HM Treasury has published a speech by Lord Myners (Financial Secretary to HM Treasury) at the NAPF Annual Investment conference.  

In his speech Lord Myners discusses corporate governance.  

Lord Myners starts his speech by looking at failures in corporate governance in the banking sector. He also states that whilst corporate governance deficiencies were not the sole or direct cause of the financial crisis they did facilitate practices that resulted in misjudgement, poor performance and failure to anticipate systemic risk.  

Lord Myners then looks at how the failures in the UK corporate governance regime happened. He states that more needs to be done and that the following cannot be ignored:  

  • The need for better governance and supervision.
  • Well-functioning boards.
  • Proper shareholder oversight.  

Lord Myners then discusses the work the FSA is currently doing to improve the regulatory framework for banks. This covers risk management, remuneration and the approved persons regime.  

Lord Myners then briefly touches on the issue of the treatment of dated subordinated debt in Bradford & Bingley.  

Lord Myners then turns to the Walker review stating that this will dovetail with the work of Lord Turner (Chairman, FSA) on the future of regulation and supervision of the UK banking system by examining how boards function and interact with other parties. Lord Turner will also examine how boards should operate both in terms of their committee set up and ensuring that management is subject to effective and rigorous scrutiny. Lord Myners states that he hopes that the Walker review will include coverage of:

  • Whether professional investors should have a legal responsibility to seek to enhance the quality of investment and governance to promote value creation – based on the US ERISA model.
  • Placing an additional legal obligation on bank directors and senior executives to have regard to the need to promote and maintain systemic financial stability through actions.
  • Whether the director of risk should have a separate and independent reporting line to the board.
  • Whether non-executive directors should be required to have professional qualifications relating to banking.
  • Whether there is a case for non-executive directors (NEDs) having dedicated support to help them assert their responsibilities when appropriate and commission reports independent of management.
  • The case for appointing an independent adviser to the audit committee whose role could include engaging with external auditors, developing agendas, providing technical briefings and recommending when a second opinion should be obtained.  
  • How much time NEDs should be expected to spend performing their role and what rewards are necessary to ensure good performance.  
  • Whether the statutory reporting of remuneration should be extended to cover non-board positions, providing greater insight into group wide remuneration, the culture and behaviours the group seeks to promote.  

View NAPF Annual Investment conference, 12 March 2009