an elderly person has mental problems. The President of First Bank of Buxboro Ernest “Big Daddy” Bux is growing older, and he’s showing it. Despite tightening bank regulations on lending and credit documentation, Big Daddy seems to be getting even more lax. Moreover, just last week – during important loan renewal negotiations with the Bank’s largest customer – Big Daddy could not remember the name of the company or the name of its principal. Do the directors of First State Bank owe any legal responsibility to the FDIC as the insurer? Do the Bank directors have any legal responsibilities to the Bank?  What about Big Daddy, personally, does he have rights?


In short, yes, as the insurer of the deposits of First Bank of Buxboro, the FDIC requires the Bank’s directors to closely examine and consider the risks associated with President Big Daddy’s potentially declining mental health. As the First Bank of Buxboro’s dominant official, Big Daddy significantly influences, if not controls, virtually all decisions involving the Bank’s policies and operations and is key to the Bank’s core operation. His loss or incapacitation could well deprive the Bank of critical institutional knowledge and competent management – resulting in short- or long-term business disruptions, productivity losses, and decreased profitability. Also legally, in addition to the government regulators, the Bank’s Directors owe a fiduciary duty to the Bank’s stockholders to ensure that the Bank is competently run and managed to protect, and hopefully grow, the profitability and value of their Bank stock.

Yes, Big Daddy, individually, has rights including ADA and HIPAA. Big Daddy and many others in the upper end of America’s aging work population are likely to develop problems with hearing, seeing or getting around. They are protected by the Americans with Disabilities Act. Although people who are aging often don’t think of themselves as having a disability, according to the ADA, having a “physical or mental impairment that substantially limits a major life activity” equates to having a disability. Under the ADA, it isn’t the cause of the disability that matters, but what it means in everyday life.

Getting an objective opinion of Big Daddy’s physical or mental competence may be problematic given the Privacy Rule of the Health Insurance Portability and Accountability Act. Family and friends can express concerns to the healthcare provider. However, unless it’s the healthcare information of an inquirer, the only other person who has access to that information (generally speaking) is one authorized by them in writing to have such access. Consequently, how can the Bank’s Directors – or the directors of any company, for that matter – expect to protect the company from a feared-to-be mentally declining owner / officer who insists that he / she is just fine?


Let’s take a lesson from the hospitals and healthcare providers. Granted, the physical and mental capabilities and competencies for performing open heart surgery are qualitatively and quantitatively different from being a bank president. However, the potential business complications are comparable.

As their medical practitioners age, more and more hospitals and healthcare providers require periodic assessments of the capabilities, competencies and health status of those physicians who request medical staff privileges. The nature and frequency of the assessment is typically tied to the nature of the medical services being performed and the age of the applicant. To be re-credentialed, every two years or sometimes more frequently, those practitioners age 70 or above holding or applying for privileges often must undergo physical and cognitive evaluations conducted by a qualified geriatrician. The evaluation is a “fitness to work” and must indicate that the practitioner has no physical or cognitive problem that might interfere with the safe and effective provision of patient care. Typically, the evaluation report form has criteria to be considered and a short response form to disclose any concerns about the clinicians ability to practice medicine in a safe and effective manner: cognitive abilities, motor skills and sensory functioning, together with any recommendations for further study or evaluation are the Yes/No criteria. An even shorter version could request one or the other of the following be checked: ___ Is capable of practicing medicine in a safe and effective manner; or ___ Requires further evaluation regarding his/her ability to practice medicine in a safe and effective manner.

Tilting the Scales in Your Favor

If your company either has or expects to have aging key employees / officers / directors, and the company documents have no mandatory retirement age or process for evaluating the competency of key personnel, consider amending the company by-laws or company agreement to insert a policy that protects the Company from the unintended actions or omissions of aging key personnel. For example, the Company could provide that it is the policy of the Company’s Executive Committee / Board of Directors / Partners or other governing body that it specifically consider, on a regular basis, assessing the capacity and the capabilities, competencies and health status of each key employee, based upon the nature of the responsibility and customary company oversight of those who have privileges/responsibilities to provide the Company’s services, and the nature of the risk – both short term and long term – to the Company if the quality of those services is lacking or deteriorating. The evaluation is a “fitness to work” evaluation and must indicate that the key employee has no physical or mental incompetency that may interfere with the safe and effective provision of key Company services. Getting all of the Company’s owners to agree to the details and the implementation of such an evaluation process early on is key to the success and the acceptability of such a protective effort over the long term. Note, because HIPAA and the ADA have unique implications, it’s recommended to speak with healthcare and employment law attorneys before implementing the recommendations in this blog.

A word of caution, however. A determination of competence in the workplace is not the same as an individual’s competence to manage daily personal matters. Personal autonomy is a foundational American value, and making choices is the experience of autonomy, in matters every-day or life-defining. Personal autonomy and business competency are very different, and although it may later be addressed, the right of personal autonomy is not the subject of this blog.