Are there any rules governing board of director fees? Can a board member be paid a monthly fee if they are absent from the meeting?

It depends how the bank sets up the fees. Our bank sets a fee per meeting attended. Not there, no buc-a-molies. Some banks set up an annual fee. Others allow an occasional meeting missed while still paying per meeting held. But if the director repeatedly misses meetings, the examiners will pick up on it as shirking of duties, and could pressure you to have the director resign.

Wow! I personally don't know about any specific rules, but it doesn't sound prudent unless maybe there is a contract involved. If our directors are absent, they forego the money.

If you are a publicly-traded company subject to the SEC's rules, your annual proxy statement will have to disclose the names of any of your directors who fail to attend 75% of the aggregate of board meetings and meetings of board committees to which they are assigned.

One other note: If you use an annual fee with or without any adjustment for attendance, make sure you don't pay fees in advance. It's an extension of credit that will possibly violate Reg. O.

We are not a publicly traded company. Are you saying that annual fees could not be spread out over 12 months even if there is no attendance “rule”? Since we are not publicly traded, is this just a matter of how board fees are set up at the annual meeting?

Included in the regulation O definition of extension of credit (see §215.3(a)(6)) is an advance of salary or other compensation of more than 30 days.

So, if you pay directors their fees quarterly, you should always make sure they are being paid in arrears, and not in advance. If you pay a director his first quarter fees on January 2, and he doesn't finish "earning" them until March 31, you've paid at least 2/3 of the fee more than 30 days in advance. That makes it a "free" loan, which is clearly verboten under Reg. O.

I don't believe that there are regulatories covering director compensation, but if they are out of line with peers or simply unreasonable given the institutions financial situation, there is a big price to pay in the long run - key in FDIC "director compensation" in any one of the major search sites to see how the FDIC handles out of control institutions (a lot of cease and desist orders are posted that involve director compensation issues).

I think when the legislative "dust" finally clears from the recent business scandals, you will see a change in the attendance records of board members, their expertise levels, their involvement, and, probably their fees as well. Maybe I am being naive, but it seems to me that being a board member is getting to be more and more an occupation, not an honorary title!

Board members are expected to be independent. Pending rules seem to suggest that "independence" for SEC regulated banks will require minimal or no business relationship with the bank. That'll shake some boards up!

And board members -- particularly audit committee members -- are expected to have more and more accounting knowledge. Besides that, they are being required to get involved in the management of their banks to an unprecedented degree -- one that is, IMHO, crossing the line into daily management.

Add in a heavy dollop of personal liability for perceived mismanagement, and we'll see directors' fees SOAR in order to attract qualified members.

Just the way I see it.