Good Men/Women and not codes
assure effective governance
In terms of the Central Bank’s Road Map; Monetary and Financial Sector Policies, the mandatory Corporate Governance Rules for banks will become applicable from 2008.
There is much controversy over the perceived negative implications on the management of banks and even legal challenges have been filed by some banks. Most controversy appears to be on the following, with even charges being levelled that these rules have been adopted aimed at removing from the leadership of banks, individuals who are not in the good books as supporters or have annoyed the leadership of the Central Bank and those in governance of the nation;
•Mandatory retirement age
•Mandatory numbers of years as a director of a bank
•Limitation on the number of directorates
•Minimum number of meetings in an year to attend
•Independent directors and applicable definition
•Related party and conflicts of interests definitions
The recent editorial in a newspaper focussed on the role of Executive Directors and reminded directors to be mindful of responsibilities under the new Companies Act, pull up their socks or resign before they are hauled up by shareholders, creditors and regulators, in the context of the general perception that many of them;
•Just warm their seats at meetings
•Lack commitment to study board papers before meetings
•Rarely challenge or probe at meetings
•Fail to independently validate the state of affairs
•Lack Guts and Courage
•Fail to focus on the big picture and industry issues
•Are selected on connections and not capabilities and within meritocracy principles
•Open and transparent assessment by all as to whether directors are ‘fit and proper persons’ will go a long way in assuring good governance.
Towards above should not directors of banks be required annually to declare and affirm in a sworn affidavit placed before the board/shareholders that they have, in
dividually and collectively, engaged throughout the year in managing the affairs and the resources of the bank, acting at all times in the interests of the stakeholders of the bank, (including the depositors), and that individually and collectively they have
•Been ‘fit and proper persons’ in terms of the Banking Act
•Duly discharged their duties and obligations with diligence, care and professionalism
•Acted within the applicable laws, regulation and accepted best business practices of the banking sector
•Exercised their judgment and decision making without bias
•Maintained the confidentiality of information received in the performance of their duties
•Not used client and other privileged information for personal, family or third party gain
•Not at any time acted in conflict of interests
•Adhered at all times to Business Standards and Ethics of the Bank
•Not knowingly acted in any manner enhancing the risks of the bank and its stakeholders including the depositors
•Not knowingly at any time acted in any manner prejudicial to the interests of the stakeholders of the bank including depositors
•Committed a minimum of 80 hours to 120 hours in the performance of duties, including time devoted to enhance general and specific capability (in relation to the functional specialism of directors and also in relation to the business of the bank and its operations), capability in effective performance of the duties and responsibilities as a director, pre meeting reviews, attendance of meetings, and post meeting follow up
• Remained relevant in the performance of the duties as a director of a licensed bank and towards which devoted time to meaningfully understand the present and future business environment, its impact on the sector and business of the bank, likely risks and challenges of the sector and the bank and drivers and strategies for stakeholder value enhancement and risk mitigation
•Not engaged in any unethical and immoral practices nor in any acts in defiance of accepted societal norms and values
•Adopted necessary risk management procedures and mitigation plans within the operations to assure the long term stability and solvency
•Assessed the effectiveness of the board and thereafter taken such steps to eliminate any weaknesses identified and commit to enhance further the effectiveness and for such purpose used a structured framework or questionnaire.
•Assessed on a quarterly basis the Solvency, Capital Adequacy and Going Concern Status and have satisfied due compliance with and operating within best practice guidelines and regulatory stipulations
•Reviewed long term business plans, assessed likely business, competitive, and regulatory environments and the associated business challenges and likely impact and risks and agreed a long term strategic action for management of the business, risk mitigation, capital planning and enhancement of stakeholder value.
Shareholders, depositors, analysts and media, it is now over to you for debate and action.