2.5.6 Banks

Documentgegevens:

Mr. W.J.L. Calkoen, datum 16-02-2012

Datum: 16-02-2012
Auteur: Mr. W.J.L. Calkoen
JCDI: JCDI:ADS596052:1
Vakgebied(en): Ondernemingsrecht (V)

As in other countries special attention has sine the credit crisis been given in the UK to corporate governance at banks. The themes of the consultation document of the Walker Review of 17 July 2009, were repeated in the executive summary of the Walker Review.1 It stresses board behaviour, i.e. the need for an environment in which effective challenge of the executive by NEDs takes place in board meetings before decisions are taken on major risk and strategie issues. It also emphasizes time commitment of NEDs, as well as financial industry experience and independence of mind of NEDs.

Some specific items in the Walker Review are:

—: banks and other financial institutions (BOFIs) on both sides of the Atlantic with long entrenched imperial CEOs and linie NED input have fared materially worse than those with challenging NEDs. The NED contribution was materially helpful in BOFIs that have weathered the crisis better than others;2 BOFIs where CEOs later became chairmen also fared wel1;3
—: the majority of NEDs and the chairman should have financial experience;4
—: the chairman of a BOFI should be submitted to re-election on an annual basis;5
—: each BOFI should have a chief risk officer (CRO) and a risk committee which has a majority of NEDs; the risk committee should carry out special due diligence investigations in the case of large acquisitions;6
—: the greater the prospective risk appetite of a BOFI board, the greater will be the need for financial industry expertise among NEDs on the board; however, although the board should have a majority of NEDs with financial experience, these boards will also require some NEDs with other skills;7
—: there will have to be a greater time commitment on the part of NEDs (up to 35 days a year)8 and the chairman of a major BOFI (two-thirds of his time)9

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Walker Review, pp. 9-10.

Walker Review, nos. 2.12 and 2.13; see also two research papers by Nestor Advisors: (i) Governance in Crisis, a comparative case study of 6 US investment banks; those that weathered the crisis best — Goldman Sachs and JP Morgan — had CEOs with shorter terms and more knowledgeable NEDs; (ii) a study of 20 European banks which came to the same conclusions, see www.nestoradvisors.com.

Walker Review, no. 309.

Walker Review, nos. 3.13 and 4.20 and recommendation 8.

Walker Review, recommendation 10, this idea is criticised on the ground that it would promote short-termsism; this is already a compromise because the one-year only rule applies to the chairman.

Walker Review, recommendations 23, 24 and 26 and nos. 6.1 to 6.37.

Walker Review, nos. 3.7-3.15.

Walker Review, recommendation 3.

Walker Review, recommendation 7.