Monday, 30 April 2012

UK: Commons Treasury Committee begins inquiry into the governance of systemically important financial institutions

The House of Commons Treasury Committee has begun an inquiry exploring corporate governance in systemically important financial institutions. The inquiry's terms of reference are wide-ranging and the following questions are amongst those identified for consideration:
  • What outcomes should corporate governance in the financial services sector seek to achieve?
  • Are Board structures effective? For example, should UK financial institutions consider adopting alternatives to the unitary Board structure?
  • Does the UK approach to regulation and supervision of financial services incentivise Boards to perform their role effectively?
  • Is more intrusive regulation a substitute or complement to effective corporate governance?
  • Is a 'comply or explain' approach an effective framework for governance?
  • What type of corporate culture should financial services firms seek to foster? In what way can this be encouraged? How effective are Boards at shaping corporate culture within their institutions?
  • What impact has the Walker Review (2009) had on corporate governance and corporate behaviour in financial services? 
  • Should non-executive directors bear greater liabilities than under current law? 
  • Is the existing FSA approval process for significant influence functions (SIF), including non-executive directors, effective?
  • Should shareholders be required to exercise a stronger role in systemically important financial institutions?
  • What are the key barriers to greater shareholder activism by institutional investors in financial institutions? 
  • What role should institutional investors, remuneration consultants, employees and others play with respect to remuneration in the financial services sector?
  • The Chairman of the Financial Services Authority has argued that there may be a case for changing the personal risk return trade-off for bank executives. He has suggested either a 'strict liability legal sanctions or an automatic incentives based approach. What are the merits and drawbacks of these proposals? Are there other ways to achieve the same objective? 
  • What is the relationship, if any, between Board diversity and company performance in the financial service sector?

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