The makeup of the board of directors at First Niagara Financial Group has changed as the bank has grown through acquisitions, welcoming members who have little connection to Western New York.
Today, only one person on the 10-member board – First Niagara President and CEO Gary M. Crosby – is from the region.
Now that board holds the future of the Buffalo-based bank in its hands, as the institution has reportedly hired JPMorgan Chase to help with a possible sale of the institution.
A decision to sell would result in the region losing one of its most important corporate headquarters, and put in jeopardy many of the bank’s 2,300 local jobs.
“If somebody comes and offers them a lot of money, all bets are off,” said Fred Floss, an economist at SUNY Buffalo State. “But there’s regulatory issues. It’s not just money.” For instance, he said, a prospective buyer would have to demonstrate it has adequate capital to complete a deal.
Any decision would require approval by the board that includes four of the directors who came aboard as a result of First Niagara acquisitions, as well as shareholders of both banks.
When First Niagara bought Connecticut-based NewAlliance Bancshares in 2011, three NewAlliance board members – Carlton L. Highsmith, Roxanne J. Coady and Nathaniel D. Woodson – joined First Niagara’s board as part of the deal. G. Thomas Bowers came aboard in 2003, in conjunction with First Niagara’s acquisition of Finger Lakes Bancorp.
First Niagara’s board used to have more local members. The board lost two local voices last year with the retirement of Thomas Bak and the death of James Boldt, the Computer Task Group chairman and CEO.
Crosby has said he expected First Niagara to choose another director from Western New York, but such an appointment has not yet come. The board has named two members since summer 2014: Austin A. Adams and Susan S. Harnett, neither from Western New York.
The size of First Niagara’s board is flexible. In its corporate governance guidelines, First Niagara said it is comfortable having nine to 13 members to carry out its goals.
Members of boards of publicly traded companies are bound by their “fiduciary responsibility” to shareholders, meaning they must consider how to maximize shareholder value. First Niagara has struggled to improve its performance and increase its stock price after a series of acquisitions a few years ago, and analysts have wondered if a sale might be the solution.
Floss, the Buffalo State economist, said board members who do not have an attachment to a region like Buffalo beyond their board seat might think differently about a deal. “You don’t think of any of the other issues. You don’t think of any of the problems that may or may not occur.”
Floss said a board chairman can be influential within a board, and he pointed out that M&T Bank Corp.’s chairman, Robert G. Wilmers, has strong Buffalo connections, and several of M&T’s other board members have Buffalo ties. First Niagara’s chairman, Woodson, is from Connecticut.
But Floss said where someone is from isn’t always the whole answer. “It’s not always the case that you have to live there, but you do have to have a connection to the place,” he said.