Catbird Seats, Dunk Tanks, and Bank Mergers

Bank directors seeking a new CEO may think potential candidates will be flattered to be considered, perhaps even willing to put up with a few inconveniences, or even less in exchange for the chance to run their own show. After all, they stand to inherit the bank's top spot, the throne that the departing CEO ruled from. If that's your assumption, get real would be the advice from consultants, recruiters, and bankers who have been through the process. Directors and bankers seeking successors shouldn't expect an easy willingness to jump into the driver's seat. Indeed, two of the biggest issues involved in CEO succession today are 1. money and 2. the certainty of getting that money--in that order. So sorry, you're history Why so mercenary, when the CEO of a community bank supposed to be in the catbird seat? Frankly, because today that catbird seat has a hinge on it--one as likely as not to be released. How's that? Consider that even in today's jaded age of hightech entertainment, a common fixture remaining at many county fairs the dunk tank. You know the routine--as a banker, you may have even been the star attraction yourself. Some willing soul, usually someone with some degree of local authority, dresses in a clown suit and sits in a chair suspended over a pool of water. Folks pay $1 apiece to throw softballs at a target linked to the chair. If the hurlers hit the bullseye, the hinge releases and--splash!--the clown gets dunked. In the same way, succession candidates worry that their time in the CEO's chair going to be limited. So when they consider taking a post, they look for all the and all the certainty regarding that that they can get. most important issue here the tremendous uncertainty about the life cycle of any institution, says James M. Rockett, an attorney with McCutchen, Doyle, Brown & Enersen, LLP, San Francisco. The odds that a given community bank will be bought out in the next decade are strong enough that many of the candidates that your bank likely to encounter, as it looks for a successor, will want top dollar and contracts locking up that dollar for as long as possible. For many management candidates, the issue of job loss due to merger is not a matter of if, but of when, says Dick McCarthy, principal at McCarthy Associates National BancSearch, LLC, a New Orleans-based executive recruiting firm. Commanding top dollar With so many mergers occurring, there no shortage of potential candidates for the CEO's chair today. However, finding a candidate who the right fit for your bank may not be as simple--or cheap--as the large supply would imply. It's more than likely, for example, that the bank will need to spend more on its new CEO than on its old one. A new CEO who more sales- or computer-oriented, for example, may be able to command more than a retiring CEO who focused mainly on credit and balance-sheet issues. Even if it may seem unfair to the departing CEO, directors need to be aggressive in forming incentives for the new candidate, observes The Report of the NACD Blue Ribbon Commission on CEO Succession, issued last summer by the National Association of Corporate Directors. And this trend can affect more than the top spot. Attorney Jeff Gerrish of Memphis, Tenn., who frequently works with bank boards, notes that a client of his recently brought in a new number three officer who needed more, to be persuaded to join, than the second-in-command was getting. That's a problem, says Gerrish, of Gerrish & McCreary, P.C. But he adds that there are ways of handling such differences without explicitly paying the new man or woman the extra cash as salary. Special bonus plans can be set up, for instance, says Gerrish, or the new arrival can be paid a signing bonus. Indeed, while we've spoken of compensation in terms of money, thus far, it isn't salary alone that drives candidates to accept one position over another. …