Walker: Risks and regs get mixed reviews

Posted by Janice McGinn in Strategy & Planning, Risk & Regs on Thu, 26/11/2009 - 12:52

On non-executive directors and risk, the WSJ reports that Walker's key change relates to the minimum expected time commitment from non-execs.

"The report softens the previous stance that non-execs should spend a minimum of 30 days, so as not to preclude chief executives of other companies sitting on a bank's board. Instead, the report calls for certain non-execs to commit 30 to 36 days, and for the time commitment to be agreed and made clear to shareholders on request. “

Mathew Rutter, partner at Beachcroft LLP, said: "Sir David's recommendations will require a big cultural change in many boardrooms, and a change in the role of the chairman and non-executive director in particular. In many cases this will require a greater time commitment than has been the case in the past, and a more questioning mind on the part of NEDs.

John Cridland, CBI Deputy Director-General, said: “We are concerned about the risk of ‘spill over’ from the Walker Review. Banks play a unique role in the economy and have particular systemic risks associated with them. They require different rules.”

Cridland said that although the focus is on banks, “the review says that many of the recommendations are at least partially applicable to other financial institutions, such as life insurers.

Cridland said, “it would be wrong to burden all companies with extra, inappropriate regulations when they have played no role in the financial crisis. Listed companies are already covered by the Combined Code, and there has been no widespread failure of corporate governance beyond the few, specific examples in the banking sector.”

Charles Cotton, Policy Adviser at the CIPD said the review ramps up the responsibilities on NEDs. “It is essential that significant effort is put into learning and development programmes for NEDs, so they acquire and maintain the skills, knowledge and attitudes required to fulfil their expanded roles effectively,” said Cotton.

The Bottom Line:If Mr Cable has his way...

"If Mr Cable had his way, all the big banks would be broken up and bonuses would be virtually eliminated - a sure-fire way in my view of guaranteeing an end to the UK’s ability to compete as an international financial centre. Let’s not forget that this is a man who is on record as saying that everyone who works in a bank has an ‘aristocratic lifestyle’ clearly demonstrating his lack of understanding of the sector." A tough line on bankers’ bonuses could make a brain drain of financial talent a distinct possibility, warns Paul Marsden. Read more

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