4000 - Advisory Opinions
Applicability of Depository Institution Management Interlock Rule on "Honorary" or "Advisory" Directors
January 23, 1981
Pamela E. F. LeCren, Attorney
On August 12, 1980 the Legal Division responded to your request for an opinion regarding several hypotheticals and the application of Part 348 of FDIC's regulations (12 C.F.R. 348)1 thereto. The following is in response to your October 29, 1980 request for additional clarification concerning the first hypothetical dealt with in our August 12, 1980 opinion. That hypothetical considered, in part, whether or not an individual with the title of "director emeritus" who merely receives a director's fee and is prohibited by the financial institution in question from participating in its management is an honorary or advisory director for the purposes of Part 348. We responded that,
It is the opinion of the FDIC that a person such as described above is neither an advisory nor an honorary director for the purposes of the Interlocks Act. Although the FDIC has not officially adopted a definition of the terms "honorary" and "advisory" director, we have concluded that we will not consider anyone to be either if he or she neither attends nor is authorized to attend board of directors' meetings, does not advise voting members of the board, nor has access to information presented to the board. It is further our intention to initially presume all persons with the appropriate titles to in fact be honorary directors or advisory directors within the meaning of the Interlocks Act. We will; however, invite such persons to rebut the presumption.
You now inquire whether or not we would consider an individual A who is a director of a bank, its parent holding company, and a "director emeritus" of a savings and loan association to be an honorary or advisory director of the savings and loan under the following circumstances: (1) both the bank and its parent adopt resolutions prohibiting A from partaking in the management of the savings and loan as a "director emeritus",2 and (2) A executes and delivers to the bank and its parent on or before January 31 of each year an affidavit certifying compliance with the resolutions. We are of the opinion that where A is authorized as a "director emeritus" to partake in the management of the savings and loan, resolutions on the part of the bank and its parent will not remove A from being considered an honorary or advisory director for the purposes of Part 348. It was the intent of our August 12, 1980 letter to indicate that the institution for which the individual serves must prohibit the individual from acting in a managerial role. Inasmuch as the bank and its parent are not capable of removing A's authority to function at the savings and loan if the savings and loan has conferred such authority on A, the resolutions in question are insufficient.
1 Part 348 implements the Depository Institution Management Interlocks Act (12 U.S.C. 3201 et seq., "Interlocks Act"). In general, the Interlocks Act prohibits two nonaffiliated depositoryinstitutions from sharing a common management official depending upon the size and location of the institutions. The Interlocks Act grandfathers certain interlocking relationships which existed prior to the enactment of the statute (November 10, 1978) and provides for the orderly termination of interlocks that undergo a "change in circumstances". Go back to Text
2 Specifically, the resolution would prohibit A from (1) attending meetings of the board of directors of the savings and loan, (2) voting on any matter coming before the board, (3) advising voting members of the board regarding matters pending before the board, and (4) having access to information provided to the board of directors. Go back to Text