NEW YORK (CNN/Money) - Note to banks: Your flabby boards could use a makeover.

In the wake of corporate scandal, the banking industry has made strides in improving its corporate governance standards with improved compensation practices and better executive succession plans.

But when it comes to its board of directors, the banking industry may want to take a serious look at who's sitting on its boards and trim the fat, according to corporate governance experts.

"The board structure among banks is still pretty poor," said Mark Watson, senior vice president of Moody's Investors Services. "We're critical of boards that get too big and directors tell us that smaller boards are more effective."

The reason is simple. Ever try to get 20 different people to reach an amicable agreement on any one issue? Now imagine trying to run a company that way.

That's the main concern on analysts minds. With the average large banks' board consisting of 15 directors – Citigroup (Research) has 17 while JPMorgan Chase (Research) has 16 – analysts worry that too many board members could make it difficult for the bank to reach a conclusion on matters of strategy or management. Or worse yet, an important matter of corporate governance could fall through the cracks.

You can blame some of the explosion in board size on the merger mania that hit the industry in the last few years, said Charles Elson, director of The Weinberg Center for Corporate Governance at the University of Delaware.

He said the job of the board is to oversee management for the benefit of the shareholder. But when a board becomes too big or members are placed on the board due to a merger and not because they're the most qualified candidates, there's less likelihood that the board's decisions will ultimately be in the best interest of the shareholders. Politics can come into play as banks try to appease those that have come in as the result of a merger and sometimes board members may just be unable to see eye to eye with a company's strategy.

While Watson said that banks have made some progress in board size -- down from 30 or 40 members on the board a few years ago -- he added that boards of nine to 12 members were optimum for discussions that reviewed management and strategy.

In a report earlier this month, Moody's – which bases some of it credit ratings on how strong a company's corporate governance is – said the banking industry's boards tend to have low levels of experienced, independent directors as well as a disproportionate number of directors that either have corporate relationships with the bank or are from the bank's home state.

"Historically, a small local board helps a bank know its local environment and the local businesses in a respectable way," Watson said. "But the 27 banks in the report were large multi-state or international banks."

He said the large local flavor of banks such as Bank of America (Research) could ultimately be a cause for concern as directors may be less inclined to challenge management that they have relationships with.

The lack of management oversight by banks' board of directors in the past has been one area that's resulted in some major headaches for the industry and investors alike.

It's been a tough road for the banking industry in the last few years as the Enron, WorldCom and Parmalat debacles resulted in a high level of distrust for corporate America. The banking industry received a large portion of the blame for turning a blind eye to the corporate shenanigans running rampant on Wall Street. And that has cost banks billions in litigation and settlement costs.

JPMorgan and Enron, for instance, agreed on August 16 to a roughly $1 billion settlement to Enron's claims that the bank had played a role in the one-time energy trader's collapse four years ago. That came just two months after the company paid out $2.2 billion to Enron investors.

And Citigroup has had its share of legal troubles. In addition to its WorldCom and Enron woes, the company also settled three investor lawsuits earlier this month accusing its analysts of issuing biased research and failing to disclose conflicts of interest related to three telecommunications companies. And the banking giant was forced to apologize to Japan's Financial Services Agency after it was discovered that the company's Japanese private banking unit was shuttered by regulators last year for various abuses, including insufficient safeguards against money laundering.

With a history of lax corporate oversight, it's little wonder that Wall Street is expecting a higher level of corporate governance from its banks.

But to be fair, banks have come a long way, said Madhavi Mantha, senior analyst at Celent.

She said that increased regulatory scrutiny has caused banks to become more transparent with their practices as they found their names splashed in headlines and their reputations were tarnished.

And Moody's Watson added that only 4 banks out of the 108 banks Moody's covers filed material weakness reports in compliance with Sarbanes-Oxley. But he said that it was also the only industry that showed a pattern of control failures which raised concerns.

"I definitely think there has been vast improvement and I'm not advocating more regulation," he said. "But there is going to have to be more pressure to do way beyond the minimum."

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For more on JPMorgan's settlement with Enron, click here