A Review of Corporate Governance in UK Banks and other Financial Industry Entities

Sir David Walker is a senior adviser to Morgan Stanley. He was recently tasked by the British government to lead a commission that would review corporate governance in that country’s banks. This post is based on the Executive Summary and Recommendations of Sir David’s final report, which is available here.  Sir David’s previously discussed the consultation paper regarding his review in this post on the Forum.

In February I was asked by the Prime Minister to review corporate governance in UK banks in the light of the experience of critical loss and failure throughout the banking system. The terms of reference were subsequently extended to include other financial institutions.

To limit immediate crisis damage and to stem the risk of further contagion, substantial and wholly unprecedented public policy action has been taken in the form of state injections of equity and takeover of failed institutions, exceptional liquidity support arrangements and materially tougher capital requirements. The recent and current focus of policy debate in the UK and elsewhere has understandably been on the nature, scale and need for continuance of such public policy support and the shape, extent and timing of further regulatory tightening. But serious deficiencies in prudential oversight and financial regulation in the period before the crisis were accompanied by major governance failures within banks. These contributed materially to excessive risk taking and to the breadth and depth of the crisis. The need is now to bring corporate governance issues closer to centre stage. Better financial regulation has much to accomplish, but cannot alone satisfactorily assure performance of the major banks at the heart of the free market economy. These entities must also be better governed.

Public policy initiative including financial regulation commonly involves discrete, specific actions any one of which, such as a requirement for more capital, may fairly dependably achieve an intended outcome, in this instance lower leverage. In contrast, improvement in corporate governance will require behavioural change in an array of closely related areas in which prescribed standards and processes play a necessary but insufficient part. Board conformity with laid down procedures such as those for enhanced risk oversight will not alone provide better corporate governance overall if the chairman is weak, if the composition and dynamic of the board is inadequate and if there is unsatisfactory or no engagement with major owners. The behavioural changes that may be needed are unlikely to be fostered by regulatory fiat, which in any event risks provoking unintended consequences. Behavioural improvement is more likely to be achieved Executive summary and recommendations through clearer identification of best practice and more effective but, in most areas, non-statutory routes to implementation so that boards and their major owners feel “ownership” of good corporate governance.

Regulation will make BOFIs safer but cannot assure that they will be attractive to investors and thus able to strengthen their balance sheets other than on very expensive terms. Thus regulation cannot assure that the array of financial services that may be required will continue to be available to individual, corporate and other clients without potentially substantial increases in fees and charges. For its part, better corporate governance of banks cannot guarantee that there will be no repetition of the recent highly negative experience for the economy and society as a whole. But it will make a rerun of these events materially less likely. The challenge will be to find the right balance with, on the one hand, materially enhanced supervision and regulation to ensure safety and soundness but without, on the other hand, so cramping enterprise in major financial institutions that they fail adequately to meet the needs of the wider economy. The desirable balance is more likely to be found the greater the confidence of government and regulators that corporate governance in these institutions is set to become dependably more robust.

The consultation process since publication of the July consultation paper has been substantial, with widespread support for the main thrust of the analysis and recommendations but with important reservations expressed on various aspects of the coverage, scope and content of specific recommendations. These reservations were in six main areas:

  • a) Overall scope – while the terms of reference of the Review relate to BOFIs, the consultation process generated much discussion around the applicability of many of the recommendations to non-financial listed companies and whether, how far and how these might be adopted, above all by the FRC, for wider application.
  • b) Differentiation among BOFIs – there are large differences in the nature of business and risk characteristics of major banks, life assurance companies, fund managers and other entities which, it was widely represented, were inadequately reflected in the July recommendations on specific matters such as appropriate non-executive director (NED) time commitment, board oversight of risk and disclosure on remuneration.
  • c) Shareholder engagement – some fund manager respondents were concerned at what was seen as the at least implicit proposition in the July consultation paper that active engagement represented superior or best practice for major shareholders and fund managers as against other ownership or trading strategies. It was widely felt that the emphasis should be on disclosure of the business model being used by a fund manager, with the principles or code for stewardship seen as best practice for those whose business model embraced active engagement.
  • d) Degree of prescriptiveness – whereas some responses called for more specific guidance in areas such as the content of reports by the remuneration and risk committee and on board or governance evaluation, others expressed concern that “comply or explain” affords less flexibility in practice than the original intent and accordingly that greater flexibility should be built into recommendations themselves such as those on board oversight of risk, the role and status of the chief risk officer and the structure of “high end” remuneration (where this Review defines “high end” to cover individuals in a BOFI who perform a “significant influence function” for the entity or whose activities have, or could have, “a material impact on the risk profile of the entity”).
  • e) International competitiveness – while the responses indicated general recognition of the need for material strengthening in corporate governance standards, concerns were expressed that the UK should not move significantly ahead of or out of line with relevant policy developments elsewhere, in particular in the United States and elsewhere in the European Union. Such concerns were largely associated with the recommendations on remuneration.
  • f) Role of the FSA – several respondents called for an increased role for the FSA in the governance of BOFIs, in effect moving several of the existing Combined Code “comply or explain” provisions (and some of those proposed in the July consultation paper) into the FSA’s Handbook with which BOFIs have to comply. But this partly reflected concern that the July corporate governance recommendations might, unless explicitly taken into the ambit of the FSA, be extended over time to non-financial entities. In contrast, there was some BOFI argument against further extension of the FSA role on the basis that this would unduly circumscribe the ability of boards and of fund managers in discharge of their wider obligations.

The comments and suggestions that have been made are reviewed in more detail in my final report.

The five key themes of the Review as set out in the July consultation paper are reiterated and attracted widespread support in the consultation process. But they have been improved and in some areas sharpened through this process and the associated discussion.

First, both the UK unitary board structure and the Combined Code of the FRC remain fit for purpose. Combined with tougher capital and liquidity requirements and a tougher regulatory stance on the part of the FSA, the “comply or explain” approach to guidance and provisions under the Combined Code provides the surest route to better corporate governance practice, with some additional BOFI-specific elements to be taken forward through the FSA. The relevant guidance and provisions require amplification and better observance but the only proposal for new primary legislation relates to mandatory disclosure of remuneration of senior employees on a banded basis. Executive summary and recommendations Executive summary and recommendations

Second, principal deficiencies in BOFI boards related much more to patterns of behaviour than to organisation. The sequence in board discussion on major issues should be: presentation by the executive, a disciplined process of challenge, decision on the policy or strategy to be adopted and then full empowerment of the executive to implement. The essential “challenge” step in the sequence appears to have been missed in many board situations and needs to be unequivocally clearly recognised and embedded for the future. The most critical need is for an environment in which effective challenge of the executive is expected and achieved in the boardroom before decisions are taken on major risk and strategic issues. For this to be achieved will require close attention to board composition to ensure the right mix of both financial industry capability and critical perspective from high-level experience in other major business. It will also require a materially increased time commitment from the NED group on the board overall for which a combination of financial industry experience and independence of mind will be much more relevant than a combination of lesser experience and formal independence. In all of this, the role of the chairman is paramount, calling for both exceptional board leadership skills and ability to get confidently and competently to grips with major strategic issues.With so substantial an expectation and obligation, the chairman’s role in a major bank board will involve a priority of commitment leaving little time for other business activity.

Third, given that the overriding strategic objective of a BOFI is the successful management of financial risk, board-level engagement in risk oversight should be materially increased, with particular attention to the monitoring of risk and discussion leading to decisions on the entity’s risk appetite and tolerance. This calls for a dedicated NED focus on high-level risk issues in addition to and separately from the executive risk committee process and the board and board risk committee should be supported by a CRO with clear enterprise-wide authority and independence, with tenure and remuneration determined by the board.

Fourth, there is need for better engagement between fund managers acting on behalf of their clients as beneficial owners, and the boards of investee companies. Experience in the recent crisis phase has forcefully illustrated that while shareholders enjoy limited liability in respect of their investee companies, in the case of major banks the taxpayer has been obliged to assume effectively unlimited liability. This further underlines the importance of discharge of the responsibility of shareholders as owners, which has been inadequately acknowledged in the past. For the future, this does not exclude business models that involve greater emphasis on active trading of stocks rather than active engagement on the basis of ownership on a longer-term basis. But there should be clear disclosure of the fund manager’s business model, so that the beneficial shareholder is able to make an informed choice when placing a fund management mandate, and where active engagement is the business model, the fund should commit to the Stewardship Code as discussed later in this Review and set out in Annex 8.

Fifth, against a background of inadequate control, unduly narrow focus and serious excess in some instances, substantial enhancement is needed in board level oversight of remuneration policies, in particular in respect of variable pay, and in associated disclosures. The remit and responsibility of board remuneration committees should be extended beyond executive board members to cover the remuneration structure and levels for all senior employees whose role puts them in a position of significant potential or actual influence on the risk profile of the entity. With expectation, guidance and, ultimately, pressure from major shareholders, the remuneration committee, in its enlarged role, should ensure that remuneration structures for all such “high end” employees are appropriately aligned with the medium and longer-term risk appetite and strategy of the entity; and should be a key and mature counterbalance to any executive pressure to boost short-term remuneration provision in response to a perceived threat of competitor pressure.

There has been recurrent media pressure for the naming of individuals in the “high end” category. But no evidence has been produced that this would be likely to yield any enhancement in the governance of risk in major institutions, the core preoccupation of this Review, and it is not proposed here. But disclosure of “high end” remuneration, going well beyond the previous exclusive focus on executive board members, is essential if major shareholders are to be able to reach informed views on the governance of their investee companies and appropriate alignment of incentives. There is, therefore, a recommendation for disclosure of “high end” remuneration on a banded basis and that this disclosure should be based on new statutory provision. Implementation of this provision together with the other recommendations on remuneration would create a more demanding regime than that currently in place in any other major jurisdiction.

Reflecting concerns raised in the consultative process, an indication is given in the recommendations below of the particular group of entities to which a particular recommendation relates; and, to the extent possible and appropriate, of a proposed assignment of responsibility for a recommended initiative or oversight of its implementation as among government, the FSA and the FRC.

Recommendations regarding board size, composition and qualification

Recommendation 1

To ensure that NEDs have the knowledge and understanding of the business to enable them to contribute effectively, a BOFI board should provide thematic business awareness sessions on a regular basis and each NED should be provided with a substantive personalised approach to induction, training and development to be reviewed annually with the chairman. Appropriate provision should be made similarly for executive board members in business areas other than those for which they have direct responsibility.

Recommendation 2

A BOFI board should provide for dedicated support for NEDs on any matter relevant to the business on which they require advice separately from or additional to that available in the normal board process.

Recommendation 3

The overall time commitment of NEDs as a group on a FTSE 100-listed bank or life assurance company board should be greater than has been normal in the past. How this is achieved in particular board situations will depend on the composition of the NED group on the board. For several NEDs, a minimum expected time commitment of 30 to 36 days in a major bank board should be clearly indicated in letters of appointment and will in some cases limit the capacity of an individual NED to retain or assume board responsibilities elsewhere. For any prospective director where so substantial a time commitment is not envisaged or practicable, the letter of appointment should specify the time commitment agreed between the individual and the board. The terms of letters of appointment should be available to shareholders on request.

Recommendation 4

The FSA’s ongoing supervisory process should give closer attention to the overall balance of the board in relation to the risk strategy of the business, taking into account the experience, behavioural and other qualities of individual directors and their access to fully adequate induction and development programmes. Such programmes should be designed to assure a sufficient continuing level of financial industry awareness so that NEDs are equipped to engage proactively in BOFI board deliberation, above all on risk strategy.

Recommendation 5

The FSA’s interview process for NEDs proposed for FTSE 100-listed bank and life assurance company boards should involve questioning and assessment by one or more (retired or otherwise non-conflicted) senior advisers with relevant industry experience at or close to board level of a similarly large and complex entity who might be engaged by the FSA for the purpose, possibly on a part-time panel basis.

Recommendations regarding the functioning of the board and evaluation of performance

Recommendation 6

As part of their role as members of the unitary board of a BOFI, NEDs should be ready, able and encouraged to challenge and test proposals on strategy put forward by the executive. They should satisfy themselves that board discussion and decision-taking on risk matters is based on accurate and appropriately comprehensive information and draws, as far as they believe it to be relevant or necessary, on external analysis and input.

Recommendation 7

The chairman of a major bank should be expected to commit a substantial proportion of his or her time, probably around two-thirds, to the business of the entity, with clear understanding from the outset that, in the event of need, the bank chairmanship role would have priority over any other business time commitment. Depending on the balance and nature of their business, the required time commitment should be proportionately less for the chairman of a less complex or smaller bank, insurance or fund management entity.

Recommendation 8

The chairman of a BOFI board should bring a combination of relevant financial industry experience and a track record of successful leadership capability in a significant board position. Where this desirable combination is only incompletely achievable at the selection phase, and provided that there is an adequate balance of relevant financial industry experience among other board members, the board should give particular weight to convincing leadership experience since financial industry experience without established leadership skills in a chairman is unlikely to suffice. An appropriately intensive induction and continuing business awareness programme should be provided for the chairman to ensure that he or she is kept well informed and abreast of significant new developments in the business.

Recommendation 9

The chairman is responsible for leadership of the board, ensuring its effectiveness in all aspects of its role and setting its agenda so that fully adequate time is available for substantive discussion on strategic issues. The chairman should facilitate, encourage and expect the informed and critical contribution of the directors in particular in discussion and decision-taking on matters of risk and strategy and should promote effective communication between executive and non-executive directors. The chairman is responsible for ensuring that the directors receive all information that is relevant to discharge of their obligations in accurate, timely and clear form.

Recommendation 10

The chairman of a BOFI board should be proposed for election on an annual basis. The board should keep under review the possibility of transitioning to annual election of all board members.

Recommendation 11

The role of the senior independent director (SID) should be to provide a sounding board for the chairman, for the evaluation of the chairman and to serve as a trusted intermediary for the NEDs, when necessary. The SID should be accessible to shareholders in the event that communication with the chairman becomes difficult or inappropriate.

Recommendation 12

The board should undertake a formal and rigorous evaluation of its performance, and that of committees of the board, with external facilitation of the process every second or third year. The evaluation statement should either be included as a dedicated section of the chairman’s statement or as a separate section of the annual report, signed by the chairman. Where an external facilitator is used, this should be indicated in the statement, together with their name and a clear indication of any other business relationships with the company and that the board is satisfied that any potential conflict given such other business relationship has been appropriately managed.

Recommendation 13

The evaluation statement on board performance and governance should confirm that a rigorous evaluation process has been undertaken and describe the process for identifying the skills and experience required to address and challenge adequately key risks and decisions that confront, or may confront, the board. The statement should provide such meaningful, high-level information as the board considers necessary to assist shareholders’ understanding of the main features of the process, including an indication of the extent to which issues raised in the course of the evaluation have been addressed. It should also provide an indication of the nature and extent of communication with major shareholders and confirmation that the board were fully apprised of views indicated by shareholders in the course of such dialogue.

Recommendations regarding the role of institutional shareholders: communication and engagement

Recommendation 14

Boards should ensure that they are made aware of any material cumulative changes in the share register as soon as possible, understand as far as possible the reasons for such changes and satisfy themselves that they have taken steps, if any are required, to respond. Where material cumulative changes take place over a short period, the FSA should be promptly informed.

Recommendation 15


Recommendation 16

The remit of the FRC should be explicitly extended to cover the development and encouragement of adherence to principles of best practice in stewardship by institutional investors and fund managers. This new role should be clarified by separating the content of the present Combined Code, which might be described as the Corporate Governance Code, from what might most appropriately be described as the Stewardship Code.

Recommendation 17

The Code on the Responsibilities of Institutional Investors, prepared by the Institutional Shareholders’ Committee, should be ratified by the FRC and become the Stewardship Code. By virtue of the independence and authority of the FRC, this transition to sponsorship by the FRC should give materially greater weight to the Stewardship Code. Its status should be akin to that of the Combined Code as a statement of best practice, with observance on a similar “comply or explain” basis.

Recommendation 18

The FRC should oversee a review of the Stewardship Code on a regular basis, in close consultation with institutional shareholders, fund managers and other interested parties, to ensure its continuing fitness for purpose in the light of experience and make proposals for any appropriate adaptation.

Recommendation 18B

All fund managers that indicate commitment to engagement should participate in a survey to monitor adherence to the Stewardship Code. Arrangements should be put in place under the guidance of the FRC for appropriately independent oversight of this monitoring process which should publish an engagement survey on an annual basis.

Recommendation 19

Fund managers and other institutions authorised by the FSA to undertake investment business should signify on their websites or in another accessible form whether they commit to the Stewardship Code. Disclosure of such commitment should be accompanied by an indication whether their mandates from life assurance, pension fund and other major clients normally include provisions in support of engagement activity and of their engagement policies on discharge of the responsibilities set out in the Stewardship Code. Where a fund manager or institutional investor is not ready to commit and to report in this sense, it should provide, similarly on the website, a clear explanation of its alternative business model and the reasons for the position it is taking.

Recommendation 20

The FSA should require institutions that are authorised to manage assets for others to disclose clearly on their websites or in other accessible form the nature of their commitment to the Stewardship Code or their alternative business model.

Recommendation 20B

In view of the importance of facilitating enhanced engagement between shareholders and investee companies, the FSA, in consultation with the FRC and Takeover Panel, should keep under review the adequacy of the what is in effect “safe harbour” interpretation and guidance that has been provided as a means of minimising regulatory impediments to such engagement.

Recommendation 21

Institutional investors and fund managers should actively seek opportunities for collective engagement where this has the potential to enhance their ownership influence in promoting sustainable improvement in the performance of their investee companies. Initiative should be taken by the FRC and major UK fund managers and institutional investors to invite potentially interested major foreign institutional investors, such as sovereign wealth funds, public sector pension funds and endowments, to commit to the Stewardship Code and its provisions on collective engagement.

Recommendation 22

Voting powers should be exercised, fund managers and other institutional investors should disclose their voting record, and their policies in respect of voting should be described in statements on their websites or in another publicly accessible form.

Recommendations regarding governance of risk

Recommendation 23

The board of a FTSE 100-listed bank or life insurance company should establish a board risk committee separately from the audit committee. The board risk committee should have responsibility for oversight and advice to the board on the current risk exposures of the entity and future risk strategy, including strategy for capital and liquidity management, and the embedding and maintenance throughout the entity of a supportive culture in relation to the management of risk alongside established prescriptive rules and procedures. In preparing advice to the board on its overall risk appetite, tolerance and strategy, the board risk committee should ensure that account has been taken of the current and prospective macroeconomic and financial environment drawing on financial stability assessments such as those published by the Bank of England, the FSA and other authoritative sources that may be relevant for the risk policies of the firm.

Recommendation 24

In support of board-level risk governance, a BOFI board should be served by a CRO who should participate in the risk management and oversight process at the highest level on an enterprise-wide basis and have a status of total independence from individual business units. Alongside an internal reporting line to the CEO or CFO, the CRO should report to the board risk committee, with direct access to the chairman of the committee in the event of need. The tenure and independence of the CRO should be underpinned by a provision that removal from office would require the prior agreement of the board. The remuneration of the CRO should be subject to approval by the chairman or chairman of the board remuneration committee.

Recommendation 25

The board risk committee should be attentive to the potential added value from seeking external input to its work as a means of taking full account of relevant experience elsewhere and in challenging its analysis and assessment.

Recommendation 26

In respect of a proposed strategic transaction involving acquisition or disposal, it should as a matter of good practice be for the board risk committee in advising the board to ensure that a due diligence appraisal of the proposition is undertaken, focussing in particular on risk aspects and implications for the risk appetite and tolerance of the entity, drawing on independent external advice where appropriate and available, before the board takes a decision whether to proceed.

Recommendation 27

The board risk committee (or board) risk report should be included as a separate report within the annual report and accounts. The report should describe thematically the strategy of the entity in a risk management context, including information on the key risk exposures inherent in the strategy, the associated risk appetite and tolerance and how the actual risk appetite is assessed over time covering both banking and trading book exposures and the effectiveness of the risk management process over such exposures. The report should also provide at least high-level information on the scope and outcome of the stress-testing programme. An indication should be given of the membership of the committee, of the frequency of its meetings, whether external advice was taken and, if so, its source.

Recommendations regarding remuneration

Recommendation 28

The remuneration committee should have a sufficient understanding of the company’s approach to pay and employment conditions to ensure that it is adopting a coherent approach to remuneration in respect of all employees. The terms of reference of the remuneration committee should accordingly include responsibility for setting the over-arching principles and parameters of remuneration policy on a firm-wide basis.

Recommendation 29

The terms of reference of the remuneration committee should be extended to oversight of remuneration policy and outcomes in respect of all “high end” employees.

Recommendation 30

In relation to “high end” employees, the remuneration committee report should confirm that the committee is satisfied with the way in which performance objectives and risk adjustments are reflected in the compensation structures for this group and explain the principles underlying the performance objectives, risk adjustments and the related compensation structure if these differ from those for executive board members.

Recommendation 31

For FTSE 100-listed banks and comparable unlisted entities such as the largest building societies, the remuneration committee report for the 2010 year of account and thereafter should disclose in bands the number of “high end” employees, including executive board members, whose total expected remuneration in respect of the reported year is in a range of £1 million to £2.5 million, in a range of £2.5 million to £5 million and in £5 million bands thereafter and, within each band, the main elements of salary, cash bonus, deferred shares, performance-related long-term awards and pension contribution. Such disclosures should be accompanied by an indication to the extent possible of the areas of business activity to which these higher bands of remuneration relate.

Recommendation 32

FSA-authorised banks that are UK-domiciled subsidiaries of non-resident entities should disclose for the 2010 year of account and thereafter details of total remuneration bands (including remuneration received outside the UK) and the principal elements within such remuneration for their “high end” employees on a comparable basis and timescale to that required for UK-listed banks.

Recommendation 33

Deferral of incentive payments should provide the primary risk adjustment mechanism to align rewards with sustainable performance for executive board members and “high end” employees in a BOFI included within the scope of the FSA Remuneration Code. Incentives should be balanced so that at least one-half of variable remuneration offered in respect of a financial year is in the form of a long-term incentive scheme with vesting subject to a performance condition with half of the award vesting after not less than three years and of the remainder after five years. Short-term bonus awards should be paid over a three-year period with not more than one-third in the first year. Clawback should be used as the means to reclaim amounts in circumstances of misstatement and misconduct. This recommended structure should be incorporated in the FSA Remuneration Code review process next year and the remuneration committee report for 2010 and thereafter should indicate on a “comply or explain” basis the conformity of an entity’s “high end” remuneration arrangements with this recommended structure. A review of corporate governance in UK banks and other financial industry entities – Final recommendations Executive summary and recommendations

Recommendation 34

Executive board members and “high end” employees should be expected to maintain a shareholding or retain a portion of vested awards in an amount in line with their total compensation on a historic or expected basis, to be built up over a period at the discretion of the remuneration committee. Vesting of stock for this group should not normally be accelerated on cessation of employment other than on compassionate grounds.

Recommendation 35

The remuneration committee should seek advice from the board risk committee on specific risk adjustments to be applied to performance objectives set in the context of incentive packages; in the event of any difference of view, appropriate risk adjustments should be decided by the chairman and NEDs on the board.

Recommendation 36

If the non-binding resolution on a remuneration committee report attracts less than 75 per cent of the total votes cast, the chairman of the committee should stand for re-election in the following year irrespective of his or her normal appointment term.

Recommendation 37

The remuneration committee report should state whether any executive board member or “high end” employee has the right or opportunity to receive enhanced benefits, whether while in continued employment or on termination, resignation, retirement or in the wake of any other event such as a change of control, beyond those already disclosed in the directors’ remuneration report and whether the committee has exercised its discretion during the year to enhance such benefits either generally or for any member of this group.

Recommendation 38/39

Remuneration consultants should put in place a formal constitution for the professional group that has now been formed, with provision: for independent oversight and review of the remuneration consultants code; that this code and an indication of those committed to it should be lodged on the FRC website; and that all remuneration committees should use the code as the basis for determining the contractual terms of engagement of their advisers; and that the remuneration committee report should indicate the source of consultancy advice and whether the consultant has any other advisory engagement with the company.

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One Comment

  1. Prof. Alexander Kostyuk
    Posted Sunday, December 27, 2009 at 4:01 am | Permalink

    Dear Sir David Walker.

    I thank you for such “just in time” contribution to development of corporate governance in banks through writing the Report. I assess very positive most of the clauses of the Report. At the same time I would like to underline the weaknesses of the Report.

    The most important – a lack of appropriate attention to remuneration of the board committees members. We investigate for more than 7 years this issue worldwide and we found that the weak functionality of the board is inside of the board committees. Board committees members do not provide the initiative while developing the agenda for committee meeting and do not participate actively in deep discussions. What is the reason? It is a weak remuneration system. The main weakness is a lack of remuneration to be paid for the committee member’s participation in the committee activity, not through the presence of the meetings, but through initiating the new questions to be included in the agenda (through agenda composing), through active discussng the issues of the agenda at the committee meetings. We need to assess the performance of the committee member through finding out how many issues of the committee meeting, he initiated, have been later approved by the committee and the board. This could be taken for his personal contribution to the committee and board performance and he should be paid for this.
    This year our research team developed such a remuneration system for the committee members.

    I hope for your comments of this issue.

    Prof. Alexander Kostyuk
    Ukrainian Academy of Banking
    Corporte Ownership and Control journal