My long-time banking guy friend, Jerry, sent me a follow-up to my last post about Executive Compensation. He provided a link to a CNBC article called “Pay for Boards at Banks Soars Amid Cutbacks.” The full story can be seen at

The key point is that since the financial crisis (which was not caused by, but certainly exaggerated by, banks), the compensation for the Boards of Directors of the largest U.S. banks keeps rising. This is occurring while the banks are receiving more governmental pressure on their banks’ officers pay and bonuses. The article cites one of my favorite banks, Goldman Sachs, where many of their 13 directors earn over $500,000 a year for a part-time job.

In defense, the article goes on,  some Board experts are saying that banks are trying to recruit directors with more financial expertise to provide better oversight and avoid some of their past problems.

Now, I am all for avoiding problems, especially those that can cripple our whole economy.  I also believe that historically many bank boards, like many general corporate boards, fall into what I call my One Third rule. That is that One Third of directors are not qualified to be on a given board.  One Third of directors may be qualified but do not have the time or interest to be on a given board. And, the final One Third of directors are qualified, spend the time and energy,  and do most all the work, on a given board.

In my book, The Business Zoo, we have a separate chapter that explains this director rule further. We also tell stories of Boards that do a good job and some where Boards do not. We also suggest Management or Advisory Boards for most smaller, private firms and explain their value.

But let’s go back to the article about bank boards and what sounds like their excessive and increasing pay.

Leadership, we are rightly told, starts at the top. The Board of Directors is as top as we get in the world of public companies or many private firms and even nonprofits.

Senior Management, serves at the pleasure of the Board. The company officers work for the Board. The Board each year elects or re-elects the senior officers and approves their pay.

So, Directors and Boards need to set an example and actually lead the firm. This should include being sensitive to the perception of their own pay by their shareholders and the public. Strong Board leadership can also occur by not agreeing to everything management proposes and learning to say No more often and, at times, to say goodbye! Goodbye to CEOs or other officers who do not work out. That is real Board leadership.