The subtle art of leading in banking – Make it or Break it
Subtitle: on how board reputation impacts the executive team and its effects on organizational performance
Today we sat down for a warm cup of coffee, leaning back, and hearing stories about the high stakes in the world of banking from someone who’s been through many financial organizations, banks included, – Mrs. Marilena Popovici. Today, we’re not talking about numbers or market trends; instead, we’re diving into what it takes to truly lead in this field, the subtle art of leading in banking, navigating public perception, the weight of every decision, and the courage required to stand firm when the stakes are at their highest. From a seasoned banking CEO or board member view or, simply, from the ground up, we all learned firsthand that reputation isn’t built overnight; it’s carefully crafted through each press release, every conversation, and even the briefest public statements. CEOs, board members, supervisory board members, they all know that, in today’s fast-paced, highly scrutinized environment, trust can be eroded in an instant. Yet, this trust is the foundation upon which a bank’s resilience is built. It’s about transparency, showing up even when the environment isn’t favorable, and being proactive in communication—turning challenges into moments of accountability, rather than hiding behind closed doors. As strange as it may seem, when talking about top management, executives and board level, not even job recommendations are not advisable. Leaders at this level are not merely employees but are seen as the strategic pillars of an organization, guiding the ship to the shore, making high-stakes decisions, and upholding its reputation and values. Unlike other positions where recommendations serve as a useful validation of skills and experiences, at this level, a leader’s credibility must be directly observable and self-evident through their track record, integrity, and strategic impact.
Needless to say, in the world of banking, reputation is the bedrock upon which trust is built. For CEOs and board members, it represents far more than personal pride; it’s a strategic asset that defines public confidence, strengthens investor loyalty, and sustains the institution’s resilience during crises. Successfully leading a bank through turbulent times demands not only financial expertise, but also a mastery of strategic critical thinking and an unwavering commitment to integrity. Drawing from age-old wisdom and applying nuanced, modern strategies, we shall delve into the complex terrain of leadership in banking—where every move, statement, and decision holds the power to either fortify reputation or expose it to risk.
Let us delve further into the board’s reputation impact on the executive team and its effects on organizational performance alongside Mrs. Marilena Popovici, Chief Financial Officer / Chief Operating Officer at BCR Banca pentru Locuințe.
Board reputation is a nuanced and powerful force, built on the perceptions of stakeholders and reflected through indirect assessments. Serving as both mirrors of leadership integrity and guardians of trust, Boards of Directors set the tone for an organization’s identity, shaping its reputation through every decision and example they set. Marilena Popovici emphasizes further that “Board Reputation, as stated by Ruiz in 2014, is a cumulus of stakeholders’ perceptions.” This intrinsic link between board reputation and stakeholder trust makes measuring the direct impact challenging, yet essential. Popovici elaborates, “Measurable ways to assess the stakeholders’ perception about Board reputation on a bank’s overall reputation are hardly identifiable or detectable. However, the most used methods, which measure or cover indirect reputation, include stakeholder opinion surveys, customer surveys, NPS, ESG ratings, stakeholder surveys on ESG, analyst ratings, stock performance, financial performance, employee engagement surveys, turnover rates, and social media image or reputation surveys.”
The board’s role in influencing a bank’s reputation extends beyond governance to intangible yet impactful areas. According to her, “Boards of Directors are identified by literature as being the ones setting the tone for company reputation.” Sotillo (2010) supports this, stating that boards are an “intangible asset” and that their influence works by “boosting executives’ reputation.” Popovici also notes Ruiz’s (2014) observation that boards serve as a “main instrument by power of example to give trust to customers,” a dynamic that directly enhances the reputation of the bank.
“Further” Marilena added “literature showed that CEO reputation and Board reputation are linked, a special impact being noticed especially on INED and on Chair of the Board. Several studies consider that 45-50% of the company reputation is due to CEO reputation (Weber Shandwick,2020, p.2). The employee’s opinion surveys, show that in the banking industry, generally more than “half of the executives and the same percentage of staff, accepted their job for the CEO and even higher number stays in the company for him, considering him an asset for the organization” (Weber,2020, p.4)
Proactively managing reputation risks in today’s financial landscape means to “be integer, acting ethically and morally, create a strong governance, being transparent, walk the talk, keeping the word, good technical knowledge, good understanding of risks, measuring and knowing permanently the risks, including the reputational one, engagement of the stakeholders, strengthening and fostering trust.”
And “without repeating myself, in my opinion, the qualities that define a banking leader are a mix of several such as, but not limited to the following – openness to listen and observe, humbleness (so nicely called “smerenie” in Romanian), curiosity, permanent interest to learn from the others and self-development, emotional intelligence, stewardship, trust and courage.”
This intricate interplay between board reputation, CEO influence, and stakeholder perceptions highlights the profound responsibility placed on banking leadership to uphold trust and integrity. These dynamics become even more critical in terms of crisis like the Global Financial Crisis (GFC), that increased even more than before the requirements and expectations for banking leadership, particularly in terms of accountability and transparency. “Main areas of action developed by the regulatory bodies after GFC are: tightening governance, implementing “fit and proper criteria”, risk management with focus on reputational risk etc. Criteria developed are focusing on: experience, skills (mainly hard skills), knowledge, reputation, honesty, integrity, independence of mind and commitment to allocating reasonable time. They are stricter mainly for the initial access to position and become a bit more relaxed if no major incidents occur.” said Marilena.
There is no doubt that GFC reshaped not only the banking industry’s operational frameworks but also the way leadership credibility is perceived and evaluated hence bringing permanent shifts in terms of what constitutes credible leadership, stakeholder engagement, and the consistent demonstration of accountability. Just to mention a few.
These changes in the banking landscape directly influenced the role and expectations of leaders at all levels.
“A link between credibility, transparency and assessment has been noticed. Clear criteria for assessing “Fit and proper” are provided by the supervisors. In the financial industry Board individual and collective assessment are required, institutions being accountable for both assessment and frequency of assessment. A very clear framework is defined and minimum topics to be addressed:” good repute, sufficient knowledge (adapted to the role-fit), ability to act with honesty, integrity, independence of mind and respect committed allocated time.”
In situations like the above, and not only, the “regulator and regulatory bodies play one of the most important roles in shaping and sustaining reputation of banking leaders and boards”, but they are” being considered “the first line of assessment of the Board capacity and reputation, ensuring the quality of executives and non-executives.”
Because “in order to properly identify the determinants for the perception of the Board reputation a deep look should be taken at the entire process: recruitment-identification-nominalization-authorization-rumination-evaluation-succession. What was almost unanimously reflected by the interviewees is that the most important determinant in board reputation from both criteria set, checking performed, is the regulator and regulatory framework. As presented by literature(Grief,2008, Ferris,1902, North,1990, Edward and Ogilvily,2012) the history of finance and banking since the beginning 12th-14th century, was marked by two opinions: one stating “ for the financial system to develop, legal institutions, contracts and incentives need to be present” or the second stating that network” integral part of the government and financial system” “strong interaction, integrity and strong reputation. My interviews and discussions for collecting data revealed that to create trust, to add value, to be accepted, both formal (rules, regulators, reports, disclosures, assessments) and informal (network, perceptions, communication) need to coexist.”
But what characteristics or qualifications are most crucial for a board member to have a positive and respected reputation in the banking sector: “For a board member to have a positive and respected reputation in the banking sector a mix of hard and soft skills is required: financial/banking experience/expertise, technical knowledge (adapted to the role-fit), integrity, honesty, good reputation, independence of mind, courage, ethics, leadership, communication, curiosity, will to permanently learn and develop. The best example of required abilities for banks board is the one required for Knight Templars: “reputation for being integer and having very strong administrative skills and processes, a good risk management structure, blacklisting risks and strong networking skills”
If you look around, each of us bear a “reputation badge” influencing how we are perceived in our environment. For professionals, for banking leaders’ mirrors in the authority they have within the industry.
“Since Templars Knights the reputation seems linked to networking and what image a person has created.
The reputation of a position is not a ghost, it is taking shape. For the regulator to see the reputation of a
position, it must be seen by the regulator. It seems that the man who evolve in the system, creates his
reputation in the position, metaphorically speaking the “badge” comes with confirmation and
responsibility to walk the talk and act ethically and morally, with stewardship and accountability centered
on customers and stakeholders’ protection”
The deeper we explore the reputation and impact of banks’ board members and CEOs, the clearer it becomes that banking leadership is of utmost importance – especially for those at the top. These are the individuals who inspire pride in working for a company, whether local or a subsidiary, and who ‘fight battles’ on our behalf, often without our knowledge.
In the case of banks subsidiaries, for example, “the board dynamics and reputation management differ from those in standalone institutions. There are some particularities of the corporate governance of the subsidiaries, one of them being related to the fact that are common Directors within the Group, sometimes having executive positions in mother company and non-executive position in subsidiary, and due to this, the main role is the one of monitor and control. Generally, the strategy is decided by the mother/group and is communicated locally, the implementation being assumed/committed by the CEO. Due to this, the role of the Board is more focused on control and compliance, the stewardship belonging to CEO and executives.”
Delving further “the dynamic/relationship Board-Management is a critical capability and a source of competitive advantage (Erakovic, 2018), the way in which they interact with stakeholders “create a strong trustful relationship that at the end create strong ties creating competitive advantage” (Erakovic, 2078). Independent Directors are the main pillars of corporate governance (Madhani,2017). Due to their scarcity (especially in banking), they are a critical resource. Their reputation, mainly due to their role as Chair of necessary Committees (Nomination, Remuneration, Audit, Risk) make them crucial and one of the essential elements for setting the tone for executives and organization reputation.
There is an interconnected dynamic between the subtle art of leading in banking, and not only, and the environment banks are running their business, and I mean, the political, economic, social, legislative and cultural at both micro and macro level. This intricate interplay requires leaders to not only adapt to shifting external conditions but also to anticipate changes and align their strategies to ensure resilience and sustainability. Boards and CEOs continuously develop a deep understanding of how these external factors influence internal operations, shaping the policies, decisions, and reputations of banking institutions.
This alignment of strategy and adaptability is mirrored in the qualities required of banking leaders, who must possess a unique blend of attributes to navigate such complexity effectively.
“Without repeating myself, in my opinion, it is about a mix of several qualities such as: openness to listen and observe, humbleness (so nicely called “smerenie” in Romanian), curiosity, permanent interest to learn from the others and self-development, emotional intelligence, stewardship, trust and courage.
Continuous business education is another path that enriches and support the board members and CEOs in leading, hence improving and anchoring their reputation as Marilena acknowledges “Both MBA from City University of Seattle and Master of Arts in Board Practice and Directorship contributed to what I am like person and leader. The MBA (graduated in 2003) brought me expertise in finance, financial performance, managerial accounting, organizational behavior, strategic thinking, leadership development and offered an important opportunity to understand international markets particularities, different business triggers and perspectives. Henley/Envisia Master of Arts in Board Practice and Directorship was a perspective changer, preparing me for independent, non-executive role, to deal with complex situation, to use both leadership and coaching abilities for board discussions and negotiations, to express my curiosity, to understand stakeholders perspective and needs, to practice with real case-studies in boards of five, with different profiles(testing impact on dynamics), covering challenging topics of strategy and governance, access to a network of high caliber professors, colleagues(peers), a community of professionals, centered on education of Board Members in a trust environment , sharing opinions and collaborating in decision-making.”
This commitment to adaptability, strategic foresight, and a strong ethical foundation naturally extends to the qualities banking leaders must embody and cultivate within their teams. As leadership evolves to meet complex demands, continuous personal and professional development becomes a cornerstone of effective leadership.
“My approach is centered on people, focusing on their growth, on their empowerment. I used my coaching abilities: to observe, to listen , to give space, to offer feedback without being judgmental, to validate, to be curious in a constructive way in the benefit of the team , to trust people and their ability to identify solutions and give the best of and I always preferred to guide them to self-development, focusing on education, and learn them how to fish not giving them the bought fish.”
After all it is like in everyday life. You need to be the best friend your child has at the same time as being a parent and parenting does not come with a user manual. It teaches us adaptability and resilience. By extension, leaders use coaching not just as a tool, but as a way of guiding their teams toward uncovering their strengths, embracing change, and shaping their own paths. This journey of empowerment and shared learning fuels not only individual growth but also at the level of the team and extended teams / suppliers / partners / clients.
“Coaching has a direct impact on team performance. Offering the proper framework for sharing, for assessing past experiences and using them to build the present and future, identifying the strengths, nurturing them, it is about change, it is about strong will, it is about patterns and roles. Coaching creates trust and safe environment for collaboration, for learning, this stimulating performance, productivity, innovation.”
The transformative power of education and coaching is evident not only in how leaders manage their teams and build trust but also in how they prepare themselves for the complexities of governance. This intersection of personal development and strategic oversight comes to life through advanced programs that shape leaders to meet the evolving demands of their roles.
As one of the first ten graduates globally to complete the MA in Board Practice and Directorship,
Marilena’s insights into the Envisia MA in Board Practice and Directorship program offer a compelling narrative of transformation and growth. Drawing from her experience as one of the first ten graduates globally, she reflects on how this pioneering program not only shaped her leadership journey but also prepared her for the nuanced challenges of non-executive roles.
“The Envisia pioneering program, MA in Board Practice and Directorship was a cornerstone in my leadership journey and in my preparation for a non-executive (NED or INED) career. I always counted on education, but Envisia Henley program is a real mind changer in leadership, making a great job in the professionalization of the Board, in evidencing the value added by a Board of professionals, aware about their role and contribution, with a strong sense of stewardship. During the program I understood better the challenges in the marketplace, the geo-politic and geo-strategic included, the cultural particularities, the vital role of reputation, the way in which, the board dynamics, the chair-CEO dynamic. I obtained better strategic oversight, a visibility on my leadership style and leadership strengths to maximize value added and performance for board where I act and organization. I understood how I can be a better steward from my non-executive role, how to use better coaching skills in board meetings and to manage better the complexities. In a nutshell I developed /enhanced my governance experience, and I had the privilege to be part of a community of professionals “Board Members” Envisia Board of Elite, with whom I shared, argued, consulted, learned on topics related to governance and future of governance, complex situation from Boards, role of Board, maximizing value added of Board, transparency accountability and of course stewardship.”
Marilena’s contribution is further stressed by the inclusion of a summary of her graduation paper “Board reputation impact the executive team and its effects on organizational performance” in the first “Chronicles from the Boardroom: A Romanian Perspective.” “The study provides three recommendations to practitioners that are based on research findings. The first recommendation relates to RBV theory and how the Board and especially the Independents that can be more effectively used, in both communication of the bank, and by ensuring visibility on their action even becoming a competitive advantage. It regards also how Regulatory body, NBR could improve and strengthen the communication with Independents and Directors. The second recommendation is that the Regulatory Body requires independent evaluation for Directors and profiling to be used. The third recommendation is the need to strengthen the talk by creating visibility on Director’s activity, making decisions in this way that allow stakeholders to document their perceptions about Directors and the way in which they perform/accomplish their duties.
This study is limited to 15 interviews. It is also, hardly repeatable conclusion and thirdly, inner biases – being part of the “population under study” (Mehra, 2002).
Future studies may explore subsidiary status and gather more data and perception about willingness of Directors on visibility and track on their activity, and thirdly is the newly well-educated generated generation of Independents, with both local and international exposure’s role and visibility of Board.”
In short “reputation is more important than your paycheck, and your integrity is worth more than your career.”
10.12.2024 / Editor, Andreea Dragan
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