UK: the Walker Review consultation paper on bank corporate governance

Sir David Walker's consultation paper reviewing corporate governance in UK banks and other financial industry entities was published this morning: see here (pdf). A press release is available here.

The report contains 39 recommendations covering the following areas:

• board size, composition and qualification;
• functioning of the board and evaluation of performance;
• the role of institutional shareholders: communication and engagement;
• governance of risk;
• remuneration.

Notable recommendations include:

• annual re-election of the chairman [the report rightly stresses the paramount role of the chairman in board effectiveness and notes that the role should involve a "priority of commitment that will leave little time for other business activity"];
• the formation of a risk committee separate from the audit committee;
• greater disclosure of pay beneath board level and the extension of the remuneration committee's responsibility for remuneration across the whole organisation;
• the chairman of the remuneration committee should stand for re-election in the following year where, in the advisory vote on the remuneration report, less than 75% of the votes cast are in support;
• a minimum expectation set with regard to non-executive directors' time commitment;
• extending the remit of the Financial Reporting Council to cover the development and encouragement of adherence to principles of best practice in stewardship by institutional investors and fund managers.