Wal- lace, a 27-year banking veteran, gave up his role as chief operating officer to helm a newly created role, chief digital officer. “All of the products we deliver to clients today go through the electronic channels,” Wallace says. “We designed this position to go end-to-end, so somebody would be responsible for the technology piece, the product piece, the delivery piece and the service piece.” He now has responsibility for all online and mobile channels, APIs (computer applications that allow different platforms to work together) and every other channel where Silicon Valley Bank digitally connects with its clients. His group is also responsible for all development of new products. Wallace, who came to SVB after 20 years at Wells Fargo & Co., says the new job remains a work in progress. However, he already sees benefits from bringing the lender’s developers and technology pros into the same group with its product teams, sharing the same goals. He also is able to apply his lengthy commercial and retail banking background, freeing up developers Adam O’Daniel under his supervision to focus on their strengths. is a freelance “I do draw from my understanding of the regulatory and compliance writer and environment, understanding data and privacy and all the things that come contributor to Bank Director from a long banking background,” he says. “We don’t want to bog down the digital magazine. development team with too much compliance and regulation. We want them focused on innovating and delivering in rapid way new experiences for our clients.” |BD|

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THE C-SUITE ISSUE These banks have promoted the chief human resources officer to the executive suite, and here’s why.

EXECUTIVE SUITE

SERVING IN THE EXECUTIVE SUITE

BY SANDY SMITH THE C-SUITE ISSUE

he conscience of the organization. The culture car- rier. The translator of mission throughout the organization. Is that person sitting at the executive table with other key members of the management team? If a bank’s chief human resource officer (CHRO) isn’t there, the -ex ecutive team may be missing out on a key link between its leadership and its frontline employees. TGreg Becker, president and CEO of $42 billion asset SVB Financial Group, the holding company for Silicon Valley Bank in Santa Clara, Cal- ifornia, is firmly in the camp of those who find value in having the chief human resources officer in a key leadership position. SVB has about 2,000 employees and serves 20,000 customers. “The most important part of our success isn’t the strategy,” Becker says. “It really does boil down to having the right people who can engage with cus- “WE NOW tomers, people who are motivated and are creative. From my standpoint, FEEL THAT WE having the head of HR at the executive table is critical for our success.” NOT ONLY HAVE Chris Edmonds-Waters, head of human resources at Silicon Valley, holds the company to its values and culture, Becker says. “When you have THE RIGHT TO executives coming on board, they may want to make a lot of changes. It’s im- SPEAK TRUTH portant to have Chris at the table to say, ‘Let’s think about how that fits with TO POWER, BUT the context of our values.’’ Chris and the team operate like the conscience of ALSO WE HAVE the organization.” THE OBLIGATION Jennie Carlson, executive vice president for human resources at $416 TO THE billion Minneapolis-based U.S. Bancorp, sees a similar role in her opera- CORPORATION tion. “We now feel that we not only have the right to speak truth to pow- TO DO IT.” er, but also we have the obligation to the corporation to do it. It really isn’t something that’s optional.” – Jennie Carlson And that belies one of the key differences for forward-thinking organizations in terms of their CHRO. “It’s not as helpful and nurturing and sup- portive as we maybe sometimes think of HR professionals,” Carlson says. “The HR leader has to be the person who says, ‘The emperor has no clothes.’” Of course, there are also the important roles of leadership development and talent acquisition. Each year, Edmonds-Waters and Becker lead a multi- day retreat for key leaders. Edmonds-Waters also has to focus on employee

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“The HR leader has to be the person who says, ‘THE EMPEROR HAS NO CLOTHES.’”—Jennie Carlson retention. “We’re consistently approached by the competition because we do a great job in training our leaders on leading and our lenders on lending,” Edmonds-Waters said. “Once you’ve got them, from hire to retire, you have to capture the action that you want.”

The Changing Role of HR Noma Bruton, chief human resources officer at $1 billion asset Pacific Mercantile Bancorp in Costa Mesa, California, has seen significant shifts in the role since she began her career nearly 30 years ago. “When I first got into HR, it was primarily focused on an administrative type of role,” says Bruton, who writes about HR issues on her blog, Sagacity|HR. “HR has become more influential in developing leaders and driving cultural change. Many of the things that we take for granted now were cultural changes that were led by HR, things like no longer tolerating sexual harassment and im- proving cultural diversity.” Driving those culture changes can be both fun and challenging, Carl- son says. For instance, when the company recently rolled out an HR-driven purpose statement and core values, employee input was taken seriously. “Talking to employees at all levels made sure that it felt genuine and reso- nated,” Carlson says. “We looked for the ‘snicker factor.’ Are we going to say something to make people snicker? We do a lot of interpreting from the mes-

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sage that we get clearly at the top. We help form that and question how that’s going to resonate and how people hear it throughout the organization.” Case in point: The key leadership team typically talks about “looking around corners”—i.e., anticipating change. When that language was float- ed as part of its core values, “information we got back from our employees was that it sounded creepy,” Carlson says. “Like a weirdo in a raincoat.” The principle then, became “we stay a step ahead,” which had the dual success in removing the snicker factor and “making sure that all employees have a voice in the process,” Carlson says. Don’t mistake the notion that HR at U.S. Bank is focused on running committees and employee surveys. There is a savvier side with data-driven analytics. A team of HR analysts explores issues such as attributes that make a stronger branch manager or a manager in technology, or issues that lead to first-year turnover. Until recently, that team had been functionally in the HR department, but has since moved to the customer analytics team because of a “better career path and much better tools,” Carlson says. The team continues to focus exclusively on HR analytics.

Changing Skills Needed Data-driven analytics points to the changing skill set needed for a typi- cal HR executive. “Wanting to be at the table and being equipped to be there are two different things,” says Telvin Jeffries, founder and managing partner for the search and advisory firm CHRO Partners. “To be fair, HR for many, many years has been rewarded for actually reacting, to be the best EMT, firefighter and crisis management people. That’s how they got credi- bility and what was valued. People issues are messy.” That has created a dichotomy, Jeffries says, of HR executives who are good at managing crises but lack business acumen. “Because of the com- plexity of the business environment, it now requires something totally different. There are emerging leaders equipped to do that, but there are a lot of people who aren’t. The CEO may be saying, ‘I value some of the stuff they’re doing, but I don’t think they can play well here.’” That may come in part from what Silicon Valley’s Edmonds-Wa- ters terms “operating from a rules-based mindset.” “We’re more princi-

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What Happens When HR Reports to the CEO? Tap each side of the chart to view the results. HUMAN RESOURCES CEO LEGAL/FINANCE When the head of human resources When the head of human resources reports to the CEO, reports to the head of legal or finance, human resources can: human resources:

*understand the business and *is focused on legal or financial how it operates aspects of talent

*help make strategic decisions *misses out on key meetings

*understand how talent and *is out of the loop on major leadership development play into personnel changes the company’s goals

*drive corporate change

ples-base,’’ he says. “I personally—and my team—take the approach that it’s a principle-based issue and only throw out the rules card when it’s a dire situation, a severe legal issue. . . When you hang out with an executive team, you give a much broader way of looking at business issues. You’re much more in on the relevant discussion instead of being the cop that says what you can or can’t do.” Jeffries, who founded CHRO Partners after a lengthy career in retail human resources, sees value in moving HR executives into business func-

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tions and then back to HR. “There are things you can learn in a business function that you can’t learn in HR,” he says. “That is the person they’ll want to sit at the table. You’re certainly more valuable to the CEO if you really understand the business.” While the HR professional certainly has a role to play, so does the CEO, who determines how much weight is given to the chief human resources role—and where it reports inside the organization. “How do you mobilize the workforce if human resources is buried in finance? If it’s buried in finance, it is focused on controlling costs,” Bruton said. “If it is buried in legal, it’s about mitigating legal risks. When HR reports to the CEO, they are bringing a broader perspective that is in the best Sandy Smith is a writer interest of the entire company.” in Nashville, The seat at the key leadership table is, Carlson says, a place that HR Tennessee, and a contributor to executives still must earn. But when they do, it can prove valuable both in Bank Director. helping executives develop strategy while carrying the message from leadership to the front lines. |BD|

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GETTING DIVERSE CANDIDATES TO THE C-SUITE Jennie Carlson, the executive vice president for human resources at U.S. Bank, discusses her bank’s efforts to get more diverse candidates into C-suite positions.

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BANKDIRECTOR.COM THE EXECUTIVE SUITE 6 of 6 TECH COLUMN BROUGHT TO YOU BY

Considering a Core Conversion? Don’t Forget to Ask These Important Questions

By Alex Lopatine NYMBUS

n today’s ever-changing financial landscape, the board of directors must review important technology decisions that will position the bank for strategic suc- Icess. One of those important decisions is when, and how, to replace legacy core systems.

A sizable decision facing many financial institutions (FIs) as we head into 2016 is whether adopting new technology—like a cloud-based core banking platform—will better meet the needs of their increasingly tech-savvy customers and strict internal demands. As bricks-and-mortar branches are rapidly becoming a thing of the past, customers have growing expectations for 24/7 mobile transactions and top-notch customer service. Internally, FIs are pressured to increase productivity while cutting costs, creating challenges for those bound by legacy core systems.

In making the business-altering decision to convert to a modern core, boards own the responsibility of challenging management to thoroughly investigate before making the big decision. Below are a few crucial questions board members should ask the C-suite before giving the OK to convert.

1. Have you done your research? Taking the leap to updated core banking technology is easily a million-dollar decision between conversion costs and the man hours SWIPE UP SWIPE required to oversee the data transition. That’s why conducting thorough research is crucial. Make sure your executive team, especially the CIO, participates in product demos, conducts interviews and in-person meetings with prospective providers, has conversations with previously converted FIs to find out more about how the transition went, and combs through analyst reviews. After concluding the initial research, ask executives to report their findings to the board so directors can ask follow-up questions to ensure all bases are covered before choosing a specific platform.

3. Does a conversion support our overall business goals? As a board, make sure to tie any big decision back to the institution’s overall goals. If a core conversion will help meet strategic objectives and the above questions have been answered to a satisfactory degree, it sounds like the conversion is the right move.

If your legacy technology is preventing your institution from achieving improved efficiencies, new customer acquisition and improved employee retention, it may be time for the board—in conjunction with the C-suite—to begin exploring more modern core systems. With an expert board of directors and executives armed with the right questions, a modern core conversion can be the key to a more successful and profitable 2016.

Alex Lopatine is CEO of NYMBUS, the software system revolutionizing the banking industry through a modern and holistic approach to core infrastructures. He can be reached at [email protected]. n today’s ever-changing financial landscape, the board of directors must review important technology decisions that will position the bank for strategic suc- Icess. One of those important decisions is when, and how, to replace legacy core systems.

Both internal and external pressures seem to point to one solution—adopting new technology, despite the costs and conversion headaches. If properly vetted, third- party technology, especially a modern core, could mean the difference between life and death for small- to mid-sized FIs, enabling them to continue to compete with the banking goliaths and non-bank startups. TECH COLUMN BROUGHT TO YOU BY In making the business-altering decision to convert to a modern core, boards own the responsibility of challenging management to thoroughly investigate before making the big decision. Below are a few crucial questions board members Consideringshould ask the C-suite before a Core giving the Conversion? OK to convert. Don’t Forget to Ask These Important Questions 1. Have you done your research? Taking the leap to updated core banking technology is easily a million-dollar decision between conversion costs and the man hours requiredBy Alex Lopatine to oversee the data transition. That’s why conducting thorough researchNYMBUS is crucial. Make sure your executive team, especially the CIO, participates in product demos, conducts interviews and in-person meetings with prospective providers, has conversations with previously converted FIs to find out more about how the transition went, and combs through analyst reviews. After concluding the initial research, ask executives to report their findings to the board so directors can ask follow-up questions to ensure all bases are covered before choosing a specific platform.

1. Have you done your research? Taking the leap to updated core banking technology is easily a million-dollar decision between conversion costs and the man hours required to oversee the data transition. That’s why conducting thorough research is crucial. Make sure your executive team, especially the CIO, participates in product demos, conducts interviews and in-person meetings with prospective providers, has conversations with previously converted FIs to find out more about how the transition went, and combs through analyst reviews. After concluding the initial research, ask executives to report their findings to the board so directors can ask follow-up questions to ensure all bases are covered before choosing a specific platform.

2. Can you explain the benefits of modernizing technology with a newer core? It’s important that everyone fully understands the benefits behind adopting advanced core technology, so as to paint a picture of the future of your financial institution. When your CEO or other key executive is explaining the benefits, listen for key indicators like a single sign-on to access all data, individual customer information and detailed reports; streamlined mobile banking features for FI customers; intuitive design and functionality; secure, private-cloud hosting; seamless integrations and round-the-clock support. All of these attributes lead to increased productivity and decreased customer attrition rates. TECH COLUMN BROUGHT TO YOU BY 3. Does a conversion support our overall business goals? As a board, make sure to tie any big decision back to the institution’s overall goals. If a core conversion will help meet strategic objectives and the above questions have been an- Consideringswered to a satisfactory degree,a Core it sounds Conversion? like the conversion is the Don’t right move. Forget to Ask These Important Questions If your legacy technology is preventing your institution from achieving improved efficiencies, new customer acquisition and improved employee retention, it may be timeBy Alex for Lopatine the board—in conjunction with the C-suite—to begin exploring moreNYMBUS modern core systems. With an expert board of directors and executives armed with the right questions, a modern core conversion can be the key to a more successful and profitable 2016.

Alex Lopatine is CEO of NYMBUS, the software system revolutionizing the banking industry through a modern and holistic approach to core infrastructures. He can be reached at [email protected]. SWIPE UP SWIPE THE C-SUITE ISSUE The job of the bank CEO is becoming more difficult. What should a CEO focus on? TEN CRUCIAL RESPONSIBILITIES

OF A MODERN BANK CEO BY THOMAS K. BROWN

Being a bank CEO today isn’t what it used to be. Since the financial crack-up and the advent of the Dodd-Frank Act, the job of successfully running a bank has become far more broad and challenging. Effective CEOs are spending a lot more time on compliance-related issues, for one thing. Thomas K. Brown Plus, the rise of competitors from outside the banking industry—most nota- is the founder of bly, the rise of the shadow banking system—mean that CEOs are having to the hedge fund acquire expertise in activities (most notably tech development) they once company Second Curve Capital, could largely delegate to others. The changing banking world requires that which primarily bank CEOs combine time-tested management practices with new ways to invests in financial services companies. go about their jobs. On the next page, you will find the 10 tasks I believe are He is a former the most vital for a successful 21st-century bank CEO to get right. sell-side analyst Running a bank in the coming 10 years is going to be a much different and long-time commentator on job than it was at the start of the century. The CEO who tends to 10 tasks on bank stocks for a the following page will have a serious leg up, in my view. variety of media outlets.

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BANKDIRECTOR.COM 10 CRUCIAL RESPONSIBILITIES 1 of 2 THE C-SUITE ISSUE