Stilpon Nestor is Managing Director and Konstantina Tsilipira is an Analyst at Nestor Advisors Ltd. This post is based on their Nestor Advisors report.
Introduction
This post is based on research carried out for a European client bank. It is about board governance in large banking organisations. Using information from a sample of 32 international “best practice” banks compiled by Aktis Ltd (www.aktisintel.com) and a series of interviews with bank board leaders and senior supervisors, we examine the way bank boards organise themselves to effectively deliver their tasks: directing and controlling the organisations they lead; and taking timely, effective decisions in this regard.
The complete publication develops along three broad themes: board leadership, board interface with management and board—level strategic human resources issues. This post focuses on four specific areas within these broad themes: board composition, i.e. the profile of the people that populate the boards of best practice banks; board succession planning and nomination approaches which will determine the quality of people over time and ensure continuity; board committees, i.e. the way the board organises itself to manage areas where conflicts might arise and/or where expertise and deep dives are required; and senior management committee architecture, which reflects the changing strategic priorities and risk perspectives of major banks, determines the sources of board information and orders accountability of management to the board.
We recognise that best practice in the areas under investigation comes in many forms. Differences are due not only to jurisdictional idiosyncrasies but also to different philosophies, corporate origins and legacy. While common solutions do exist, very often we find that there is more than one way to address board governance imperatives.
Fiduciary Duties of Proxy Advisors Under the Investment Advisors Act
More from: Bernard Sharfman
Bernard S. Sharfman is Chairman of the Main Street Investors Coalition Advisory Council. This post is based on a recent letter from Mr. Sharfman to the U.S. Securities and Exchange Commission.
The SEC’s proxy process review has so far led the SEC to approve two separate releases regarding proxy advisors. The focus of this comment letter is on the guidance provided in one of those releases, Release No. IA-5325 (Release). This guidance identifies, under the Investment Advisers Act of 1940 (Advisers Act or Act), a “principles-based fiduciary duty” that requires investment advisers with delegated voting authority to closely monitor the voting recommendations and research provided them by their proxy advisors. This comment letter recommends that the SEC provide additional guidance that recognizes a corresponding “principles-based fiduciary duty” owed by proxy advisors to their clients. This fiduciary duty would arise from the SEC recognizing proxy advisors as investment advisers under the Act. This duty would require proxy advisors to “implement policies and procedures” that result in voting recommendations that are in the best interest of their clients, supporting what is required of investment advisers under Release No. IA-5325. The burden of monitoring this new fiduciary duty would fall on the SEC, not the investment advisers. The following provides the argument for this additional guidance.
The Fiduciary Duties of Investment Advisers
In general, an ‘“investment adviser” means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; ….”’
Section 206 of the Advisers Act establishes “federal fiduciary standards” “to govern the conduct of investment advisers.” As stated by the United States Supreme Court in SEC v. Capital Gains Research Bureau, Inc.:
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