Partner Article

Banks examined in Walker Report

The next generation of boardroom directors are being told to crack down on risk and oversized pay deals.

Recommendations unveiled this week by Sir David Walker are designed to prevent another banking meltdown. The recommendations follow four months of consultation with the City.

Sir David’s review said remuneration committees should be able to examine company-wide pay, and called for new risk committees with power to block major takeovers if necessary.

He also wants non-executive directors to be better-informed, spend more time on the business and be able to stand up to chief executives.

Sir David said: “Many boards inadequately understood the type and scale of risks they were running and failed to hold the executive to high standards of sustainable performance.

“Bonus schemes contributed to excessive risk-taking by rewarding short-term performance. And shareholders failed to exercise proper stewardship.”

He said his recommendations on pay were “as tough or tougher than anything to be found elsewhere in the world”.

Sarah Green, Regional Director, CBI North East, said: “Sir David Walker has set out a sensible package of proposals that can strengthen the role of boards in identifying and managing risk.

“In particular, we welcome the emphasis on ensuring balanced boards which are also equipped with the right skills, and on ensuring investors are active and engaged in scrutinising business strategy.

“Because the Walker report focuses on financial institutions, it is able to recommend specific measures that reflect banks’ complexity and critical role in the economy. This is much more effective than trying to make corporate governance recommendations which apply to all companies regardless of their circumstances.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .