Board work can be tiring but rewarding

The companies in your stock portfolio might have board members more interested in learning how to save themselves if a scandal hits than discussing strategy to compete in the global marketplace.


Board meetings in corporate America are running longer, and not always because the directors are talking about strategy to make profits. Instead, there are a lot more "cover your butt" matters, such as personal liability insurance, that show up on board agendas, said Geoff Loftus, the vice president of the New York-based Society of Corporate Secretaries and Governance Professionals.

Produced from the scandals at Enron, Worldcom and Adelphia was the other reason meetings are lasting longer: complying with Sarbanes-Oxley. The legislation that made the two congressmen household names in responsible corporate governance recently turned 5.

There's a different atmosphere in boardrooms today, issues created in the aftermath of Wall Street scandals, Mr. Loftus said. Corporations nationally are having a tougher time recruiting people to serve on their boards of directors.

"The days of a country club board are over," said Georgia Bank & Trust Chief Executive Dan Blanton. "It was fun and prestigious, got a little board fee and my best friend was on the board, too. Those days are over. Boards these days have got to be vigilant, mindful of their responsibilities and the consequences ... and they are."

The boards for Augusta's two publicly traded companies, both banks, seem to be bucking the national trend.

Mr. Blanton and the chief executive for the other publicly traded company, Pat Blanchard, of Georgia-Carolina Bancshares - which owns First Bank of Georgia - say it has not been tough to find good people willing to serve on their boards. Even dealing with the compliance of Sarbanes-Oxley hasn't added much time to their meetings.

Nor have any of the directors been openly concerned whether the rewards of governing the company outweigh the risks they face, they say.

"The fact that we have not had any issues is a reflection of our community and the abundance of business and community leaders," Mr. Blanchard said.

Mr. Loftus said a bigger problem is not the reluctance to serve, but the concept of "over-boarding," being on too many at the same time. Corporations are now limiting their chief executives to one or two boards besides their own.

"The reason you limit is so that they don't spend too much time on other people's business," Mr. Loftus said. The counter-argument is that there's an advantage to watching how other companies conduct business, possibly generating new ideas.

Mr. Blanton said he serves on nonprofit boards, but would not serve on the board for a for-profit corporation, citing a feeling of conflict of interest.

Mr. Loftus said overhead matters such as liability insurance were once something that directors didn't worry about before the corporate scandals. "But now when directors are being sued, and in some cases having to settle personally, it becomes a very big concern to them. Even though they think they're joining a wonderful company that isn't going to get them sued, they still have to protect themselves," Mr. Loftus said.

Georgia-Carolina Bancshares board Chairman Sammy Fowler said he understands the concern generating the interest in personal liability.

"You have to rely on the information you are given by other people," he said. "I'm a country lawyer; I fight with insurance companies, litigation, real estate and divorces. There's no way for me to have absolute technical knowledge about all the different laws the bank is required to comply with. I have to rely on people.

"It doesn't give me any heartburn. Our board of directors is a strong board."

According to The National Association of Corporate Directors, directors on public boards spent an average of 210 hours on board-related matters in 2006, up from 190 hours in 2005.

Rhonda Graybeal, the president of Hang-Ups Custom Framing and Art Galley, said the financial statements she receives before MCG Health Inc. meetings are inches thick.

"I read front to cover. If I don't understand it, I ask questions," Ms. Graybeal said.

MCG Health Inc. runs the hospital at the medical college. Ms. Graybeal has been on its board for more than four years. She said financial committee meetings can last for hours. The information is pored over again during the board's regular monthly meeting.

Mr. Loftus said more responsibility on understanding a company's financial condition has been placed on boards' audit committees.

Mr. Fowler said he can see why boards need more time to understand such matters. For the banks, however, the requirements of Sarbanes-Oxley could be taken in stride because they already were heavily audited and regulated by the Federal Deposit Insurance Corp. and state banking department.

Nationally, the increased responsibility and a greater time commitment have led to a decrease in multiple directorships, shrinking the pool of available board directors.

It is enough of a trend that Nasdaq launched a board recruiting service in May, the first time such a service was offered by a stock exchange. It is like an eHarmony for boards, matching the profiles of interested potential board members with the corporations that have a vacancy.

Mr. Blanton said Southeastern Bank Financial Corp., the company that runs Georgia Bank & Trust in Augusta and Southern Bank & Trust in Aiken, has filled four vacancies in less than a year without trouble.

The bottom line, Mr. Blanton said, is that the only trouble in local corporate governance is from Sarbanes-Oxley's cost. Southeastern Bank Financial Corp. spends $500,000 to comply with the additional auditing measures. Mr. Fowler said Georgia-Carolina Bancshares spends an additional $200,000.

"We now have accounting firms looking over the shoulder of accounting firms - more abundance of review than ever before," Mr. Blanchard said.

He said it would cost the bank $100,000 annually to meet regulatory requirements even if it weren't publicly traded.

Reach Tim Rausch at (706) 823-3352 or