Townebank had a decentralized board structure. Townebank is among the most developed institutions in Virginia. Established in 1999, the institution has developed within the state to offer overwhelming services. Decentralization arose due to development of the units within the institution (Hunton & Williams, 2014). This board structure was momentous in the decision-making roles within the organization. When the bank was expanding at the end of the twentieth century, there was need to distribute managerial positions to departmental heads. Moreover, the operations were becoming more complicated. This was to make possible swift and successful decisions to run the various sectors of the organization without hitches. Presently the organization is involved with insurance, banking, and stock marketing.
There are diverse benefits, which have been felt due to devolution of the board structure. There is enhanced expertise for the wide range of services offered by the managers. Decentralization introduces delegation of decisions to the departmental leaders. Decisions can thus be made quickly without waiting for approval from the central management. The main managers can concentrate on key issues affecting the organization such as continuing strategic planning. The departmental boards are given the mandate of managing the department and sorting out day-to-day complications. Since there is distribution of responsibilities, departmental leaders are easily motivated as they are in control rather than being controlled. There were improved customer services as decisions were made nearer to the clients. Managers are able to take action to local situations such as motivating the staff and training and developing the low-ranking management (Hunton & Williams, 2014).
Devolution has its disputes. For instance, divergence of interest mostly arises. This mostly occurs as leaders are assessed based on their departments. Therefore, the same managers have been making decisions to benefit their departments only rather than the entire organization. Devolution results in duplication of services like computer protection and support. Decentralization has led to loss of control of the institution. For instance, loss of control and complications of making developmental decisions has led to the present case study of Townebank. The primary board is at a loss of whether to continue in growth and expand or whether to decentralize and maintain the organization’s growth. Loss of control becomes disastrous when the departmental board makers decisions which negatively affects the reputation of the entire organization. It is also difficult to attain a fixed economic control and making strategic decisions.
TARP fund is a federal government’s program to buy properties from other financial institutions for the strengthening of the financial department of an institution. It was a program established in 2008 to tackle the subprime mortgage disaster (US Government Accountability Office Report, 2008). The American department of treasury acquires the troubled assets of institutions. The assets are properties of banks and other financial institutions, which are difficult to be liquidated. TARP employs secondary market approaches to purchase these properties to prevent further loses of the financial institutions. The banks as a result acquire a stable balance sheet, which enables it to continue with its operations (US Government Accountability Office Report, 2008). Eventually as prices of the assets become stable, the assets can then be re-possessed by the institutions. This is advantageous to both the Treasury and the institutions. Townebank should not have accepted TARP funds. This is because it was against the Virginia Stock Act, which is based on the good faith of the director rather than the standard of the reasonable man. Townebank should instead divulge into geographic diversification as an alternative to product diversification. This will enable the management through the board be in control of the institution.
Hunton & Williams. “Virginia Corporate Law Update: Federal Court Rules in favor of Virginia Corporation in Public Company Merger Litigation.” 2014, December.
US Government Accountability Office Report GAO-09-161. “Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency.” 2008, 2 December