|"Action to improve corporate governance at many financial institutions is seen by us as a matter of urgency."|
| ||Roger Ferguson, |
Chairman of the G30 Steering Committee on Corporate Governance
| "The paramount aim of our new report is to promote changes in governance behavior, which demands changing the ways in which people think."|
| ||Jean-Claude Trichet, |
| Listen here: || |
What's being asked of the stakeholders in the bank governance process?
Corporate governance reforms at major private financial services firms still have a long way to go in securing financial stability. The Group of Thirty (G30) report provides the first, post-crisis, detailed, governance action plan to be developed by the private sector.
Weak and ineffective corporate governance of systemically important financial institutions (SIFIs) was an important contributory factor in the massive failure of financial-sector decision-making that led to the global financial crisis, according to many sources.
According to the G30, management teams, boards of directors, regulators and supervisors, and shareholders all failed, in their respective roles, to prudently govern and oversee SIFIs.
The G30 report, developed in collaboration with Ernst & Young and Tapestry Networks, outlines how each of these participants must reassess their approach to corporate governance and take meaningful steps to make it stronger.
Recognizing three basic tenets on effective bank governance can help financial institutions (FIs) function well, adjust to changes and address challenges in a manner agreeable to all stakeholders:
- Diversity in governance approaches is a good thing. There is convergence around the core roles of the board, management, supervisors and shareholders, but the specifics of those roles vary substantially from firm to firm and country to country. Financial institutions tailor their specific governance systems to optimize effectiveness under unique circumstances.
- Governance systems are defined by both hardware and software. Bank governance systems are built around a defined architecture comprising both "hardware" (e.g., organization structures and processes) and "software" (e.g., people, skills and values). The software makes the hardware function.
- Effective governance depends on people and how they interact. Financial institutions need to adopt good governance practices, but if bank governance systems have the wrong people, or if those people behave in dysfunctional ways, the arrangements do not matter.
In this report, we explore the topic across the following audiences: