Five principal factors for restoring trust: expectations for bank boards

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The job of the bank board member became a great deal more complicated, demanding, important and visible as the global financial crisis unfolded in 2008.

Below are five main challenges facing bank boards as they work to meet and exceed the lofty expectations placed on them by the full range of players who have a stake in the success of the global financial system.

1. Everyone expects much more from bank boards now.
Bank boards are expected to fix today’s problems and prevent new ones from arising. They are simultaneously addressing the concerns and demands of regulators, shareholders, senior management, customers, staff, politicians and the general public. Bank directors are fully committing to meeting the new expectations.

2. Restoring trust by building great institutions may be the most compelling single goal.
By setting the objective of building strong and enduring firms, leaders of banks can both defuse and redirect the debate about the primacy of shareholders relative to other stakeholders. Great institutions provide high-quality services and build respected brands; they behave ethically; they balance safety and financial results in search of sustainable performance; they are excellent long-term employers; and they show commitment to their communities. In so doing, they serve all stakeholders’ long-term interests.

3. Key to the board’s success is its rededication to making a meaningful difference.
Mere oversight, if it was ever adequate, will no longer meet anyone’s expectations. The commitment of the board, and each director on it, must be focused and unwavering. With these facts in mind, boards are forging a deeper, more engaged partnership with management and are increasing the frequency of their interactions with external constituents as well. They are seeing a transformation in their involvement in risk governance.

4. Breadth, depth, and relationships are required.
Board members today must have both a broad perspective and deep understanding of the details. Moreover, they must cultivate relationships with management, investor representatives and regulators. Direct engagement with shareholders, regulators and policymakers will likely become the norm rather than the exception.

5. Governance is at a crossroads.
No one is sure which direction governance will take, but everyone hopes that it will emerge better, stronger and more effective. However, board members are deeply concerned that the unintended consequences of the many reform measures being imposed or under consideration may be to destabilize and degrade corporate governance. Board leaders wish to engage constructively in the public discussions on how to improve corporate governance, but do not have a collective forum through which to do so.

Download “Restoring trust: lofty expectations for post-crisis bank boards” for more information.

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